Triggered by the arrival of new data, the price elasticities within the model will automatically adjust to reflect the latest information. Individual outlet elasticities and competitor cross elasticities are used within the PriceIt! Pro model [image-nocss] to forecast the volume resulting from a price change. As marketplace changes occur, such as new entrants and outlet closures, elasticities can be impacted. Previously, customers had to contact MPSI to request elasticity changes. Now, with the automation, the model recalculates these on its own each time it receives new data.
"Since elasticities and cross elasticities are the engine in pricing models, MPSI conducts ongoing research and development to improve our methods for keeping these values current," said Don Spears, managing director of global pricing for MPSI. "Whenever we can automate a process, we're reducing the time it takes for our customers to get their jobs done."
The Tulsa, Okla.-based company also recently announced the availability of another new option in its online PriceIt! Pro systemthe automatic recalculation of volume goals. A volume goal represents the total amount of fuel an outlet can be expected to sell on a long-term basis, measured as an average daily value. PriceIt! Pro users are trained to review these periodically and, when warranted, are encouraged to make adjustments to their volume goals to reflect non-temporary marketplace changes. To assist with this challenge, MPSI now provides users with the ability to input parameters on an outlet-by-outlet basis which the model will then use to recalculate the volume goal.
Users opting for this enhancement are able to enter the rules that the model will use to adjust volume goals which will include both a "setting" and a "look-back period." The "setting" tells the model how often to reset the volume goal, such as every 28 calendar days. The look-back period provides the model with the constraints for computing the new volume goal by allowing the user to define how many weeks to go back in history. This automation removes the risks associated with volume goals that are set too high or too low that can occur when a user does not have time to manually adjust them before establishing their prices for that day.
There may be times when the user wishes to override the result, the company said. One such example could be during times of high seasonality. Rather than establishing a price that will allow for maintaining a lower volume level, there could be a desire to raise the volume goal, thus lowering price to increase volume. The PriceIt! Pro system provides users with the flexibility to override the automated volume goals as needed.
"This automation allows our users to establish a consistent method for keeping their volume goals up-to-date," said Spears. "Consistency is the key to ensure that corporate strategy is being followed and this automation is one of the things we can offer to promote this within an organization."
The online PriceIt! Pro system is designed to help users set the best motor fuel prices for each outlet in their network. It combines daily fuel volumes, costs, prices and key competitor prices, consumer price sensitivities and an optimization routine to establish a price position that achieves optimum profit and volume.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.