Professor Maxime Cohen explains how AI is reshaping retail pricing strategies
Professor Maxime Cohen recently discussed how AI is enabling retailers to move from broad segmentation to granular personalization of prices. He said personalized pricing is expected to grow substantially, initially taking the form of tailored discounts and offers rather than unique posted prices for each shopper.
AI systems can combine purchase history, browsing behaviour, location, and other contextual data to estimate a shopper's willingness to pay in real time. Cohen notes that adoption will be fastest among large e‑commerce retailers, marketplaces, travel companies, and loyalty‑driven businesses that possess rich data and the technical infrastructure to run large‑scale experiments. He warns that while differentiated pricing is not inherently problematic, it can damage trust if customers perceive the differences as unfair, exploitative, or based on sensitive attributes. Cohen adds that generative AI could let retailers ask an AI system to recommend prices without building complex algorithms from scratch. He stresses that the key challenge with AI-driven pricing is ensuring differences can be justified and explained as fair and transparent to consumers.
“Traditional dynamic pricing typically adjusts prices based on factors such as demand, inventory, or time, whereas AI can combine a large number of signals about an individual customer, including purchase history, browsing behaviour, location, and other contextual information, to estimate willingness to pay in real time,” Maxime Cohen, professor at McGill University said.
“Adoption will be fastest among large e-commerce retailers, marketplaces, travel companies, and loyalty-driven businesses that have rich customer data, frequent transactions, and the technological infrastructure to experiment at scale,” Maxime Cohen, professor at McGill University said.
Companies have always tried to predict what customers will pay – airlines have long adjusted fares based on demand, and retailers have experimented with perso
What we know
Maxime Cohen is a professor at McGill University.
Maxime Cohen is author of the forthcoming MIT Press book Pricing in the Age of AI.
He expects personalized pricing to grow substantially, initially taking the form of personalized discounts, promotions, and offers rather than different posted prices for every customer.
Adoption will be fastest among large e-commerce retailers, marketplaces, travel companies, and loyalty-driven businesses that have rich customer data, frequent transactions, and the technological infrastructure to experiment at scale.
AI can combine a large number of signals about an individual customer, including purchase history, browsing behaviour, location, and other contextual information, to estimate willingness to pay in real time.