[rtb]

This seems like a spammy advertorial to me. There is nothing in the article to back up any of their sensationalist claims.

As far as I can tell, they ask customers how much they would pay, and draw a pretty graph of that. What evidence do they have that people's responses to price questions are an accurate indicator of what they would actually spend? What have they done to address selection bias?

[pccampbell]

Great points, rtb. We've actually done a lot of research on validating our process and algorithm. I addressed this in another comment, but we've run this process with commodities (very marke driven products) to ensure the process is sound (check out more info here: http://blog.priceintelligently.com/blog/bid/153543/Pricing-i...).

We've also started working on honing more and more validity checking into the model to filter out as much noise, outliers, and selection bias as possible.

The next step for this particular angle would be to test the deals out at the higher price point. Past customers of ours have definitely seen changes. Appreciate the feedback though. For the next part of the series we'll make sure we outline more about the foundation of the methodology and the validity behind it. Happy to hop on a call to outline, as well.

[rtb]

Thanks for the thoughtful reply. Your gold example doesn't really prove the approach sound though. If you ask a gold buyer how much they would pay for gold, I would expect them to be able to give you an accurate answer immediately.

However, if you ask a consumer how much they would pay for a discretionary purchase, I would not expect their answer to match reality.

Let's say you asked me how much I would pay for a BMW. I would probably never buy a BMW at any price (except if I thought I could sell it on immediately for more), but I would happily name a price if I was asked. This would distort your figures.

I just don't believe that what people say about prices matches what they will do (except for traders in commodity exchanges, which I think is a very unrepresentative example v.s. consumers visiting a restaurant).

(Thanks for the offer of a call. Luckily, I don't have the stress of setting any customer facing prices at the moment, so I'm not a potential customer, but thanks anyway.)