Far from a new concept, price optimisation software platforms have been in the market since the early 2000’s. They basically fall into two categories: 1) Algorithmic testing of pricing boundaries and 2) market price aggregation. In this article we explore the benefits and dangers of these technologies as both face increasing legal tests around the world.
Equipment Rental in Australia first flirted with this technology ~ 15 years ago when Coates Hire engaged PROS as a provider. More recently, Rouse Services has been active in the market providing pricing intelligence. These platforms have met with mixed success in the Australian market for different reasons…
Primarily, both intelligence platforms are based on a singular requirement. Volume. Each logic requires a sufficient number of ‘like’ transactions within an; equipment type, geographic area, customer type and transaction type. This type of logic works very well with high volume environments such as airlines, hotels and supermarkets where conditions are typically seasonal and less subject to other variables… less so in a complex pricing environment such as rental.
For the most part, price optimisation software is perfectly legal as it is based on internal data to the organisation and responsive to sales-rejections or price ceilings. Price aggregation services however are somewhat more troublesome*. Those services aggregate transactions from multiple actors in an industry and feedback information on utilisation and pricing to the providers. In 2024, a Nevada court found that some casino/hotels in Las Vegas had engaged in price fixing after they had all independently engaged a price aggregation provider who fed back hotel room utilisation and price data to clients. Closer to home, the afore-mentioned Rouse Services is facing a similar anti-trust court action in Chicago in the US charged with breaching what is known at the Sherman Act (see link). We will all be watching with interest as to how this plays out.
The reality is that the Australian equipment rental market is a combination of too complex and too small to leverage the logic of these algorithms to drive computer based decisions. In an industry that balances: day-to-day, project contracts, short/long term leasing and EPC solutions, no software platform can be expected to aggregate all of the necessary factors that are required to produce ‘a price’.
It’s good news for the rental sales reps/BDMs of the world but it doesn’t mean that we should stop working towards a world where better is possible. Every client I have worked with in this industry is not gathering/collecting the data that they should be to drive better performance and profitability. This is almost always related to capturing costs. Without true cost/maintenance data you cannot understand asset profitability, without asset profitability you cannot understand contract profitability, without contract profitability you cannot understand customer profitability. Sometimes your ‘best’ customers are your least profitable… but do you know that?
Having been involved in the management discussions about adopting these platforms (and spending millions of dollars), these early entrants made all of the promises in the world based on their American and European ‘experience’… The next generation based on ‘AI’ are coming… beware the snake oil merchants…
One parting observation – ‘Up’ is not a pricing strategy. I have worked with many CEO’s/GM’s who make this mistake. Pricing in a complex market with different products, geographies and customers is fluid and ‘Up’ doesn’t work for all circumstances, sometimes ‘Down’ or ‘Both’ is better.
*This article in no way insinuates or suggests that any named organisation or provider is in any way acting in a manner that is illegal or contravenes any Australian trade practices.
