Don’t worry, this isn’t one of those articles that glorifies the contributions of science towards society while berating the arts as restricted to ‘hippies’. Neither does it vilify science as an evil, heartless machine, lacking warmth and human touch, that is found when reflecting inwards via arts and humanities.
Often you will hear of this constant tussle between what’s ‘Art’ and what’s ‘Science’. Which is superior? Which is the ‘divine truth’?
Here I’m just trying to analyse Pricing in light of these apparently contradicting notions.
Pricing is something that I wonder and talk about quite a lot. Maybe because it’s such a simple but effective communicator of the quality, utility or affordability of a product. Or maybe because it’s my job! :D
The Science of Pricing
Science is the study of the natural world. Science aims to unravel the world around us using the scientific method — where observations are made of real world phenomenon, data is gathered, and laws are framed.
When it comes to pricing, there’s a lot of ‘science’ involved. Demand forecasting, price-demand elasticities, market sensitivity analysis, game theory, cost and break-even analysis, bundle configurations, decoy pricing…phew!!
What makes the world go round?
Is it the interplay of gravitational forces between the Sun and Earth coupled with the Earth’s velocity in a direction perpendicular to the Sun’s pull…well, not anymore. It’s data! Data makes the world go round!
There’s been an unprecedented explosion in the amount of data that humans have been generating lately, and the ‘scientific approach’ to pricing aims to leverage relevant data to make informed and intelligent enhancements to your pricing strategies to steer towards more optimum returns.
The Art of Pricing
Art is the expression or application of creative skill and imagination. To quote Robin Williams from the beautiful movie Dead Poets Society:
“…medicine, law, business, engineering, these are noble pursuits and necessary to sustain life. But poetry, beauty, romance, love, these are what we stay alive for”
The problem with approaching pricing with a strict ‘data’ perspective is that we tend to forget what the data stands for. It stands for people, users, customers, consumers. Living, breathing, emotional beings.
At the end of the day, it is a human that you are selling to. And human psychology plays a big role in making the decision to purchase.
Take for instance a flea market. The seller always quotes an insanely high price, which starts off a negotiation process with an interested buyer.
“How low should I go” is the nagging question in the seller’s mind, as he/she tries to gauge the buyer’s willingness to pay. At the end, different customers end up purchasing at different prices depending on the value that they derive from the products.
It is well known that Albert Einstein has been falsely attributed with a lot of famous quotes. One of his quotes (not sure if genuinely his or not) is:
“After a certain high level of technical skill is achieved, science and art tend to coalesce in aesthetics, plasticity and form. The greatest scientists are artists as well”
At Greendeck, we strive to find the perfect balance between science and art into pricing. In fact, that’s exactly our motto:
“Bringing Science to the Art of pricing”
Greendeck is an API based Dynamic Pricing engine that brings the power of data analysis, experimentation, and artificial intelligence to your business, while ensuring that you are in the driving seat, on top of your pricing strategies at all times.
This wonderful post on reddit sums it up very well — Art does not undermine science, nor does science downplay the importance of art. It is within the synthesis of the two that greatness resides.