AI-Driven Product Pricing Optimization

Problem: E-commerce stores struggle to price their products competitively while

maintaining profit margins.
Solution: Use SQL to store historical sales data, and Flask to create a web app that uses
machine learning (e.g., regression) to suggest optimal product prices.
Key Features:
 Product and sales data in the database.
 An ML model integrated into Flask to suggest price changes based on factors like
demand, stock, and competition.
 Visual analytics to help the user see the impact of pricing decisions.

1. Define the Problem and Project Scope

The idea behind this project is to help e-commerce businesses optimize their product pricing
using machine learning. By analyzing historical sales data, competitor prices, and market
trends, the system can suggest optimal product prices to maximize profit and sales.

Key Features:

 Price Optimization: Use machine learning to predict the optimal price for each
product.
 Data Visualization: Show pricing trends, sales data, and suggested price adjustments.
 Historical Sales Data: SQL database will store historical data about products, sales,
customer behavior, and competitors.
 User Feedback Loop: Users can input feedback on suggested prices, and the model
can adjust over time.

Data:

 You’ll need historical sales data, which typically includes:

o Product information (ID, name, category, cost, etc.)
o Sales data (dates, quantities sold, prices, revenue)
o Competitor prices (if available)
o Customer demographics (optional but useful for personalized pricing)

2. Design the Database Schema

You’ll need to store various entities in your database such as products, sales data, and pricing
history. A simple relational database schema could look like this:

Tables:

1. Products: Stores product information.

2. CREATE TABLE Products (
3. ProductID INT PRIMARY KEY,
 4. Name VARCHAR(255),
5. Category VARCHAR(100),
6. Cost DECIMAL(10, 2),
7. Description TEXT
8. );
9. Sales: Stores historical sales data.
10. CREATE TABLE Sales (
11. SaleID INT PRIMARY KEY,
12. ProductID INT,
13. Date DATE,
14. Quantity INT,
15. Price DECIMAL(10, 2),
16. Revenue DECIMAL(10, 2),
17. FOREIGN KEY (ProductID) REFERENCES Products(ProductID)
18. );
19. CompetitorPrices: Stores competitor prices.
20. CREATE TABLE CompetitorPrices (
21. CompetitorID INT PRIMARY KEY,
22. ProductID INT,
23. CompetitorPrice DECIMAL(10, 2),
24. Date DATE,
25. FOREIGN KEY (ProductID) REFERENCES Products(ProductID)
26. );
27. PricingSuggestions: Stores the AI-recommended prices for each product.
28. CREATE TABLE PricingSuggestions (
29. SuggestionID INT PRIMARY KEY,
30. ProductID INT,
31. SuggestedPrice DECIMAL(10, 2),
32. Date DATE,
33. FOREIGN KEY (ProductID) REFERENCES Products(ProductID)
34. );

This is a simple schema. You can add more tables or attributes as needed for your project.

3. Set Up the Flask App

Create a Flask web application that allows users to interact with the database and view
suggested prices.

Flask Project Structure:

/product-pricing-app
/templates
index.html
pricing_suggestions.html
/static
styles.css
app.py
models.py
machine_learning.py
config.py

Dependencies:

 Flask: Web framework to create the application.

  Flask-SQLAlchemy: ORM to interact with the database.
 Pandas: For data manipulation and preprocessing.
 Scikit-learn: For machine learning models.
 Matplotlib: For data visualization (e.g., price trends, sales).
 Joblib: For saving and loading machine learning models.

Install the dependencies:

pip install Flask flask_sqlalchemy pandas scikit-learn matplotlib joblib

app.py:

Create a simple Flask app that handles routing and integrates the machine learning model.

from flask import Flask, render_template

from models import db, Product, Sale, CompetitorPrice
from machine_learning import get_optimal_price

app = Flask(__name__)
app.config['SQLALCHEMY_DATABASE_URI'] = 'sqlite:///pricing.db'
app.config['SQLALCHEMY_TRACK_MODIFICATIONS'] = False
db.init_app(app)

@app.route('/')
def home():
products = Product.query.all()
return render_template('index.html', products=products)

@app.route('/suggested-prices')
def suggested_prices():
suggestions = []
products = Product.query.all()
for product in products:
optimal_price = get_optimal_price(product.ProductID)
suggestions.append((product, optimal_price))
return render_template('pricing_suggestions.html',
suggestions=suggestions)

if __name__ == '__main__':
app.run(debug=True)

4. Create Machine Learning Model for Price Optimization

This is the core of your project. You'll need to train a machine learning model to predict the
optimal price based on historical sales data, competitor prices, and other factors.

