Towards a Framework for Knowledge-based Pricing Services Improving Operational Agility in the Retail Industry

Marketing research has identified several benefits of dynamic pricing models. For example, dynamic pricing in terms of inventory considerations and time horizons, bundling or personalized offerings has been found to increase sales volume, customer satisfaction and to skim reservation prices. However, today's retailers lack the capability to apply dynamic pricing models because of missing services that realize them and technologies such as smart product infrastructures that deliver the resulting prices to customers. Moreover, dynamic pricing models rely on various price parameters provided by several stakeholders such as retailers (e.g., inventory data), suppliers (e.g., recommended sales price), customers (e.g., buying history or products in the shopping basket), or the government (e.g., taxes). In this sense, interoperability between the price parameters of these stakeholders is required and can be addressed with the help of semantic technologies. Because unprecedented, our objectives are therefore to model, implement and evaluate a framework for pricing services that rely on explicit semantic descriptions and rules. We call them knowledgebased pricing services (KPS). In contrast to dynamic pricing models that are solely based on historical data about prices and customers, the knowledge-based approach uses logical statements to individualize a price. In the current work, we propose a conceptual model for KPS and exemplify its use for a personalized pricing scenario within an in-store shopping situation. Furthermore, we draw implications for business models in the retail industry to motivate the adoption of KPS. And finally, existing tools (e.g., ODRL-Services, SPDO or the Tip "n Tell smart product infrastructure), which may play a major role for the implementation of KPS, are discussed in order to guide future work. This paper is therefore a first step towards the application of dynamic pricing strategies in retail stores that are based on explicit semantics and which have the potential to improve operational agility in the retail industry through an improved availability and quality of price information. Thus, KPS may foster the evolution of a new business ecosystem around pricing services.