Pricing

Moneyball: How Data Trumps Expertise

By James Marland
October 13, 2011

Moneyball asks the question: can a statistics-crunching machine really understand baseball better than a man?

For decades it had been accepted that spotting potential baseball stars was an art best performed by veteran scouts whose instincts had been elevated to near mystical levels after years on the road watching endless college and high school games. An alternative approach, pioneered by the Oakland As in 2001, relied on computer-driven analysis of previously neglected statistics to identify players that were under-valued and ignored by other managers.

The A’s started winning with the resulting team of misfits, and fans hailed the manager (played by Brad Pitt in the movie) as a visionary; a card counter in a casino full of fortune-tellers. The availability of in-memory analytical tools had suddenly brought advanced analysis into the baseball back office.

Those same tools can provide a similar winning strategy to Pricing Managers, allowing you to pass better financed rivals in the quest for profits. Instead of pouring over on-base percentage and slugging percentage, pricers are cranking up their analytical engines to look at Price Yield, Cost-to-Serve ratios, Price Realization, Defection Risk and a host of other metrics to come up with the optimal plays. Gross Margin? That’s old school.

Trouble is the cat is out of the bag and everyone understands the principles – you need to do this before your competition does. You don’t have Brad’s good looks to fall back on.

– James Marland

  • Analytics , Price Optimization , Price Realization , Pricing Metrics , Pricing Optimization , pricing science , Value Realization

    James Marland

    James Marland is the Director of Business Consulting at Vendavo based in London. In this role he helps diagnose Pricing Opportunities and develops business cases for pricing projects with ROI models. James has been in the pricing software space for many years, both on the customer and supply chain side: so he has a view from “each side of the table”. Prior to his pricing career he was VP of Solutions at Ariba and has also spent 5 years at SAP America. He has a Bachelor of Science degree in Mathematics from the University of Southampton.