NodePrice Maximize

Predictor

The Price Maximize node is designed to continuously change the Price of a small set of Focus Products until the Maximization Goal is reached. Both increases in Price as well as decreases in Price are tested. The Maximization Goal can be to maximize Profit, Revenue, or Quantity Sold. While only the user-selected Focus Products can change Price, the user can define a broader set of 'In Scope' Products that are considered when evaluating the Maximization Goal.

For example, a Retailer may wish to maximize Profitability across their entire Store by changing the Price of one or two Focus Products. Or a Brand Manager may wish to maximize Revenue across all Products having the same Brand as the Focus Product.

Evaluating the Maximization Goal across a broader set of 'In Scope' Products is the way to account for Cannibalization. Cannibalization occurs whenever a Customer would have purchased a different same-Store or same-Brand Product but switches to the Focus Product because of a discount. While the Profit, Revenue, and Quantity Sold of the Focus Product would increase, the overall impact to the Store or Brand may be detrimental.

Note that other multi-Product Pricing nodes are available. The 'What If Product' node has a 'Portfolio Pricing' algorithm that can be used to reach a Maximization Goal by simultaneously changing different Prices of many Focus Products. This allows the 'What If Product' node to identify a Pricing strategy that will return greater Profitability without losing Customers. There is also the 'Price War' node that simulates Competitive Rivals constantly setting and resetting maximizing Prices for multiple Products in a series of Competitive Battles.

More Help: Examples and sample workflows can be found at the Scientific Strategy website: www.scientificstrategy.com.

Input Ports

  1. Port Type: Data
    Input Product Array: The set of Products that define the Market. Each row corresponds to a Product that competes for customers in the Market. The 'Input Product Array' should include the following columns:
    1. Product (string): The name of the Product corresponding to a column of the same name in the 'WTP Matrix' input port. There can also be an additional row with a Product named 'No Sale' - this row is used to track those Customers who are in the Market but have not yet purchased a Product. If the Product column is not found then the Row Identification (RowID) column will be used in place of the Product column.
    2. Description (optional): The description of the Product or the full name of the Product if the Product field contains an identification number.
    3. Brand (string): The name of the Product Brand. This is required to calculate the total Profit, Revenue, or Quantity Sold across all same-Brand 'In Scope' Products.
    4. Store (string): The name of the Product Store. This is required to calculate the total Profit, Revenue, or Quantity Sold across all same-Store 'In Scope' Products.
    5. Location (string): The name of the Product Location. The additional set of 'In Scope' Products can also be defined by same-Location.
    6. Family (string): The name of the Product Family. Many Product SKUs can be classified as all belonging to the same Family, and can be grouped as 'In Scope' Products.
    7. Category (string): The name of the Product Category. Several Product Families may be part of the same Category.
    8. Platform (string): The name of the Product Platform. The Platform is a general purpose label that can be used in any way. It can, for example, indicate whether the Product is sold both 'Online' as well as 'Offline'.
    9. Price (double): The Price of each Product in the Market. The Price of the 'No Sale' Product should be zero.
    10. Cost (double): The Product Cost is required for all 'In Scope' Products. Cost estimates are also useful for other Products as the node will calculate the change in Profitability for Competitive Rivals. This can be useful in evaluating how a Competitor might react to a Price change.
    11. Capacity (integer): The Capacity Constraint for the Product. A Product's Capacity may be limited by manufacturing constraints or by inventory levels. If the Capacity level is provided then the Quantity sold for the Product cannot exceed the Capacity limitation. If Capacity is not provided, or Capacity is negative, then the Quantity sold for the Product is not limited. Capacity will be limited relative to the total number of Customers in the 'Market Size' Configuration Dialog.
    12. Quantity (integer): The Quantity sold for each Product in the actual Market. But note that this Quantity value will largely be ignored by the node. Instead, Quantity sold is determined by the Price and Willingness To Pay (WTP) of Products. The Quantity value provided in this field can only be used to set the total output Market Size.
  2. Port Type: Data
    Input Willingness To Pay Matrix (double): The Willingness To Pay (WTP) Customer Distribution matrix for each Product column in the Market by each Virtual Customer row. The total number of Virtual Available Customers is equal to the number of rows in the WTP Matrix. In addition to each of the Product's WTP Customer Distributions, this 'Input WTP Matrix' can also contain two types of 'Dynamic Cost' Distributions that depend upon the Customers who Purchase the Product. These 'Dynamic Costs' are added to the 'Static Cost' from the 'Input Product Array' to calculate the Product's Margin.
    1. Product01, Product02, etc (double): Each of the Products listed in the 'Input Product Array' should have a corresponding column in this 'Input WTP Matrix'. Each row represents a different Virtual Customer, and each value represents the Customer's Willingness To Pay (WTP) for each Product.
    2. _CTS (double - optional): The Cost To Serve (CTS) is the additional Cost that must be incurred when a Product is sold to a particular Customer. This is a Dynamic Cost as some Customers are cheaper to serve than others, and is only incurred if the Customer actually Purchases the Product. The 'Cost To Serve' column is identified by the Product's Name followed by a trailing 'CTS'. The 'CTS' designator can be upper-case or lower-case and may-or-may-not be separated by a space, underscore, or other single character. For example, 'Product_01_CTS' or 'Product 02 CTS' or 'Product03cts'.
    3. _CTM (double - optional): The Cost To Make (CTM) depends not upon the individual Customer but upon the number of Customers who Purchase the Product. This 'Cost To Make' can be used to simulate the Law of Diminishing Returns. Starting from the first row in the column, each 'Cost To Make' row represents the incremental Cost of manufacturing each additional Product. If the Product is sold ten-times, then the total Dynamic Cost is the sum of the first 10 CTM rows. The 'Cost To Make' column is also identified by the Product's Name followed by a trailing 'CTM' in a manner similar to the 'CTS' designator.

