By Thierry Arrondo
Special to YNOT
Here’s a myth that has been spreading lately: “Shop owners know the best price for their products.” We’ve yet to meet a shop owner who thinks they’re great at pricing. We’ll give the myth a quick “busting.”
Shop owners know their costs better than anyone. What they don’t know is the best price for each shopper. How could they? Any small- to medium-sized shop can see 100,000 visitors a day. That’s more than one per second. All those visitors are different. How could a shop owner know which price to give each of them?
Here’s what a shop owner is missing:
Access
Access to data about each shopper from across the industry. Shop owners only have their own data.
Access to prices competitors offer. Competitors don’t share their data.
Tools
Artificial intelligence to analyze billions of combinations of user profiles and product attributes. No combination of nerds and spreadsheets will help.
AI to measure the effect of each price on revenue — conversion and lifetime value — for each visitor.
AI to deliver the best price to multiple visitors per second. No human can keep up with the variety of visitors and how quickly they appear.
So, let’s bust this myth:
Myth:
“Shop owners know the best prices for their products.”
Fact:
Shop owners know their costs, but they cannot know the best prices.
Our clients set price floors (example: “not below $20 for a monthly membership”) to ensure they cover their costs. Then they use AI to set the best price for each shopper. They don’t risk choosing prices without access to the right data and tools. That would kill revenue. Only a dying business, stuck in the past, would recommend it.
Thierry Arrondo is managing director for Vendo Services GmbH.
