Ventata - Maximize your profits with dynamic pricing.

by mtrimpe • 14 years ago

25 19 14 years ago

hahla• 14 years ago

1% of revenue for any company earning in excess of $10k per month seems excessive. But I guess if those clients are also seeing substantial percentage increases in revenue it would warrant the 'data fee'. This is classic supply and demand on-the-go pricing, but from my initial glance the site doesn't really explain where they have tested it, and what real results were measured.

saurik3• 14 years ago

It is actually 1% of revenue for all companies: the lower-priced brackets have caps that make it work out as 1% (or higher, due to the granularity) across all brackets.

My problem with this is that there is no way that this algorithm is really that impressive to warrant what might be a substantial amount of someone's margin: if you are finding yourself spending a ton of money on this algorithm, you can easily re-implement it... based on both the video and the FAQ it sounds like they are doing simple hill-climbing, which should take a few hours to implement (and which, I will however point out, isn't even anywhere near optimal for this kind of problem).

ljd8• 14 years ago

It's not hill climbing. Gradient descent has some severe limitations.

Also, I have mentioned it before but if you are charged 1% and someone makes you 2%, I don't understand why you wouldn't buy from them. (On a side note: we earn our sellers more than 2% on average)

ljd8• 14 years ago

We are making all of our vendors more than 1% and for some we've doubled their revenue using a Limited Supply strategy. They weren't a large store but we did make them several thousand more per month.

jacques_chester4• 14 years ago

Pricing is more complex than the classic Econ 101 diagram for maximising revenues under the demand curve on a particular price point. Much, much more complex.

There's also considerations of customer value, segmentation, price fencing, bundling, unbundling, price strategy and so on and so forth.

In fact ... whole books are written about it. I read one recently: http://chester.id.au/2012/09/12/review-the-strategy-and-tact...

It's probably the most important business I book I can remember reading. Pricing is the low-hanging fruit, the big juicy lever of profitability.

zissou2• 14 years ago

Of course you're right that pricing is not easy. Your list of other considerations is also very good (sounds like you've taken a course in industrial organization). The only other main idea I want to add is that price is just one of the ways that firms compete with one and other (Bertrand competition). Firms also compete with each other over quantity (Cournot competition), and among other general dimensions like quality (i.e. product differentiation).

In order to have good estimates of price elasticity via a derived demand function, one would also need to consider the price and features of competing products in that demand function (which would enable the use of other economic measures of marginal effects like cross-price elasticity of demand). Your competitor's price is just as important as your own price because of substitution effects.

jacques_chester4• 14 years ago

That book actually has a good discussion on advanced pricing techniques, including taking competitor prices into account. They even outlined techniques for selecting the most efficient bundle of features for a given price -- right up to labs built to perfectly resemble a supermarket.

ljd8• 14 years ago

While pricing is in fact a very complex topic and we actually incorporate some of the aspects of grouping that you are mentioning, when it comes to communicating what we do to small to medium sized ecommerce shops we found that it was best to stick to a more simple approach in our marketing video.

Thanks for the feedback

jacques_chester4• 14 years ago

True.

But I have to show off mah fancy book learning somehow, dammit! :D

zissou2• 14 years ago

Technically, the goal of this service (whether the owners describe it this way or not) is to find the unit elastic point on a product's demand curve. In theory, assuming a linear demand function, profits are maximized at the price and quantity associated with the point where price elasticity of demand = 1 (or equally, where marginal revenue = 0). If your current price is higher than the unit elastic price, your total revenue increases by lowering your price. If your current price is lower than the unit elastic price, your total revenue increases by raising your price. These topics are covered in any intro to microeconomics course (as well as any MBA economics course).

That being said, I like the idea, and I wish you guys luck. I'm actually building something similar (YC application in the pipeline) but with a more specific focus on a particular set of markets.

ljd8• 14 years ago

Hi, I'm one of the cofounders. Your description is a great start to what we are doing. There are more considerations that just that but to be fair we aren't publishing papers on economics. We really do want to combine well understood economic principles with machine learning to make a very affordable product for ecommerce stores and event providers.

Thanks for the good wishes!

donjigweed• 14 years ago

Wonder how these guys compare with Runa.

ljd8• 14 years ago

Hey, I'm Luke. I'm one of the founders of Ventata. This is quite unexpected but I'm trying to bring more people online to help with questions and such.

For now, I'll try to answer as many questions as possible.

Ventata - Maximize your profits with dynamic pricing.

Related Stories