Output Ports

  1. Port Type: Data
    Output Change Results: Lists the degree by which each Product in the Market was changed (if at all) and the impact of the change on each of the other Products in the Market. The 'Change Results' contains these columns:
    1. Product: The name of the Product that was (or was not) changed as part of the 'Change Scenario'.
    2. Brand: The name of the Product Brand or a missing value if the Brand has not been defined.
    3. Store: The name of the Product Store or a missing value if the Store has not been defined.
    4. Location: The name of the Product Location or a missing value if the Location has not been defined.
    5. Family: The name of the Product Family or a missing value if the Family has not been defined.
    6. Category: The name of the Product Category or a missing value if the Category has not been defined.
    7. Platform: The name of the Product Platform or a missing value if the Platform has not been defined.
    8. Change Scenario: The method by which this Product was changed. For example, the Change Scenario may be 'Maximize Profit for Store' or 'Maximize Revenue for Brand'.
    9. Change Factor: The numeric degree by which the Price of this Product was changed.
    10. Price Change From: The original Price of this Product.
    11. Price Change To: The new Price of this Product after the 'Change Scenario' caused a change.
    12. Price Change: The difference between the original Price and the new Price of the Product.
    13. Price Change Percentage: The percentage difference between the original Price and the new Price of the Product.
    14. Quantity Change From: The original Quantity of the Focus Product.
    15. Quantity Change To: The new Quantity of the Focus Product after its positioning was altered.
    16. Quantity Change: The difference between the original Quantity and the new Quantity of the Focus Product.
    17. Quantity Change Percentage: The percentage difference between the original Quantity and the new Quantity of the Focus Product.
    18. Share Change From: The original Market Share of the Focus Product.
    19. Share Change To: The new Market Share of the Focus Product after its positioning was altered.
    20. Share Change: The difference between the original Market Share and the new Market Share of the Focus Product.
    21. Share Change Percentage: The percentage difference between the original Market Share and the new Market Share of the Focus Product.
    22. Revenue Change From: The original Revenue of the Focus Product.
    23. Revenue Change To: The new Revenue of the Focus Product after its positioning was altered.
    24. Revenue Change: The difference between the original Revenue and the new Revenue of the Focus Product.
    25. Revenue Change Percentage: The percentage difference between the original Revenue and the new Revenue of the Focus Product.
    26. Profit Change From: The original Profit of the Focus Product.
    27. Profit Change To: The new Profit of the Focus Product after its positioning was altered.
    28. Profit Change: The difference between the original Profit and the new Profit of the Focus Product.
    29. Profit Change Percentage: The percentage difference between the original Profit and the new Profit of the Focus Product.
  2. Port Type: Data
    Output Product Array: The output Product Array corresponds to the Input Product Array but updated to reflect the impact of the 'Change Scenario' outcome. The Product Array will contain these columns:
    1. Product: The name of the Product corresponding to the Input Product Array.
    2. Brand: The name of the Product Brand or a missing value if the Brand has not been defined.
    3. Store: The name of the Product Store or a missing value if the Store has not been defined.
    4. Location: The name of the Product Location or a missing value if the Location has not been defined.
    5. Family: The name of the Product Family or a missing value if the Product Family has not been defined.
    6. Category: The name of the Product Category or a missing value if the Category has not been defined.
