Optimizing Pricing & Promotion Powered by Causal AI
Investments, strategies, and experiments are powerful tools for increasing revenue, margin, and category leadership, yet they are also difficult to get right. According to BCG, upwards of 50% of promotional strategies implemented bring no noticeable lift, or worse, a negative return.
Causal AI helps us to understand the impact of pricing and promotional strategies before implementing them. Driving an increase in revenue and profitability, and improving customer experience that leads to long-term customer relationships.
Today’s consumer is more informed, savvy, and price-conscious than ever, meaning brands need to understand the drivers of customer value to inform promotional investment. As the last 2 years have shown, the dynamic macro environment is impacting the volatility of consumer demand and making it even more difficult to make good pricing and promotional decisions under extreme uncertainty.
Brands now need to consider:
• Inflationary pressures across the global economy
• Potential recessionary period
• Material changes in consumer sentiment
• The shifting employment landscape and the impact on spending and demand
• The cost and capacity to procure raw materials
• Transportation limitations and costs that affect baseline pricing
• macro-economic changes that affect fossil fuel costs
To top this off, at the end of the day organizations still need to find ways of balancing their goals of growth, profitability & supply chain.
Challenges like these should always start with a question, surveying the industry, the questions being asked by leadership and brand managers are:
- What strategy enables the brand to maximize GP and/or growth yet align with the equity and value proposition of the brand?
- How can I achieve my sales targets, maximize the ROI from my trade investment, and align with the brand strategies?
Revenue, category, and merchandising managers might ask:
• What strategy enables the team to maximize EBITDA by maximizing the GP and driving operational efficiency?
• What strategy, across all brands within the category, enable us to achieve our topline and bottom-line goals?
What do all these questions have in common? They are in fact causal questions that require an understanding of cause and effect to answer them. Here at causaLens, we’ve pioneered Causal AI to empower decision- makers to gain a deeper understanding of the cause and effect relationships within a domain. Ultimately providing more trustworthy and actionable insights that lead to more effective decision-making.
Introducing the Pricing and Promotion Optimization Solution powered by Causal AI
The interactive web app allows revenue leaders to work with a causal graph of the drivers of demand, and interrogate causal models to answer questions such as:
• What would have happened if we increased promotion by 10% last holiday season?
• What actions do I need to take to ensure appropriate inventory levels within the promotional strategy?
• How should I adjust my pricing and promotional strategy if our competition changes it’s strategy?
This solution is built under four principles: start with meaningful data, move beyond historical patterns, leverage causal relationships, and make decisions with confidence.
Understand what data is material to the analysis, automatically. Given there is typically a lot of data, organizations struggle with what data is meaningful to the business question or KPI, a capability that will save a material amount of time and resources – 100x speed, 90x cost savings.
Move beyond historical patterns
Learn from the past going beyond a basic review. Counterfactual analysis enables organizations to perform what-if scenarios to inform better decision-making going forward based on what they should have done in the past.
Leverage causal relationships
Leverage the identified relationships as well as the weight of the relationships delivered through causal ai to perform dynamic scenario planning to optimize the decisions moving forward.
Make decisions with confidence
Causal insights are generated and delivered at the required level of granularity to enable more informed and faster decision-making across all functional areas, personalized to those personas who are making the decisions.
Efficient pricing and promotional decisions that drive value
With the help of Causal AI, revenue leaders that use this solution in their workflows, are able to plan more effectively, see the impact of decisions before they are made, explore macroeconomic scenarios, and leverage dynamic pricing recommendations, all while balancing revenue growth and profitability.