Pricing is the best way to improve margins. But many B2B organizations are struggling with ever-increasing volumes of pricing data.
While intelligent pricing solutions use this data to provide optimized pricing, many commercial AI and machine learning pricing solutions don’t explain what’s being analyzed and how results get calculated. Even worse, you can’t customize inputs and criteria to get insights that are truly actionable for your organization. In other words, whether you are using a “black box” or a “glass box” solution, pricing guidance control is missing.
There is a third way: the centaur approach to intelligent pricing combines AI and machine learning with the human intelligence of your sales teams to offer optimized, tailored, and transparent pricing in every situation.
“Black Box” vs. “Glass Box” Pricing Solutions
Intelligent pricing solutions enable you to offer different, optimized prices based on a number of variables. For example, customer history, deal size, geography, and time of year.
“Black box” pricing technology solutions are probably the most common on the market, but also the least transparent of solutions.
The most that a typical “black box” solution will provide are the “stretch,” “target,” and the “floor” or lowest possible sales prices. More often, a black box solution may only provide one target price. Without much visibility behind the rationale for that pricing guidance.
Additionally, there is no ability to “interrogate” the black box approach to discover the “why” behind the pricing provided.
Better than black box? A “glass box” approach. A glass box solution provides the target price but also shows you the pricing waterfall – a complete picture of all the variables that affected the final price that a customer was willing to pay.
Meet Centaur: Glass Box Transparency + Human Control
Best-in-class intelligent pricing solutions go one step further than a glass box. “Centaur” intelligent pricing provides all of the visibility of a “glass box” solution. Yet with the added ability to include human intelligence and control.
In mythology, a centaur is half-man, half-horse. Back then, this was a compelling notion: that the intelligence and skill of a human could be merged with the strength and speed of a horse. In technology, the centaur model represents the convergence of human and machine intelligence to deliver something superior to both.
Even with AI, technology by itself isn’t always smarter than your sales team. That’s why the human component is so critical to intelligent pricing. The centaur model enables you to adjust a price based on specific information that was not included in the original AI-driven pricing model.
So How Does the Centaur Model Work in a Sales Process?
Centaur gives you an added layer of control. You can manually “prune” out a variable that is affecting pricing, such as geography, supply levels, or previous discounts. For instance? A buyer at a company may have been grandfathered into a discount that is longer offered. When that buyer leaves the company, the salesperson can change that pricing model to remove that discount going forward.
An AI-driven pricing algorithm might not know these specific variables. But a centaur approach allows for human intervention. Manual adjustments from your team can have a large impact on margins and the bottom line.
Centaur Enables More Powerful Negotiations
AI with expert human intelligence enables you to:
- Use pricing science algorithms to build the complete segmentation tree
- Manually set, modify, and add changes to reflect business judgement at the broadest and most granular levels
- Provide statistical feedback and safety nets to ensure profitable outcomes and confidence.
Be Confident in Your Pricing, Every Time
AI-driven solutions provide transparent pricing guidance and segmentation based on historical transactions – and easily explainable recommendations through statistical and visual interface. Clear, insightful, up-to-date information enables your sales team to present and support pricing decisions in every situation.
Our own intelligent pricing solutions at Vendavo take a centaur approach. They give your sales team the flexibility to consider continuous market dynamics. Those include supplier cost increases and competitive pricing changes, helping to optimize your intelligence engine. When we use the term “AI”, we prefer to think of them as delivering augmented intelligence, not just artificial.
Ready to Take Control of Your Pricing?
Contact us to learn how Vendavo’s intelligent pricing solutions leverage the best of machine and human intelligence to provide the best price in all situations. And ultimately, help your organization win more deals.