Building a win-win pricing strategy with AI negotiation


Do you know what your customers are happy to pay for your products? Not just which of your voucher codes perform best — but what price is actually enough for them to happily convert?

How do your prices and promotions compare to that of your competitors?

This year, many of our clients have been so surprised by the results they have seen from using Nibble that it has triggered re-examinations of their entire pricing strategies.

Which is hardly surprising. Especially when one retailer in particular saw AOV improve by +50% and took their discounts from 25% off down to an average of 9% while improving conversion at the same time

Clearly these retailers had been over-discounting for years, and the Nibble data showed by exactly how much.

But re-building a pricing strategy is not easy. So we have distilled what our various customers did into a 7 Step plan, initially delivered as an exclusive Nibble Table Talk, and now summarised here so you can find the win-win price for every transaction and stop leaving money on the table.  

Step 1: Deploy a test campaign to see what discount is actually necessary

Many of our retailers have found that in recent years, competition has led retailers to become accustomed to “buying” traffic and customers with big headline discounts, in turn pushing profitability down. But, do you really need to be doing this? 

The first step to a win-win pricing strategy is to use AI negotiation in a test campaign to identify the price your customers are in fact happy to convert at, relative to your previous promotions.

The important thing is that you remove your pre-existing promotions so you can see what discount customers are really wiling to convert at with Nibble.

You will almost certainly discover that you have been over-sacrificing.

For real examples of retailers who have run such test campaigns, check out our Customers page. 

Step 2: Cross-check your results against Nibble's industry benchmarks

AI negotiation can show you at what discount your customers will agree a deal, compared to the discount you were previously willing to give. 

The area in between these two points is the opportunity for negotiation, or more accurately, for margin-saving.

But these gaps and opportunities vary considerably by sector and season, so leverage Nibble's real-time data to find out how your prices and promotions compare to others in your industry.

Step 3: Anticipate future trends in customer expectations

In January 2023, we found retailers were offering on-average 10% discounts to customers — perhaps under strict instructions from their finance directors to reduce discounting that had run out of control in 2022.

But as 2023 went on, retailers were starting to offer more and more off, until a high of 15% off in April.. 

The consumer meanwhile was reducing their discounting expectations, becoming willing to pay more while retailers were giving away greater discounts! Were some retailers racing to the bottom too quickly? Probably.

Sometimes it is a matter of holding your nerve, and using the data from AI negotiation to find out exactly where consumers' price expectations lie relative to your discounts. 

Did You Know? According to Nibble data, retailers in Europe are suffering from over-discounting even worse than North American retailers. 

Step 4: Recognise trends differ from sector to sector

To work out what the right level of discount is for your brand, we can look at Nibble data sector by sector to find the ideal match between what you can offer and what the customer is willing to pay. S

ome sectors are already matched up well – for example, consumer electronics are quite closely aligned. A shopper's opening offer is often close to how much the retailer is prepared to discount by, and the win-win is easier to come by.

On the other hand, Nibble data shows apparel retailers wanting to discount at only 10% off, but consumers on average want at least a 30% discount – perhaps because they are used to seeing larger blanket discounts. Here, it is harder to find the middle ground where both parties can be happy – but through clever use of conversational AI and real world negotiation science, this gap can be closed.

Step 5: Really get to know what your customers want

Use conversational AI and real chats with your customers to find out more about your customers than you ever have before – including what they value the most, and what they don't.

Nibble’s natural language understanding really becomes powerful here – some retailers for example notice they have a lot of customers who say they have a voucher code they’re wanting to use. Bespoke responses to these kind of queries to a chatbot can make customers feel heard and teach them to accept a different kind of deal. This is about helping customers think in dollars (or pounds), rather than discount percentages.

With other retailers using AI negotiation, we see a lot of price-matching requests.

Did you know, we see this intent 3.5x more often in retailers who sell items over $100?

So, if you are selling higher value items, you need to be aware you're more likely to receive price-matching requests from your customers – and you've got to be able to respond effectively.

Step 6: Counter un-matchable expectations with your Brand Values

Nibble’s chats can be tailored to your brand through Brand Value Statements.

If shoppers are price matching or querying why they should shop with you, Nibble will take your brand messaging and use generative AI to combine it with our conversational design to generate compelling negotiation chat statements that explain why shoppers should buy from you, and at your price.

These reasons will then be deployed at the most relevant part of the conversation to persuade a shopper to convert and defend your price point.

This is part of the real magic of a 1-on-1 conversation – you get a real opportunity to connect with a shopper and steer the negotiation to a values-based rather than price-based discussion in a rare instance when you have the shoppers' undivided attention. 

Mentioning things like free delivery or testimonials in your Brand Value Statements work fantastically here and can increase conversion by up to 148% according to recent Nibble data published in IMRG.

Step 7: Tailor your negotiations with your normal offers in tandem

Finally, bring your usual promotions back into the fold seamlessly alongside AI negotiation.

Do you normally offer a Gift With Purchase? Incorporate it into the Nibble negotiation so that customers still get the experience they are used to, but with a personal touch. 

Or, perhaps you normally entice customers with popular bundles – in which case, offer them within the chat, or let them build their own with suggestions from Nibble. This combination of AI negotiation with your normal offers keeps the promotion feeling on-brand and familiar to your loyal shoppers.

Did you know? People generally overvalue free items – so if you can throw in a free gift with a purchase, you can really delight your customers AND save on margin at the same time.

So, what are the results from using these 7 steps?


For one client who went through these 7 steps, Nibble improved AOV by 50%, reduced discounting from 15-25% to an average of 9%, and improved conversion by 4% at the same time. 

See more customers 

The data and insights gained from AI negotiation provide a unique opportunity to learn what your customers are willing to pay, identify how you match up to competitors in your sector, and redesign your pricing strategy with unique, bespoke promotions that offer real value while saving your margins.


What next?

You can check out some of our customer stories, showing examples of us reducing discounting, increasing margin and conversion rates, and even boosting AOV. 

Or, check out Nibble's feature with generative AI integration – Brand Value Statements deliver the message your customer needs to hear at the exact moment they need to hear it to make the purchase.



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