Correspondence: Theodore Valkov, PROS Revenue Management,¹ 3100 Main St. Suite No. 900, Houston, TX 77002, USA. Tel: +1 713 335 5151; E-mail: info@prosrm.com

¹Theodore Valkov is a Group Vice President at PROS Pricing Solutions, responsible for solution design. During his career at PROS, he has worked with over 50 enterprises across 11 different industries to help analyse, design, implement and evaluate science-based methods and solutions for pricing and for other commercial decisions. Theodore holds a doctorate in science from the Massachusetts Institute of Technology in the areas of computer modeling and management of technology.

Received 16 November 2005.

Abstract

Outline: Scientific pricing began as a disparate collection of models and custom tools developed by researchers and industry specialists. In the last decade, however, scientific pricing has become a technology in its own right. Standardised pricing models and analytics are embedded into software components, which are deployed today across a growing number of Fortune 500 companies to power pricing and marketing business processes. The rapidly increasing adoption of pricing software in everyday business operations is being driven by the substantial monetary benefits and process improvements it has generated across industries. This paper will review the key pricing models and analytics in industry use, and provide examples of their application. Every day, the research literature reports on new pricing models and methods. But which are the ones that global companies actually put into large-scale production use? Who uses them? What do they do with them? To a large extent, the answers to these questions have been provided by the pricing software industry, which provides the tools used in everyday operations by large enterprises. Much of the value realised from pricing technology comes from driving pricing inefficiencies out of the market. This value is measured in hundreds of millions of dollars shared between suppliers and consumers. From PROS' privileged standpoint as the dominant vendor of pricing software, this paper provides highlights on the 'what' and the 'how' of the technology that is helping manage the price of an ever-increasing array of items around you — from the plywood in your home to hamburgers, paper towels, latex gloves, motor oil and much more.