Pricing Strategies

1. Navigate to “Goals and Settings” on your Luca Dashboard.
2. Click on “Add a new Pricing Strategy”
3. Give the strategy a name
4. Select which SKUs you want this strategy to impact. If this is a strategy that impacts all your SKUs, select “All SKUs”
5. Select a “Primary Objective”. For most users, this is either to optimize revenue, optimize profit or optimize units sold. This Primary Objective is Luca’s northstar for your business and Luca will try to optimize for that metric with its pricing strategy. Maing a change
6. However, you probably want to add constraints to that “Primary Objective”, for example you want to maximize for profit, but you don’t want to increase prices more than 5% at any given time, or you want to grow revenue but you want to make sure your margins remain greater than 50%. That’s where Rules come in.

Once you’ve configured your strategy, the next price plan produced will reflect the strategy you’ve set up.

Short answer, yes.

Long answer, as a complex retail business, you probably have different goals for different parts of your business. For example, as a grocery business, you might be optimizing for profitability on high-end alcohol products but optimizing on units sold for basic products such as eggs and milk.

Therefore Luca allows you to configure different parts of your business to optimize for the metrics that matter for that part of the business.

You can prioritize Pricing Strategies by ordering them in the sequence you want, with Strategy 1 taking higher priority over Strategy 2, Strategy 2 over Strategy 3, and so forth. This will allow you to do things such as this - “I want Luca to maximize profit for my entire business, but I don’t want Luca to increase prices more than 5% for XYZ SKUs.”

• Strategy 1: Max Price Increase of 5% for XYZ SKUs.
• Strategy 2: Improve Profit for All SKUs.

This prioritizes the max price increase of 5% for XYZ SKUs over improving profit.

If you want to reverse that order and would be willing to violate the 5% max price increase over profit improvement, simply drag and re-order the strategy order.

Short answer is, Don’t do that.

Long answer is, when conflicting strategies or rules are applied to the same SKUs, the higher ranked strategy is applied to those SKUs.

• Strategy 1: Improve profit for XYZ SKU.
• Strategy 2: Improve revenue for XYZ SKU.

Luca’s pricing engine will prioritize improving profit.

Once you add or edit a Strategy, it will be applied to the next price plan scheduled for your business.

A primary objective is the northstar metric you want to improve for the selected SKUs. There are four types of Primary Objectives you can select amongst.

1. Improve Revenue
2. Improve Profit
3. Improve Units Sold
4. Improve Margin

When you select a Primary Objective, you will see a tradeoff meter that looks like this.

What this is asking is “you want this objective, but how badly?” For example, will you be willing to lose 10 dollars in revenue for 1 dollar in profit gained? Probably not. This Tradeoff Meter specification tells Luca’s pricing engine what that tradeoff constraint is, and applies that to the prices for all SKUs within that strategy.

A Rule is a hard constraint applied to your prices. Luca currently supports the following types of Rules, and we are constantly adding more as we hear requests from our customers.

1. Margin - Total: This is the aggregate margin for all SKUs covered by this strategy, but might not be true at a SKU level.
2. Margin - SKU Level: This is the margin target for every individual SKU covered by this strategy.
3. Price Change: This is the max percentage or absolute price increase or decrease allowed everytime a price change is made.
4. Competitor Price: This rule allows you to specify how closely priced you want to be with your competitors. Note that this is only available if you’ve subscribed to Luca’s competitor intelligence service.
5. Price Rounding: This rule allows you to specify guardrails around rounding each price, such as the closest 99 cents.

A Primary Objective is a northstar goal that you want Luca to optimize for. A Rule is a guardrail Luca should respect while striving for that goal.

Sometimes our customers might see a price plan that seems contradictory to their Primary Objective. For example, a customer might set a profit maximizing Primary Objective, but their price plan might actually show profit decreasing. Why would that happen?

There are two reasons why -

1. There are certain Rules that are preventing Luca from meeting the Primary Objective. For example, you might have set a Competitor Guardrail that is forcing Luca to reduce prices, however your Primary Objective might be to improve margin.
2. It is impossible to meet your Primary Objective within the tradeoffs provided. For example, you’ve set your profit maximization goal to not lose more than 1 dollar in revenue for 1 dollar in profit gained, but your product elasticities might not allow that condition to be respected. Try loosing that constraint to observe what happens.

1. Click on “Add a new Pricing Strategy”
2. Add a strategy name of your choice
3. Add the SKUs you want to ensure that Luca doesn’t change prices for by selecting categories from the dropdown or by uploading a list of SKUs in a CSV.
4. Select the checkbox which says “Exclude from Price Changes”
5. Save the strategy

Any SKU that has a Price Strategy associated with it allows Luca to change its price. If there are no Pricing Strategies that include a given SKU, Luca will not change its price.

The counter at the top of the Price Strategy Home Page reflects the total number of SKUs Luca is currently allowed to price.

• Select from a Dropdown You can select Categories, Sub Categories, Brands or Tags from the Pricing Strategy dropdown.
• Upload CSV: You can upload a CSV using the upload functionality.

You can create new Tags or use Luca-generated Tags such as ‘Top Sellers’ or ‘Up and Comers’ to support creating a strategy for a certain set of SKUs. For example, you might want to make sure you’re at most increasing prices by 5% for your Top Sellers.

You can set a strategy around your Top Sellers by selecting the ‘Top Sellers’ tag from the Dropdown.