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Decision chain · 05

Retail pricing and promotions

Retail price optimisation compares candidate prices or promotions against expected demand, margin, stock and business constraints.

Last reviewed

Optimise the outcome, not volume alone

An apparent sales lift can be offset by lower unit margin, cannibalisation or demand pulled forward from a later week. Planning should make those trade-offs explicit before the event is committed.

  • Price-response assumptions
  • Incremental margin
  • Cannibalisation review
  • Calendar and inventory context

Keep the recommendation explainable

A merchant needs to see the proposed action, the assumptions behind it and the limits it was checked against. Approval remains a business decision, not an unexplained model output.

Questions

What is price elasticity?

Price elasticity describes how demand is expected to change when price changes, holding the relevant context and assumptions explicit.

How should promotions be evaluated?

Evaluate incremental demand and margin, not gross event sales alone, and account for cannibalisation, timing, stock availability and costs.