Fix your pricing problems and improve profitability

Most leaders focus on the wrong profit levers.  Cutting costs, hiring freezes, or opening new locations without data to back up the decision are common strategies.  And we get it; the business landscape is challenging.  Sometimes these manoeuvres are what keep you afloat for the next 6-12 months.  But often they are just that: short-term band-aid solutions.  Not sustainable, long-term profit drivers.

Forbes reports that 68% of companies plan to raise their pricing to keep up with challenges such as inflation and tariffs.  However, simply increasing prices isn’t necessarily the answer.  Implementing blanket increases as a reaction or simply following the market may lead to more harm than good. 

Even the largest steaming company in the world is not immune to this.  Netflix has gradually increased prices in recent years, due to its investment in new original content and competition from the likes of Disney+ and Amazon.  One price hike in early 2025 meant Netflix subscribers left in droves, settling for more affordable options on the market.

Optimal pricing – not sudden and steep price hikes - is one of the most overlooked levers of profitability.  Getting it right is critical for growth, winning market share, and creating stability and predictability for your business.  Not to mention keeping your customer relationships intact.

But first, it’s essential to understand exactly how poor or optimised pricing impacts a company.

How do I know I have a problem with pricing?

On face value, you may think your pricing is working.  You’re growing revenue and sales volume is healthy.  Before you implement a price rise, it’s time to look deeper to find any signals that your current pricing is working against you. These signals could look like:

• Company revenue is growing, but profitability is not

• You frequently rely on discounts. Without discounts, your products don’t move off the shelf

• Pricing is benchmarked against whatever your competitors are doing – not the value your product provides

If your company is experiencing one or more of these, it’s time to explore some new pricing strategies.

Why fixing pricing problems is critical for retailers

Pricing isn’t just a simple number on a shelf.  PwC’s annual Customer Experience Survey continues to find that pricing is the leading factor as to whether consumers make a purchase or not.  69% say that comparing prices amongst competitors significantly influences their decisions.

It affects all areas of your business, beyond just profitability and growth.   Pricing too high (or too low) can affect your brand reputation and erode customer trust.  It can also be the difference between acquiring new customers, retaining existing ones, or losing them to competitors entirely.  Remember that acquiring new customers is about five times more expensive than retaining existing customers.

It’s no wonder the pricing optimisation software market size is expected to grow 19% annually to over $6 billion by 2029 - companies are catching on to the idea that pricing directly affects the bottom line.  

This is where pricing optimisation comes into the fold.  Let’s look at how this works, and how retailers can take advantage of it to achieve their profitability goals. 

Pricing optimisation is a win for both company and customer

At its core, pricing optimisation is about using data and predictive modelling to find a price point that’s a win for both the company and the customer.  It enables you to maximise profitability and predictability – without driving away customers to your competitors.  The best part is that it continues to work for you even during uncertain times.  If you’re looking for stability and normalcy in your business, pricing optimisation could be the solution.

Why use predictive modelling for pricing optimisation

Sure, you could go with traditional strategies like market-based or cost-plus pricing.  But these can be surface level or may not suit your products. They also usually don’t consider your invaluable customer data. 

Today’s retailers need less uncertainty and more accuracy with their pricing – and predictive modelling is how you get there.  This method typically uses machine learning models to interpret historical data and customer behaviour to predict likely future outcomes and find price points that deliver to your goals.  It also can identify risks and opportunities to achieve your goals even more efficiently. 

Yet pricing shouldn’t be set-and-forget affair.  As retailers know, the industry is a seasonal and dynamic beast, so your pricing should also adjust with the seasons, holidays and customer behaviour shifts.  It can and should be optimised 365 days per year.  The good news is machine learning doesn’t stop working; it’s continuously learning and optimising, using real-time customer data and market trends to improve your profitability each day.

Pricing optimisation = predictable profitability 

Let’s face it, there will always be business challenges to overcome.  To make life a little easier, focus on the factors you can control, and the key levers that drive predictable profitability (even in a challenging market) - like pricing optimisation.  Don’t just stick with one pricing strategy because it’s common or “always been the way”.  

At Datamine, we’ve been using pricing optimisation to drive the profitability of retailers for over 30 years, so we can work with you to develop the best solution based on your objectives and available data.  From there, we’ll help you interpret the results which will guide you to set the most effective price points for both you and your customers.  Get in touch for an initial discussion on how this could work for your company.