Dynamic Price Optimisation for a Prominent FMCG Brand
Crafting an end-to-end price optimisation solution to maximise revenue and strategies for a major FMCG brand.
increase in incremental net revenue for the client.
products dynamically price adjusted without any human intervention, saving 2 days of man hours per week.
Conversion rate improved by 3% points on core products.
Objective:
A leading FMCG brand was looking to increase its dynamic price optimisation, which looks at the relationship between a product’s demand and price. We were chosen as its proactive solution due to our one-of-a-kind AI offering in the retail market.
Challenge:
The brand had faced challenges with consistent pricing across all of its channels, resulting in significant sales losses over time. An effective pricing strategy needs to consider product elasticity, cross-elasticity and cross-channel cannibalisation to provide a true reflection of how to price products. It must also factor in the current market demands, including consumer behaviour and competitors. However, it can take up valuable time trying to gather all the relevant information.
Solution:
We built a unique Mixed Integer Programming system, a discrete mathematical model, that establishes the optimal price of a product in each of the channels and at every point in the year. It is not just a recommendation of one product, but a combination of all products in a complementary group, i.e. milk and bread.
We started with deep-cross utilising graph networks for product and social channel interactions, helping to bring a comprehensive understanding of market dynamics. Any non-linear elasticities were extracted to provide a greater analysis of price changes and demand fluctuations. In addition, competitor actions and their impact on market dynamics were captured to inform the strategy.
This culminated in a rapid response planning algorithm that provided data for our 24/7 dynamic monitoring feed engine. The feed sends Pricing Managers the latest price recommendations via an alert and allows them to access trends on a dashboard, with a summary of the competitive activities and market trends across channels.
This helped to maximise net revenue to increase strategic alignment and operational efficiency.
These methods were tested in live scenarios and evaluated over a three-month period. We are now scaling this across multiple markets.
“An effective pricing strategy is key to any business’s success; however, without considering the wider picture, brands can see profits fall in competitive and ever-changing markets. Our solution brings key insights for brands to refine their pricing strategies. We are aiming to further roll out our dynamic price optimisation solution, so watch this space for more.”
Debonil Chowdhury, CEO and Co-founder of Aria