    7. Platform: The name of the Product Platform or a missing value if the Platform has not been defined.
    8. Price: The Price of each Product. If the Product is the 'Focus Product' then the Price will be updated to reflect the 'Change Scenario'.
    9. Cost: The 'Static Cost' of each Product from the 'Input Product Array' or a missing value if the Cost has not been defined. The 'Dynamic Cost' from the 'Input WTP Matrix' is NOT included in this output 'Cost' field so as to allow multiple Market Simulation nodes to be chained together. Instead the 'Dynamic Cost' is accounted for in the output 'Margin' field.
    10. Margin: The average Profit Margin of each Product, where: Profit Margin = Price - Static Cost - Average Dynamic Cost. The Dynamic Cost depends upon the Customers who Purchase the Product and is averaged across the total Quantity Sold.
    11. Capacity: The Capacity Constraint of each Product or a missing value if the Capacity has not been defined.
    12. Quantity: The simulated number of Customers who selected each Product, including those who selected the 'No Sale' option.
    13. Share: The simulated Market Share as a percentage (%) of each Product based upon the 'Quantity' column but not including those customers who selected the 'No Sale' option.
    14. COGS: The Cost of Goods Sold (COGS) for the Product is calculated as the Product's 'Cost' and final 'Quantity'. COGS is only calculated if the Product's 'Cost' was provided in the 'Input Product Array'.
    15. Revenue: The Product's Revenue is calculated as the Product's 'Price' and final 'Quantity'.
    16. Profit: The Product's Profitability is only calculated if the Product's 'Cost' was provided in the 'Input Product Array'.
    17. Include: Whether the Product was included in the 'In Scope' set and was evaluated for maximization in accordance with the user-specified 'Change Scenario'.
  3. Port Type: Data
    Output Purchased Products List: The list of Products purchased by each Virtual Customer. The user can use the views to hilite the Customers of interest who switched their purchase decision. These Customers who switched as a result of the 'Change Scenario' change can then be further analyzed. The 'Purchased Products List' contains these columns:
    1. Before Purchases: The name of the Product selected by each Virtual Customer row before the change caused by the 'Change Scenario'.
    2. After Purchases: The name of the Product selected by each Virtual Customer row after the change caused by the 'Change Scenario'.
  4. Port Type: Data
    Output KPI Indicators: The Output KPI Indicators contain select information about the tuning process and the quality of the final results. The Output KPI Indicators will contain these columns:
    1. Product: The Product associated with the Key Performance Indicator (KPI). If the KPI refers to the overall results and not to a specific Product then this field will be left blank.
    2. Indicator: The name of each Key Performance Indicator (KPI), including:
      Iteration Count: the number of iterations used during the Portfolio Pricing tuning process.
      Final Adjustment: the final percentage (%) by which the Price of the Focus Product was adjusted.
      Average Price Change Percentage: the average Price change of the 'In Scope' Products expressed as a percentage.
      Average Weighted Price Change Percentage: the weighted average Price change of the 'In Scope' Products where Prices are weighed by Revenue contribution expressed as a percentage.
      Quantity Change Percentage: the total percentage change in Quantity of the Portfolio Products in the 'In Scope' set.
      Revenue Change Percentage: the total percentage change in Revenue of the Portfolio Products in the 'In Scope' set.
      Profit Change Percentage: the total percentage change in Profit of the Portfolio Products in the 'In Scope' set.
      Goal Growth Percentage: the growth of the user-defined Portfolio Pricing Goal (Quantity/Revenue/Profit) as a percentage.
    3. Value: The final value of each Key Performance Indicator (KPI).