Black Box v Clear Box: Transparency in Dynamic Pricing

Black Box v Clear Box: Transparency in Dynamic Pricing

07/12/2022 - Dynamic pricing

Automated pricing using dynamic pricing tools employs Artificial Intelligence to interpret data, predict results, and execute changes. Now that it is available to all, the software algorithms’ transparency is questioned. How do you know if the system makes the right decisions? We explain the differences between Black Box and Clear Box and how to get a tool you can trust 100%.

Clear Box and Black Box in your price optimisation

Staying in control of setting prices is one of the concerns of brand pricing and e-commerce strategists today. Many online retailers have already adopted Artificial Intelligence (AI). It helps them sell more and better thanks to its phenomenal data analysis and decision-making capabilities. It is the bona fide revolution behind deep learning and machine learning.

However, the algorithms AI uses to make these decisions must be accessible and understandable by the team to detect gaps and, above all, be able to re-optimise its operation where necessary.

When this does not happen, it is known as the Black Box effect. The black box contains complex algorithms that govern some dynamic pricing tools. It is characterized by being inaccessible and not making its analytical rules known to the pricing teams that use it. For many, this mathematical complexity is an insurmountable stumbling block. However, tools that take the opposite path of transparency, the Clear Box, like Reactev, show that it does not have to be this way. One of the dynamic pricing myths is that it is based on a Black Box system that doesn’t let you determine what kind of decisions the machine makes, instead of the pricing team. Nothing could be further from the truth.

Transparency in dynamic pricing actions is key to strengthening the team’s confidence in the tool. It is right to always be aware of the values the algorithm takes into account, with what weighting and under what parameters, to predict, adjust and make decisions. Only in this way will it be possible to optimise prices with critical evaluation.

Turn your back on the Black Box to maximise results

Turn your back on the Black Box to maximise results

As in any relationship, trust is essential for the workflow between your team and your pricing tool to work. This is possible if you know the principles of the pricing intelligence algorithm used by your pricing optimisation tool.

With Reactev, we put all the necessary explanations at the disposal of your company’s pricing specialists. Therefore, they can see first-hand where the data are taken from, and the basis for each pricing and sales estimate. We believe that it is the least we can do to keep you in control of your business.

Having this information will improve two key aspects of your business strategy:

  1. It will strengthen your team’s confidence in the tool and in themselves, as it will have the ability to analyse the data and follow the evolution of changes with ease.
  2. It will allow you to readjust the values involved in the dynamic pricing proposal to optimise results: include competitors, segment user profiles, assign new parameters or set more profitable limits for your business.

Request your Reactev trial now, and access disruptive technology to improve your business results. All your products at the optimal selling price.

Category: Dynamic pricing

Tags: pricing

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Maria Jose Guerrero
Content Manager

The first dynamic pricing solution designed by and for retailers