5 Algorithms every Pricing Director should know

Peter Sondergaard from Gartner recently coined the term of “Algorithmic Business” to state that data volume does not really matter, but what companies do with that data – how they turn it into proprietary algorithms – is a powerful competitive advantage and therefore the cornerstone of business growth.

Most of Pricing professionals are lagging behind in the digital transformation, and despite an important investment in software and data capture, most of the companies are facing a black box when it comes to understanding how pricing decision is decided and executed.

Mastering the Algorithmic Era in Pricing means creating in glass box situation within the organization, by getting back the control over pricing data and rules and developing and installing sustainable pricing analytics skills.

Where to start?

Here is our Top 5 Algorithms for Pricing:

  • Clustering: Clustering, K-Means are central mainly because segments (both customer and products) are at the very heart of pricing performance.
  • Regression: OLS, Multivariate, Logistic will allow you to identify predictors with or without interaction. Must have for elasticity and cross-elasticity measurement among other.
  • Associated Rules: even if the two first are obvious, this one is often missing. A priori rules are at the center of market basket analysis for example. Very useful when you have a large product portfolio and need to identify product sharing consumption patterns. It can allow you to extrapolate accurately value related insights from market research to your transactional data.
  • Decision Tree: Pricing is all about rules. Decision Trees (CART, CHAID, etc.) allow a representation of pricing decisions relating antecedents and outcomes, as well as a definition of the rules behind them (if / then). The backbone of pricing execution and efficient promotions and discounting for example. 
  • Deep Learning: because pricing is complex and volatile by nature, more advanced tools need to be used in order to deal with complex data or event structures, generate multiple layers of analytics, and learn from continuous data enrichment.

Algorithm and mathematics are at the very heart of the scientific process. And Pricing needs to be treated as a science. If you want to be prepared for the algorithmic era, you’d better start now!




Singapore – Internet Service Providers wage new broadband war

They are targeting 360,000 cable modem users

A broadband price war has emerged as Internet service providers (ISPs) take aim at some 360,000 cable modem users whose services may be discontinued by end-2017.

Sources said StarHub’s existing network leasing agreement with Singtel – which is crucial for the former’s cable broadband and TV services – is coming to an end next year.

Should StarHub choose to end the lease, its cable services will cease, making its 360,000 customers a prime target for ISPs eager to expand their customer base.

When contacted, StarHub chief marketing officer Howie Lau said: “We will ensure a smooth transition for our customers, from cable to our fibre broadband services.”

The Straits Times understands that a decision has yet to be made on the Singtel lease. In April, StarHub slashed the monthly price for its 300Mbps package from $49.90 to $29 – the cheapest offer yet – as part of early efforts to retain its cable broadband customers.

  • New tech takes over

  • Conventional broadband is based on older technologies such as StarHub’s cable and Singtel’s asymmetric digital subscriber line (ADSL) systems.

    These technologies, which have been around for more than a decade, have a surfing speed limit of around 100Mbps, unlike fibre broadband services which are 10 to 100 times faster.

    Fibre broadband – launched here in September 2010 – now commands about 70 per cent market share among households, according to the latest statistics on the Infocomm Development Authority’s website.

    In contrast, there are now only 360,000 cable modem users and “thousands” of ADSL subscribers. It is not known when Singtel will retire its ADSL systems, but StarHub’s cable service may be discontinued next year.

    StarHub’s existing network leasing agreement with Singtel – which is crucial for the former’s cable broadband and TV services – is coming to an end next year.

    The long-term lease dates back to the early 1990s, when StarHub’s predecessor, Singapore Cable Vision, was set up. It had to lease Singtel’s networks as the latter had a monopoly on telecommunications facilities.

    Irene Tham

But other ISPs also sniffed out the opportunity. Last month, M1 matched the StarHub deal with its own $29-a-month 300Mbps plan.

ViewQwest – which has so far been focusing on ultra-fast plans with surfing speeds of 1Gbps or higher – said it is set to offer a 350 Mbps fibre broadband plan for $29 a month tomorrow. “This group of users may not need high-speed plans, but they will be looking to switch to a good fibre broadband provider,” said Mr Vignesa Moorthy, chief executive of ViewQwest.

Mr Mike Ang, president of the Association of Telecommunications Industry of Singapore, said the switch from older technologies such as cable to fibre is inevitable.

“Cable technologies which are capable of surfing speeds of up to around 100Mbps are old and will eventually be retired,” he said.

Fibre broadband services debuted here in 2010, offering 10 to 100 times faster surfing than older broadband technologies such as cable and asymmetric digital subscriber line (ADSL). Now, more than 968,000 – or seven in 10 – households are on fibre broadband plans, according to Infocomm Development Authority statistics.

Mr Clement Teo, a senior analyst at market research firm Forrester, attributed the huge demand for fibre broadband to aggressive promotions. “Today, a 1Gbps plan can be bought for only $39 a month.”

Comparatively, a 6Mbps ADSL plan from Singtel – which is more than 100 times slower – cost $29.90 a month in 2013.