Fuel Pricing AI – one size doesn’t fit all

AI is the buzz word of the moment in the fuel retail industry – but fuel pricing is one aspect where AI is not new — it has been in use for years and is proven to add value.  

For over 40 years, Kalibrate has been providing data science driven pricing solutions to fuel retailers across the globe. With 7 patents awarded for the data science that drives its AI, Kalibrate Fuel Price Optimization is a unique approach to pricing that is proven to maximize profit for fuel retailers. 

Despite the obvious plus points, many fuel retailers are hesitant to fully hand over control of their pricing strategy to an algorithm. While AI-driven pricing solutions can optimize profitability, there needs to be a level of human control that ensures these tools align with each retailer’s unique strategy and market conditions. 

If everyone uses AI – does everyone get the same price?  

A common concern is whether multiple retailers using AI-driven pricing would result in everyone arriving at the same price. The reality is quite the opposite.  

Kalibrate’s Fuel Price Optimization allows fuel retailers to set constraints, rules, and parameters that align with their business objectives. Each client operates with its own pricing models and rules, ensuring that pricing strategies remain tailored to their specific needs. 

If two fuel retailers in the same market use Fuel Price Optimization, their AI-driven pricing decisions will differ. There are multiple data points that feed the optimal price calculation, and these are different for every site, even those in close proximity in the same network.  

Among other factors, the optimization calculation accounts for site specific data like customer and competitor sensitivity to price changes, as well as the impact of numerous external influences on volume changes.  

Retailers are encouraged to use margin-volume policies so the AI can optimize against specific targets for both volume and margin to provide prices that maximize profit. 

The process followed is the same for every user, but the elements that are accounted for in the optimization calculation are different for every single site. 

The result? Two retailers in the same market, using AI, but with distinctly different pricing outcomes. 

Why AI isn’t always the best fit 

AI tools are only as good as the data they process. For AI-driven pricing to work effectively, retailers need access to accurate, clean, and comprehensive data. Gaps in data or inconsistencies in historical trends can significantly impact the reliability of AI-driven recommendations. This means that while AI-based fuel pricing may be the ideal solution for some sites within a retailer’s network, it may not be the best fit for every location. 

Kalibrate addresses this challenge through its Model Health indicators, which assess pricing model accuracy using a hold-out sample of data. If a model’s accuracy falls below a predefined threshold — determined by analyzing a broad set of site-product models — it is classified as “unhealthy.” In these cases, it is strongly recommended that the product be excluded from AI-driven optimization to ensure that pricing decisions remain appropriate. 

Some markets just aren’t a good fit.

There’s no such thing as a perfect market for AI fuel pricing. But your network and market may be better suited for optimization if you have:  

• Clearly defined brand proposition 

• A good understanding of the competitive environment 

• A history of price variability (or a good understanding of price sensitivities)  

• Interconnected systems  

Read more about whether optimization is right for you.

The right AI solution for your fuel network 

AI-driven fuel pricing is not a one-size-fits-all solution, and retailers should approach it with a strategic mindset. The key to success is leveraging an AI tool that provides flexibility, allows for customization, and ensures model accuracy — and preparing your organization to prioritize quality data collection.  

By using Kalibrate’s Fuel Price Optimization, retailers can maintain control over their fuel pricing strategy while benefiting from AI-driven insights that maximize profitability. 

Want to learn more about how Kalibrate can help your business navigate AI-driven fuel pricing?  

Get in touch with our team today.