Setting Up Your First Pricing Rule: A Step-by-Step Tutorial

You have read about dynamic pricing. You understand the theory. Now it is time to actually build your first rule and see it in action.

This tutorial walks you through the complete process of creating a pricing rule in PryceScan, from selecting target products to testing and activation. If you are new to dynamic pricing, our complete guide covers the strategic foundations. This post is purely practical - the step-by-step mechanics of getting your first rule live.

We will build three example rules for three common product types. By the end, you will have a clear template for any rule your business needs.

Before you start

Make sure you have the following in place:

1. Competitor tracking active. Your target products need at least one competitor mapped and returning price data. If you set up tracking yesterday, give it 24 hours for the first data pull to complete.
2. Product costs entered. Margin-based rules need accurate cost data. Check that your product costs are current - stale costs lead to rules that accidentally price below your actual margin floor.
3. A clear objective. Know what you are trying to achieve before you build. "Be competitive" is too vague. "Match or beat the cheapest competitor while maintaining at least 15% margin" is specific enough to translate into a rule.

Understanding rule components

Every pricing rule in PryceScan's pricing engine has five components:

• Target - which products or categories the rule applies to
• Strategy - the pricing logic (beat cheapest, match average, hold position)
• Bounds - the floor and ceiling that constrain the rule's output
• Schedule - when and how often the rule evaluates
• Approval - whether changes push automatically or queue for review

Let us build three rules that cover the most common scenarios.

Rule 1: Commodity electronics - beat the cheapest by 5%

Commodity products compete almost entirely on price. Think USB cables, phone cases, basic peripherals. For these products, being the cheapest (or close to it) directly drives sales volume.

Step 1: Select your targets

Navigate to the Rules section and click Create New Rule. In the target selection panel, you have three options:

• Individual products - select specific SKUs
• Category - apply to all products in a category
• Tag - apply to products with a specific tag

For this example, select the category Cables & Accessories. This applies the rule to every product in that category, including any new products added later.

Tip: Using categories or tags means new products automatically inherit the rule. This saves you from manually adding every new SKU.

Step 2: Choose your strategy

Select Beat Cheapest Competitor from the strategy dropdown. Configure:

• Beat by: 5% (percentage-based)
• Competitor scope: All tracked competitors
• Ignore outliers: Yes - exclude prices more than 40% below the category average (this filters out likely errors or liquidation pricing)

The "ignore outliers" setting is important. Without it, a competitor accidentally listing a $50 cable at $5 would drag your price down to $4.75.

Step 3: Set your bounds

Every rule needs a floor and a ceiling. Without them, a price war with a competitor could drive your price to zero.

• Floor type: Margin-based
• Minimum margin: 12%
• Ceiling type: Fixed percentage above cost
• Maximum markup: 60%

With these bounds, no matter what competitors do, your price will never drop below a 12% margin or rise above a 60% markup. The floor protects profitability. The ceiling prevents you from overcharging when competitors are out of stock.

Step 4: Configure the schedule

• Evaluation frequency: Every 6 hours
• Active days: Monday to Sunday

For commodity products, frequent evaluation makes sense. Competitor prices change often, and being the cheapest by 5% only works if you are reacting quickly.

Step 5: Set the approval mode

For commodity products with tight bounds, auto-push is usually appropriate:

• Approval mode: Auto-push
• Condition: Only when the price change is less than 10%

Changes above 10% will queue for manual review. This catches unusual situations - like a competitor suddenly doubling their price - without slowing down normal day-to-day adjustments.

Step 6: Test the rule

Before activating, click Simulate. PryceScan will run the rule against current market data and show you:

• How many products would change price
• The average price change (amount and percentage)
• Which products would hit the floor or ceiling
• The projected margin impact across the category

Review the simulation carefully. If 80% of products are hitting the margin floor, your floor may be set too high, or the "beat by 5%" target may be too aggressive for your cost structure. Adjust and re-simulate until the output looks reasonable.

Step 7: Activate

Click Activate Rule. The rule will evaluate on its next scheduled cycle and begin generating price recommendations (or auto-pushing changes, depending on your approval settings).

Rule 2: Mid-range appliances - match the market average

Mid-range products sit in a different competitive position. You are not trying to be the cheapest. You are positioning as a reliable, fairly-priced option. For these products, matching the market average is often the right approach.

Step 1: Select your targets

Choose the category Small Kitchen Appliances or tag the specific products you want to include. Mid-range rules work best when applied to products where you have a strong brand or service reputation that justifies not being the cheapest.

Step 2: Choose your strategy

Select Match Market Average from the strategy dropdown. Configure:

• Average type: Median (more resistant to outliers than mean)
• Competitor scope: Top 5 competitors by relevance
• Match precision: Round to nearest $0.99 (e.g., $84.99 rather than $84.37)

Using the median rather than the mean prevents a single low-priced competitor from pulling your average down disproportionately.

