The Challenge
A mid-sized retailer was leaving margin on the table. They priced products based on simple "cost-plus" logic, ignoring competitor signals, seasonality, and customer willingness to pay. They feared changing prices would alienate loyal customers.
Our Solution
We implemented a three-stage optimization engine:
- Demand Modeling: Regression models to calculate price elasticity for each SKU.
- Constraint Optimization: Finding the profit-maximizing price within business rules (e.g., "never change price by >5%").
- A/B Testing Framework: A system to test specific price points in select regions before global rollout.
Impact
"We saw a 12% lift in gross margin in the pilot category without impacting sales volume."