Pricing and Profitability Management: A Practical Guide for Business Leaders

The History of the Pricing Software Market

Pricing first developed as a simple way to quantify the value of goods or services for the purposes of an exchange. As business and economics matured, mathematics and statistics were utilized to perform quantitative studies on market behavior. Analysts were able to use statistical models and applied science to forecast customer demand for different products over time. With the advent and rapid evolution of digital computing, these modeling theories have provided businesses with the means to make smarter pricing decisions and to respond to competitor actions, market fluctuations, and inventory challenges with increasing effectiveness.

The earliest pricing software offered ad hoc tools that helped set prices in niche markets. This software evolved into advanced suites capable of facilitating the pricing process holistically. In this section we discuss the historical development of this market.

The Birth of a New Science

In 1978, shortly after deregulation in the U.S., the airline industry began to focus intensely on improving yield, which led, in turn, to the development of pricing as a science. The discipline of revenue management (RM) gained traction as it developed new methods for increasing sales revenue, maintaining profitability, and strengthening competitiveness in a highly complex marketplace. RM models analyzed transactional data to forecast future demand and facilitate decision making on the pricing and promotion of available product ...