Step 3: Set your bounds

• Floor type: Margin-based
• Minimum margin: 22%
• Ceiling type: Percentage above median
• Maximum above median: 8%

The 22% margin floor reflects the higher operational costs associated with appliances (shipping, returns, warranty support). The 8% ceiling above median prevents the rule from setting prices too far above the market if competitor data is temporarily incomplete.

Step 4: Configure the schedule

• Evaluation frequency: Every 12 hours
• Active days: Monday to Sunday

Appliance prices change less frequently than commodity electronics. A 12-hour cycle is sufficient to stay current without generating excessive price changes that could confuse repeat visitors to your site.

Step 5: Set the approval mode

• Approval mode: Queue for review
• Auto-push threshold: Changes under 3% can auto-push
• Review required: Changes of 3% or more

Mid-range products carry higher revenue per unit, so the financial impact of a wrong price is greater. A lower auto-push threshold gives your pricing analyst visibility into significant changes.

Step 6: Test and activate

Run the simulation. For mid-range products, pay particular attention to the margin distribution. If the rule is pulling margins down to your floor across the board, your competitors may be pricing more aggressively than your cost structure allows. That is a strategic signal, not a rule configuration problem.

Rule 3: Premium brand products - price 10% above average

Premium products rely on perceived value. Pricing too low can actually hurt sales by undermining the brand positioning. For these products, you want to be deliberately above the market average.

Step 1: Select your targets

Select specific premium brand products or use a tag like Premium Tier. Be selective - this strategy only works for products where the brand carries genuine prestige.

Step 2: Choose your strategy

Select Position Above Market from the strategy dropdown. Configure:

• Position: 10% above market median
• Competitor scope: Authorised retailers only (exclude grey market sellers)
• Rounding: Round to nearest $5 (premium products look better with round numbers)

Filtering to authorised retailers is critical for premium products. Grey market sellers with discounted stock will distort the market average and pull your "10% above" price down to a level that undercuts your brand positioning.

Step 3: Set your bounds

• Floor type: MAP (Minimum Advertised Price)
• Minimum: As per brand MAP policy
• Ceiling type: Fixed amount
• Maximum price: Brand MSRP

Premium products often have MAP policies that set a hard floor. Using MAP as your floor ensures compliance while the rule optimises within the permitted range.

Step 4: Configure the schedule

• Evaluation frequency: Every 24 hours
• Active days: Monday to Friday

Premium product prices are stable. Daily evaluation is sufficient, and restricting to business days means weekend price anomalies (like flash sales from competitors) do not trigger unnecessary adjustments.

Step 5: Set the approval mode

• Approval mode: Full review required
• No auto-push

Every price change on premium products should be reviewed by your category manager. The revenue per unit is high, the brand relationship is important and the volume of changes will be low (daily evaluation on a limited product set). Full review adds minimal overhead.

Step 6: Test and activate

In the simulation, verify that no prices fall below MAP. If your "10% above median" calculation lands below MAP for any product, the floor will catch it - but that is a signal that the market is pricing aggressively and your premium positioning may need a different approach for that specific product.

Common mistakes to avoid

Setting bounds too wide. A rule with a 5% margin floor and a 200% markup ceiling is technically valid but practically useless. Tight bounds force better strategy definition and prevent surprises.

Ignoring the simulation. The simulate button exists for a reason. Every rule should be simulated before activation. Even experienced pricing analysts are sometimes surprised by how a rule interacts with current market data.

Too many rules on the same product. If two rules apply to the same SKU, you need a clear priority order. Rule conflicts are the most common source of unexpected pricing behaviour.

Not reviewing regularly. A rule that was perfect in March may be wrong in June. Set a calendar reminder to review rule performance monthly. Check which products are consistently hitting floors or ceilings - that is a signal the rule needs adjustment.

What happens after activation

Once your rule is live, you will want to monitor its performance. PryceScan provides rule-level analytics showing:

• Number of price changes triggered per day
• Average change size
• Floor and ceiling hit rates
• Margin impact versus the pre-rule baseline

If you are concerned about price changes going live without oversight, read our guide on price approval workflows. It covers how to set up L1/L2 approval chains that keep your team in control without creating bottlenecks.

For a broader comparison of rules-based approaches versus AI-powered pricing, see our detailed comparison. It will help you understand where rules fit in the bigger picture and when it makes sense to consider more advanced approaches.

Next steps

Start with one rule on one product category. Get comfortable with the simulation, activation and monitoring cycle. Once you see results, expand to a second category with a different strategy type. Within a few weeks, you will have a rules framework covering your core catalogue - and the data to prove its impact.