
Ventata - Maximize your profits with dynamic pricing. - mtrimpe
https://ventata.com/
======
jacques_chester
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...](http://chester.id.au/2012/09/12/review-the-strategy-and-tactics-of-
pricing/)

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.

~~~
zissou
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_chester
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.

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zissou
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.

~~~
ljd
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!

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hahla
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.

~~~
saurik
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).

~~~
ljd
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)

~~~
saurik
Rereading what I said, I am not certain of the confusion, but I will expand:
you can't evalulate the price of your product using the _gross_ value it
provides _in isolation_ , you have to evalulate the price of your product
using the _net_ value it provides _in comparison to competitors_.

If I ended up in the situation where I was paying you hundreds, certainly if I
was paying you thousands, of dollars a month, I find it impossibly difficult
to believe that I couldn't get more "bang for the buck" by spending the time
to reimplement the features I am getting from you.

(As an entirely unrelated argument, the optimal margin might not even be 1%:
to charge a percentage of revenue for something that doesn't have any scaling
terms in proportion to the dollars being moved is, to put it lightly, "bold";
my business, for example, probably couldn't afford 1%, yet I routinely move
tens of millions of dollars... and I certainly, at the price of _hundreds of
thousands of dollars a year_ , would have no trouble reimplementing your
setup, and in fact have done similar things as side projects on various
occasions.)

~~~
ljd
Customers that do tens of millions of dollars a year tend to call us and get a
lower price from us. They don't use the signup box. It's common for enterprise
companies to self select by calling for special pricing and in most cases we
oblige. We want to make a fair deal for all parties.

On the other hand, I get it - You would never use us, you would try to build
it yourself. I can respect that. I get like that for a lot of stuff I see.

The founding team's past experience is in algorithmic asset valuation,
commodity trading and machine learning. We are life long learners and are
dedicating our time to find better ways of helping ecommerce stores pick
better prices. We have several years of experience in workflow automation and
we apply that to our current business to make our product as cheap as humanly
possible and pass those prices along. Our closest neighbor in the pricing game
charges hundreds of thousands of dollars in fees because they use so much
human labor to do things.

Saurik, if you ever want to do one less thing and want us to do your price
testing. Please give us call, I would love to find a price that makes it worth
your time.

After all, I am fond of dynamic pricing. :)

~~~
saurik
You seem to have missed the point of me providing that number (something I
take some of the blame for, as I was explicitly mixing two arguments; I did go
out of my way to attempt to differentiate them, however): I was demonstrating
that even at an incredibly large extreme with regards to absolute revenue, the
percentage margin doesn't really become affected; when I was moving tens of
thousands (as opposed to millions) of dollars, the answer would have been the
same: you can double my revenue, but at 1% you are talking about most of the
magin that I'm currently playing with for my not-entirely-uncommon business
model (where my upstream obligations, fees, and taxes, scale nearly linearly
within my plausible target price range, with respect to the ticket price of
the item being sold).

It isn't because I would be an "enterprise company" that I would need special
pricing, it is because your pricing model makes a fundamental assumption about
the kind of business model that the other person might be engaged in: if you
had a "percentage of profit" model--even though you would still be in the
"this is too expensive: I could hire a full time developer and a CS grad
student at less than this price to get 90% of the benefit" regime--you would
no longer de-facto price yourself out of various markets.

(FWIW, my experience on this is that I was a CS person with an algorithms
fetish who was recently working with a long-time machine-learning specialist
in a weirdly-related-but-not-even-remotely-competing area to your company. The
result was lots of conversations both internally and with various of our
clients with regards to how to price such a service: the result is that I have
seen both a lot of failure modes of advertising and of asking for "percentage
of revenue". This is, of course, in addition to running most of my current
business on a "percentage of revenue" basis, and seeing the kinds of problems
and misunderstandings it can cause.)

~~~
ljd
I understand where you are going now. To be fair, your point about certain
people selling on low margins comes up with us and we usually start those
companies at $1/product/month on our pricing and go down from there depending
on how many products they want to price with us.

We have been testing this pricing model to see if we will earn more revenue
doing this.

I appreciate your continued feedback and your clarification.

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ljd
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.

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donjigweed
Wonder how these guys compare with Runa.

