CFOs turn to AI for pricing as affordability concerns rise

Dive Brief:

Customer price sensitivity is rising across industries, with 57% of CFOs reporting an increase in their sector, according to Grant Thornton research released Wednesday.
Artificial intelligence and advanced pricing models are increasingly being used to balance customer sensitivity with profitability, including segmented pricing for different customer groups and dynamic pricing based on demand or inventory, the consulting firm reported. While 16% of organizations have fully implemented these approaches, another 35% are rolling them out more broadly across the business.
“AI and productivity improvements are helping companies protect margins while remaining responsive to customer price sensitivity,” Paul Melville, chief growth officer at Grant Thornton, said in a press release. “The most effective pricing strategies are rooted in value, not just cost recovery.”

Dive Insight:

Consumer sentiment dipped 2.6% in March, reaching its lowest reading so far this year, according to the University of Michigan's latest Index of Consumer Sentiment.

“Gasoline prices have exerted the most immediate impact felt by consumers, though the magnitude of passthrough to other prices remains highly uncertain,” Joanne Hsu, director of the university’s surveys of consumers, said in a statement. “A broad swath of consumers across incomes, age, and political affiliation all reported declines in expectations for their personal finances, down 7.5% nationally.”

Consumer prices increased 2.4% last month on an annual basis, unchanged from January and in line with forecasts, according to the Labor Department. So-called core prices, excluding volatile energy and food prices, rose 2.5% on an annual basis. Inflation has exceeded the 2% long-run target of the Federal Reserve for five years.

Almost three-fourths (73%) of CFOs say affordability concerns have affected their pricing strategies, Grant Thornton said. The firm’s research also found that inflation has prompted nearly six in 10 finance chiefs to restructure their cost and operational efficiency practices over the past 12 months. More than 84% of respondents reported passing some cost increases on to customers over the past year.

“CFOs are trying to keep their prices affordable, but they’re facing inflation themselves,” the consulting firm said in its report.