AI-Enabled Personalization: The New Frontier In Dynamic Pricing | Forbes

Dynamic pricing, a practice started by American Airlines, a FICO customer, in the 1980s, has now become a common marketing discipline for many corporations across industry sectors. From airlines, hotels and entertainment events to perhaps the most well-known e-retailer, Amazon, these companies have been using dynamic pricing to improve profitability relative to rapid changes in supply and demand.

As technologies for machine learning (ML) and artificial intelligence (AI) become more advanced and the dimensions of available data expand, dynamic pricing is going beyond its traditional inventory management function, enabling companies to deliver optimal customer experiences in real-time. In essence, pricing is becoming dependent on the ability to make offers that continuously adjust to changing consumer behavior and preferences while also responding to organizational inventory and profit requirements as well as other external pricing influences. Today, enterprises are able to marry rich data sets with sophisticated pricing models and apply advanced analytics and machine learning techniques to produce pricing alternatives across thousands of product stock keeping units (SKUs). These offers are also uniquely tailored to the individual consumer dynamically at the point of engagement.

The application of technology alone, however, is insufficient. All pricing actions need to embody the brand value and ultimate profitability of the business. This requires human guidance and oversight in the form of constraints and outcome objectives. Balance is achieved when the machine models become enablers for the human to apply business judgment to an ever-expanding and changing source of data.

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AI-Enabled Personalization: The New Frontier In Dynamic Pricing.