Challenge
Traditional AI models often rely on historical data to provide pricing recommendations for current and future market conditions. However, these models encounter significant limitations during unexpected, rapid crises—such as the COVID-19 pandemic or geopolitical events like the war in Ukraine. These situations have drastically impacted the cost of energy and raw materials globally, affecting almost every business (e.g., electricity, gas, and other essentials). In these crisis scenarios, conventional AI models struggle with accurate price predictions, often resulting in either underpricing or unsustainable margins.
Solution
Cupset Formula-Based Target Pricing
Cupset’s innovative approach integrates adaptive formula-based target pricing, enabling businesses to navigate volatile markets effectively. This solution dynamically adjusts pricing in response to real-time data, minimizing risks associated with unpredictable cost fluctuations.
See the following slides for details on the implementation process and results.
Pricing process with formula-based target pricing:
- Indices are an integral part of the formulas applied to individual products
- If these index values change significantly (hourly, daily, weekly, monthly), it directly impacts the segment price corridors for the product
- Results in adjusted product-customer prices
- Sales representative has live access to the adjusted price corridor and customer-specific prices for negotiations
- Adjusted price is immediately available in the ERP system and online shops
- Company is the first to implement a justified price increase
Formula Pricing
create indices
Create and maintain several index types for raw materials based on product components for finished goods. Choose the index type and the frequency at which time values are refreshing from various index-providers you need.
Formula Pricing
create formula
Use this Indices as part of a formula for a finished good. Create one per drag and drop and add all relevant variables/ conditions to get a formula based price!
Price setting
Use formula for price setting
Target price at ref. quantity can be set per formula and get hourly, daily, weekly or monthly price updates (depends on the chosen frequency per index)
Customer specific prices (grey) will rise (green), if the formula price increase the pricing segment target price though
Price calculation
Price calculation based on Price setting
Sales Rep is using the adjusted price corridors based on the segment target price in real-time (device independent)
Price calculation
Basket view
Existing (reusable) baskets from a Sales Rep getting a real-time recalculation and providing the adjusted price corridor per product after opening the basket
Quoting
Create Offer and send prices to ERP and Online-Shops
Sales Rep create an offer and send prices via interfaces to all corresponding data pools, e.g. ERP, Online Shops etc.