When pricing your products either manually or automatically you want to make sure the price is not set too low or too high. With pricing safeguards, you set the price range within which the price must be.
How do safeguards work?
When calculating a new price for your product we first run all pricing actions and end up with a new price point. Next, we check whether or not the price is in the pricing range defined with your safeguards. There are two basic types of safeguards: upper and lower boundaries. When calculating the price range we calculate the lowest acceptable upper boundary and the highest acceptable lower boundary.
Say we have defined the following safeguards:
My price must be below the market maximum (100€)
My price must be below the current price +10% (85€)
My price must be above the market minimum (50€)
My price must be above my purchase price (60€)
The resulting price range would be
Upper: minimum of (100€, 85€) = 85€
Lower: maximum of (50€, 60€) = 60€
Thus the resulting price range would be 60€ <-> 85€.
When configuring a pricing strategy, you will find the safeguards in the Pricing Safeguards section. When creating a new strategy, we have set some default safeguards for you: price must be below the market maximum, above the market minimum, higher than your purchase price and your margin target needs to be met.
To remove any of the set safeguards, click on the X-icon on the chip.
To view or change the details of a safeguard, click on the chip to open the safeguard settings menu.
Here you are presented with the following fields:
Boundry type - whether the price must be above or below the defined value
Field - Here you choose the product field from which the safeguard value is calculated. You can choose between a wide range of product and market data fields. You can even upload custom values and use them as safeguards.
Operation - You can apply a simple add/subtract operation on the chosen value, either as a percent or absolute value of the chosen field
To add a new safeguard, click on the plus chip at the end of the list to open the safeguard menu.
Inspecting chosen safeguards in the simulation view
When you have set up your safeguards, you will see a simulation of their impact in the simulation view on the right.
The simulation comprises imaginary competitors' prices which change up and down in addition to static data lines representing your internal data. Note that the values do not represent real values, but merely used for illustrational purposes.
As you configure your safeguards the view will automatically update to illustrate the price range of your product. The price range is represented by a green area between the max and min safeguard values.
In the example above we see the effect of the price range on our imaginary price (represented by a thick black line). The safeguards used here are "Below market max" and "Above purchase price". At the start of the simulation, our price is within the range and we are not applying any pricing actions so our price point stays level. Then, when the market maximum lowers so that our price hits the "ceiling" of our price range, the safeguards will cause our price to follow the edge of the price range.
How you choose to set up your pricing safeguards depends greatly on your pricing strategy and your data. Here is some inspiration:
Make sure you always get profit:
The price must be above your margin target
The price must be above your purchase price
Make sure your prices are in line with the market prices, never too expensive or too cheap:
The price must be above the market minimum
The price must be below the market minimum
Make sure your price changes are never too large (work great with manual pricing as well!)
The price must be above current price -10%
The price must be below current price +10%
Follow market situation but do not react to minor changes
Effectively follow the market without pricing actions.
The price must be above market average -5%
The price must be below market average +5%