Curious about how AI can revolutionize your pricing strategies but wary of the misconceptions? Vendavo experts weigh in on the most common myths surrounding AI in pricing, from fears of AI replacing human judgment to concerns about affordability and complexity – plus how AI can be a powerful, user-friendly tool that enhances decision-making, adapts to market changes, and ensures fair pricing practices.
It’s tempting to want to jump into the latest tech trends to keep ahead of your competition, but there’s something more important to consider. How are you going to adopt those trends strategically so you get value rather than just hopping on the bandwagon?
Artificial intelligence (AI) has become a game-changer, especially when it comes to pricing strategies. But many organizations are still hesitant to dive into AI-driven pricing, For example, 18% of finance teams see implementing AI as their primary challenge in the next 12 months, largely because of the many misconceptions floating around.
In this article, Vendavo experts explore some of the most common myths about using AI in pricing and reveal the true potential of this powerful technology.
MYTH 1. AI replaces human judgment
Some people think AI will completely take over pricing decisions. The truth is, AI is a tool that enhances human judgment by providing valuable, data-driven insights. Pricing involves many nuances and contextual understanding that humans are uniquely positioned to interpret. AI supports this process by analyzing vast amounts of data quickly and identifying patterns that might not be immediately obvious to humans.
Alex Hoff
Chief Product Officer at Vendavo
“The buzz around AI has often focused on positioning man vs. machine. When will AI be ‘smarter’ than us? What will that mean? But we like to take a more pragmatic perspective and look for ways that machines (AIs) can work together with humans to help augment intelligent decision-making such as identifying the right product, at the right price, and at the right time.” – Alex Hoff, Chief Product Officer at Vendavo
MYTH 2. AI can’t understand business nuances
People often worry that AI won’t grasp the unique aspects of their business. AI systems can be customized to incorporate specific business rules, industry standards, and customer behavior. This customization ensures that the AI solutions align with the unique needs and goals of the business, providing relevant and usable insights that are tailored to their specific market and operational context.
Stephen Pack
Director of Program Management at Vendavo
“AI systems should not be overly reliant on generic data or confined to internal datasets. They should be customized to reflect the unique value drivers of each business.”
MYTH 3. AI will make pricing too complex
There’s a fear that AI will overcomplicate pricing processes. In reality, it can simplify things by automating data analysis and pinpointing optimal pricing strategies. AI systems can handle complex datasets and perform advanced analytics that would be time-consuming and challenging for humans. This can streamline operations, allowing pricing teams to focus on strategic decision-making rather than getting bogged down in data crunching.
David Anderson
Vice President of Business Consulting at Vendavo
“Pricing automation fueled by different types of AI has proven to be the right move for most B2B teams. It will generate, in simple terms, just what a human would but faster, and continuously: compile price data from the web, factor in business rules and costs, analyze data, make pricing recommendations, and monitor the market and competitors’ actions and adjust as necessary.”
MYTH 4. AI can’t adapt to market changes
Some believe AI can’t keep up with dynamic market conditions. AI systems are actually designed to analyze real-time data and adapt to market changes faster than traditional methods. By continuously monitoring market trends, competitor pricing, and customer behavior, AI can adjust pricing strategies in real-time, ensuring businesses remain competitive and responsive to market fluctuations.
Patrick Dougherty
Product Marketing Manager at Vendavo
“AI can anticipate customer actions by aggregating information on market changes, supply chain disruptions, and economic outlooks, and provide timely price suggestions for maximum margin.”
MYTH 5. AI is a silver bullet
Some expect instant magic from AI. While it can deliver quick insights, seeing substantial benefits often takes continuous tweaks and integration with your existing processes. Successful implementation involves a learning curve where the system needs to be trained and fine-tuned. It’s also essential to have ongoing data input and regular adjustments to keep the AI models accurate and relevant. Among other guiding principles for AI, it should be explainable and controllable.
Where you might see more instant results is in reducing the amount of time your team spends on tasks that can be automated.
Mike Bernard
Chief Marketing Officer at Vendavo
“AI can analyze vast volumes of data quickly and accurately, removing the otherwise time-consuming, error-prone, manual processes pricers typically wade through to compile market trends, historical transactions, product preferences, and competitor actions.”
MYTH 6. AI is a set-and-forget solution
There’s a misconception that AI in pricing is a one-time setup. Effective AI solutions require ongoing monitoring, learning, and adjustments to stay effective. AI models need to be regularly updated with new data to refine their accuracy and relevance. Continuous improvement is key to maintaining the effectiveness of AI in pricing, and businesses need to stay engaged with their AI systems to ensure they are delivering optimal results.
David Anderson
Vice President of Business Consulting at Vendavo
“The key is to use AI as a copilot to sell and price products, and better serve customers. Vendavo users have the flexibility to oversee, refine, and manage the AI algorithms, enabling a harmonious blend of human and machine intelligence.”
MYTH 7. AI will lead to unfair pricing
Some are concerned that AI might result in unfair pricing. Ethical AI solutions are designed to ensure transparency and fairness while optimizing pricing strategies. These solutions include safeguards to prevent discriminatory pricing practices and ensure compliance with legal and ethical standards. Transparency in AI algorithms and regular audits can help businesses maintain fair pricing practices while leveraging AI’s capabilities.
Sian Story
General Counsel at Vendavo
“AI promises to revolutionize our operations and boost efficiency, but we need to build these models on a foundation of ethical responsibility. We must prioritize privacy, protect intellectual property, and make users aware of potential risks and limitations from the outset.”
MYTH 8. AI implementation is disruptive
Many fear that AI will disrupt their current operations. AI can be integrated gradually, working alongside existing systems to enhance rather than disrupt workflows. A phased approach to AI implementation allows businesses to test and refine AI solutions in specific areas before rolling them out more broadly. This approach minimizes disruption and ensures a smoother transition to AI-driven pricing strategies.
David Edwards
Chief Technology Officer at Vendavo
“The most important thing we can do is keep an open mind with an insatiable curiosity about the future, yet temper those thoughts with doses of reality and skepticism.”
How to Embrace AI in Pricing
Embracing AI in pricing can bring significant advantages, from smarter decision-making to better market adaptability. But to truly reap these benefits, it’s important to move past the misconceptions that often cloud our view of AI.
By seeing AI as a supportive tool rather than a replacement for human expertise, and understanding its accessibility and flexibility, businesses of all sizes can confidently incorporate AI into their pricing strategies. The journey to AI-driven pricing might require an initial investment of time and resources, but the long-term gains in efficiency, accuracy, and competitiveness make it well worth the effort.
Ready to see how AI-powered solutions can help your organization see lasting growth and profitability? Reach out today to request a demo or speak with a Vendavo expert.