Pricing Optimization System
Dynamic pricing engine that maximizes margin while maintaining competitiveness.
Overview
Designing a system that continuously optimizes prices based on demand signals, competitor pricing, inventory levels, and margin targets....
The Problem
A marketplace was leaving money on the table with static pricing. No visibility into price elasticity. Competitors were more agile. Margin pressure was increasing.
The Solution
Designing a system that continuously optimizes prices based on demand signals, competitor pricing, inventory levels, and margin targets.
Architecture
- Real-time competitor price monitoring
- Demand elasticity modeling
- Multi-objective optimization engine
- A/B testing framework for price experiments
- Guardrails for brand and margin protection
- Executive dashboard and alerting
Business Impact
- Target: 8-12% margin improvement
- Target: Reduced time to respond to market changes
- Target: Better inventory turnover
- Target: Competitive positioning intelligence
Lessons Learned
- Pricing is sensitive - start with controlled experiments
- Stakeholder buy-in is critical
- Guardrails prevent costly mistakes
- Simple rules often outperform complex models initially
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