Chat with Oliver Roll: AI, Inflation, and Modern Pricing Strategies Unraveled
A Conversation with the Business Administration Prof and Management Consultant on the Impact of AI, Trump, and the Inflation Wave of 2022
"Costs are starting to fluctuate more frequently"
Oliver Roll, Professor of Business Administration and International Marketing at the University of Osnabrück and founder of the management consultancy R&P, discusses how the high inflation surge of 2022 impacted pricing strategies and the growing role of AI in the modern world.
By Martin Pirkl, Frankfurt
The continuous, intense inflationary period of 2022 and beyond has left a significant impact on German businesses, according to Professor Roll. Many firms, particularly those in the B2B sector, used to reassess their pricing strategies just once a year, with potential adjustments. However, this has changed, as firms are now responding to the high cost increases more frequently, Roll explains. "Companies have to frequently adjust their prices due to the enormous cost pressures," he says. "We continue to observe this newfound flexibility in pricing."
While the European Central Bank (ECB) might not anticipate a higher volatility in inflation due to Roll's assessment, the increased frequency of price adjustments could lead to a slightly quicker pace in monetary transmission, he adds.
AI's disruptive influence on modern pricing
This dynamic pricing shift aligns with the rise of AI in the economy, Pal admits. AI enables large data analysis, near real-time data processing, and swift incorporation of those insights into pricing decisions. The number of forward-thinking companies embracing dynamic pricing, from airlines to e-commerce retailers, is rapidly increasing. "We are living in a world where prices are becoming increasingly fluid," declares Oliver Roll.
However, AI's applications in pricing are still relatively new, Roll acknowledges. He emphasizes the importance of companies retaining the ability to manually adjust AI-determined prices, as no business owner wants to blindly trust an opaque pricing algorithm.
Drivers of inflation in 2023 and beyond
Oliver Roll's predictions for 2023 indicate ongoing wage growth as a significant driver of inflation, but at a lower rate compared to 2024. Cooling labor market trends and increased job cuts at influential companies like SAP, Deutsche Bahn, and VW may result in decreased wage growth.
Another possible inflation catalyst in 2025 could be the EU's countermeasures to US tariffs. In such a scenario, companies might pass these additional costs onto their customers, according to Professor Roll.
Inflation control and external factors
Economic gloom and slowdown, along with inflation expectations, influential company- and industry-specific factors, all play into businesses' pricing decisions. Central bank inflation expectations and overall economic sentiment indicators are incorporated into sales forecasts, in conjunction with a forecast for production costs.
Navigating the pricing waters in a dynamic market is no easy feat, Professor Roll admits. However, he warns against drastic price reductions, as they are usually frowned upon as a sign of failure. Instead, companies often deploy other tactics, such as off-peak discount promotions or value-added features to restore lost demand.
Enrichment Data:
While specific insights on AI's impact on pricing strategies from Oliver Roll are not explicitly stated in the given data, the rise of dynamic pricing aligns with broader industry developments in the realm of AI-driven pricing optimization. Key advantages include granular demand forecasting, automated exception handling, and continuous model refinement through machine learning. Retailers, manufacturers, and supply chain managers alike are leveraging AI for revenue and profit optimization, tariff and cost management, competitive price monitoring, and more.
Major AI-driven benefits include a 12% revenue lift and 9% profit margin improvement for retailers employing intelligent pricing algorithms. Furthermore, AI tools enable category-based tariff management, enable real-time competitor tracking, and provide for continuous model refinement. As AI-driven pricing strategies become more mainstream, industries can anticipate improved agility in volatile markets.
- Professor Roll, in his assessment, suggests that the high inflation surge of 2022 has led to a change in pricing strategies among German businesses, particularly in the B2B sector, with companies now responding to cost pressures more frequently.
- The increased frequency of price adjustments due to inflation, as noted by Professor Roll, could potentially lead to a quicker pace in monetary transmission, though the European Central Bank might not anticipate higher volatility in inflation.
- In line with the rise of AI in the economy, there is an increasing number of forward-thinking companies adopting dynamic pricing strategies, as AI enables large data analysis, near real-time data processing, and swift incorporation of insights into pricing decisions.
- In 2023, Oliver Roll predicts wage growth as a significant driver of inflation, but at a lower rate compared to 2024. Additional inflation catalysts in 2025 could be the EU's countermeasures to US tariffs, which could potentially lead companies to pass these additional costs onto their customers.
