There are two tides emerging in the field of retail pricing – both driven by advances in technology. These opposing forces are pushing retailers in different directions and contributing to confusion related to pricing policies.

The first tide is driven by advances in the retailer’s ability to target pricing, with price optimization software applying advanced algorithms to develop retail prices based on the purchasing behavior of segmented groups of customers and even individuals. Targeted price differentiation capitalizes on localized differences in price elasticity to make seemingly minor changes to prices. Collectively, these changes are capable of having a real impact on the bottom line, with benefit claims ranging from 1.5% to 5% increases in profit.

Over the past 15 to 20 years, advances in computing power together with the application of optimization methods created price optimization software. This type of application was born out of the