Steps:

1. Collect Data: Use data from your Sales and CompetitorPrices tables to build a
dataset for training the model.
2. Feature Engineering:
o Product cost and sales data are essential features.
o You might also use competitor pricing as an additional feature.
 3. Model: Use regression algorithms (like Linear Regression, Random Forest
Regressor, or XGBoost) to predict the optimal price.
4. Train Model: Train the model on historical data and validate it using test data.
5. Deploy Model: Save the trained model using joblib and load it in the Flask app to
make predictions.

Example code for training the model:

import pandas as pd
from sklearn.ensemble import RandomForestRegressor
from sklearn.model_selection import train_test_split
from sklearn.metrics import mean_squared_error
import joblib

def train_model():
# Load your sales and competitor data from the database
# For example, use pandas to load CSV or query from SQLAlchemy
data = pd.read_sql_query('SELECT * FROM Sales JOIN CompetitorPrices ON
Sales.ProductID = CompetitorPrices.ProductID', con)

# Feature Engineering
data['Price'] = data['Revenue'] / data['Quantity']
X = data[['Quantity', 'Price', 'CompetitorPrice']] # Add more features
as needed
y = data['Price'] # Target price

# Split data into train and test

X_train, X_test, y_train, y_test = train_test_split(X, y,
test_size=0.2)

# Model
model = RandomForestRegressor()
model.fit(X_train, y_train)

# Evaluate model
y_pred = model.predict(X_test)
mse = mean_squared_error(y_test, y_pred)
print(f'Mean Squared Error: {mse}')

# Save the trained model

joblib.dump(model, 'price_optimizer_model.pkl')

def get_optimal_price(product_id):
model = joblib.load('price_optimizer_model.pkl')
# Get the product's data from the database and predict price
product_data = fetch_product_data(product_id)
price = model.predict([product_data])
return price[0]

5. Build Frontend (HTML Templates)

Create simple HTML templates to display product information and pricing suggestions.

index.html:

<!DOCTYPE html>
<html lang="en">
<head>
<meta charset="UTF-8">
<title>Product Pricing App</title>
</head>
<body>
<h1>Product Pricing Optimization</h1>
<h2>Product List</h2>
<ul>
{% for product in products %}
<li>{{ product.Name }} - ${{ product.Cost }}</li>
{% endfor %}
</ul>
</body>
</html>

pricing_suggestions.html:

<!DOCTYPE html>
<html lang="en">
<head>
<meta charset="UTF-8">
<title>Pricing Suggestions</title>
</head>
<body>
<h1>Suggested Prices</h1>
<ul>
{% for product, price in suggestions %}
<li>{{ product.Name }} - Suggested Price: ${{ price }}</li>
{% endfor %}
</ul>
</body>
</html>

6. Testing and Deployment

 Test locally: Test the application by running the Flask app locally (python app.py)
and checking if everything works (ML model predictions, database integration, etc.).
 Deploy online: Deploy your app using platforms like Heroku, DigitalOcean, or
AWS. If you use Heroku, follow their documentation for deployment.

7. Showcase and Improve

Once your project is running, ensure it is well-documented:

 Create a README file explaining the problem, your approach, technologies used,
and how to run the project.
 Upload the code to GitHub.
 You could also make improvements, like adding user authentication, better UI design,
or adding more complex pricing algorithms.
Conclusion

This AI-Driven Product Pricing Optimization project will not only allow you to practice SQL
and Flask but also give you hands-on experience with machine learning. By combining
these technologies, you’ll demonstrate a high level

of technical proficiency on your resume, and you’ll have a compelling project to showcase to
potential employers.