Ep 86 | Pricing Transformation is an Evolution, Not a Revolution

Speaker A: Consultants, they are amazing at some things in particular making nice slides and then you end up with those nice slides and you don't know how to implement it. So that's why I think you, you just need to have this internal pricing resource that would be engine for the pricing change. Integrating all the best things and um, elements from all those different external resources as well as ah, the internal functions.

Speaker B: Complexity is rising for B2B companies putting a strain on legacy systems and threatening profit and revenue performance. Your customers expect exceptional service through more channels and in real time. B2B Reimagined is a bi monthly podcast that offers a fresh look at how to gain strategic control of commercial performance. Featuring thought leaders from a unique mix of industries and technology fields. Walk away from each episode with pragmatic and strategic advice to power intelligent commerce in your business.

Speaker C: Hello everyone, my name is Barrett Thompson. I'm the Vice president of customer and industry relations at Ziliint and I'll be your host for our podcast. I'm joined today by Maciej Kraus, a leading expert speaker and educator in technology, software and startup pricing. A TED speaker, author and frequent lecturer at Stanford and leading executive education and startup incubator events, Maciej specializes in pricing and sales excellence in B2B, B2C and retail markets. Maciej, welcome to B2B Reimagined.

Speaker D: It's a great pleasure to be here with you, Maciej.

Speaker C: Um, I'm so looking forward to having this discussion with you today. Before we get started on the topic, I heard that you're sometimes mistaken for a celebrity. And since we don't have video on our podcast, just audio, I wonder, would you mind sharing with our audience who is that celebrity? And uh, maybe if you even have a story about how that has worked to your advantage or disadvantage to be mistaken for that celebrity.

Speaker D: Okay, so allow me to mention two celebrities these days. Very often I've ah, been told that I reassemble Jeff Bezos and it's probably my shaved head and my serious expression. And while uh, he's known for his pioneering work in E commerce and space travel, my question is more grounded. I would say I help companies to unlock their true potential through effective pricing strategies. Uh, this is Jeff and I remember back when I was still a teenager, I would say girls told me that I look very much like Bruce Willis and I think it helped me to get few dates.

Speaker C: So yeah, you know, I could see the connection. I'll vouch for it. You know, for the sake of the audience, I could see it at uh, both of those epochs in your life. Uh, I like the Jeff Bezos reference. Yeah, that's for sure. Well, thank you for that. On a more serious note, I would love it if you gave us a few more details about your professional background and how you engage with and help your clients.

Speaker D: Okay. Yeah. So my pricing journey's been, what, like over 20 years now. I started with Niceplay. I'm originally Polish, so I started here in Poland, then Switzerland for a while. Then I moved to strategic consulting. Uh, after a couple of years traveling

Speaker A: around the world, I started my own

Speaker D: consultancy with my best friend. Uh, we grew it, uh, and sold it to PwC. So I had my own pricing startup back when I didn't know that there was a thing called startup.

Speaker C: Uh, very nice.

Speaker D: So I went the whole journey. Uh, so I'm not really a corporate guy, I guess. So I left PwC and, uh, then with the money that I made, I started a vc. Uh, so my one hat that I have is just VC helping startups, uh, grow and expand internationally. But still, um, I had my former clients and my other people approaching me. Hey, Maciej, can you help me with pricing? So at our vc, we have a pricing advisory arm where we help the, um, external companies to be better at pricing. It's relatively small team, you know, I would say around dozen people, but very experienced. I run it with my good friend Vojek, who's 25 years in pricing. He was the head of pricing at ah, uh, Syngenta. So he knows a bit about B2B pricing for sure as well.

Speaker C: Well, it's very entrepreneurial, I can tell, and success driven. So thank you so much for coming to share with us today. Uh, I'm so interested to explore with you this idea of building a strong and intentional pricing function inside an organization. And I think it would be appropriate even to go right back to basics. Why does it matter? And what are the benefits, if you will? And what does a great pricing function look like? How can someone go from where they are to where they should be? So let me just turn it to you for a moment to lay the groundwork for us here.

Speaker D: So over 20 years working as a pricing consultant, um, I see kind of a shift of what projects I'm engaged with. It used to be like, help us with the optimal pricing strategy, help us with the right discount system, um, those sort of things.

Speaker A: These days I more often get inquiries

Speaker D: around, help us to build our internal pricing muscle.

Speaker A: We don't want to rely on external pricing consultants. We.

Speaker D: Well, with all the different things happening around the world in the markets, you know, rapid changes in demand, supply, cost

Speaker A: structures, uh, customer preferences, we cannot rely

Speaker D: on, on someone external helping us with pricing. And we want to have this internal pricing capability.

Speaker A: And obviously as I work not only

Speaker D: for B2B but also I work heavily with B2C and with retail like for

Speaker A: a retailer or for a B2C, it's, it's a no brainer that you have an internal pricing team. And I still think that uh, for some reason uh, the wave is coming to B2B. But couple of companies or some companies are still, I would say not so sure that do you really need this internal pricing team? I think it's a matter of years

Speaker D: that they will come to the conclusion that there is no other option.

Speaker C: So if I'm hearing you, when you look across the landscape, you're seeing B2B companies that have not yet uh, established or committed to the very idea of having a purpose driven pricing function. Is that right?

Speaker A: Yeah, this is what I see.

Speaker D: And when I try to kind of answer myself a question, why is that?

Speaker A: I think the reason is that obviously with B2B you had in general more hefty margins, so you simply didn't have to be spot on pricing, like with airline, like with retail, like you could just for instance have those 5% discount increments and no one cared because you could afford it. And now as your margin is getting, I would say narrow, obviously you, you look for this optimization and pricing is the obvious direction that you turn your hat to.

Speaker C: I could see that. You know, one other thing we've observed sometimes is in a given business, no one may own pricing and therefore everyone owns pricing. You know, everyone has a touching at 5% of their job and perhaps the organization believes that they've got it covered because there's 20 different people who do pricing 5% of their time. Right, Something like that.

Speaker D: I usually compare pricing to soccer. I'm originally Polish, so we are a soccer country. It's like everyone is an expert in soccer in Poland.

Speaker A: Everyone know uh, how we should play, what's the right strategy, who should be in the first lineup, but when we just lose, no one is accountable, no one is responsible. And I think it's this very similar to pricing. Everyone is an expert in pricing at the company. Whoever you ask, yes, they all have a, they all have a say. But who's accountable, who's responsible?

Speaker D: No one.

Speaker A: And I think pricing has not changed in most companies because of politics.

Speaker C: You know, I'm a little empathetic. Though to those businesses where essentially what the current pricing or what the current landscape is is an inherited set of roles, processes, paradigms, practices. And you know, no one stopped to question it. Right. It's accumulated over 20 years. I see this also on the technology side often as evidenced by the Million Row Excel spreadsheet as an example. They just inherited it. And so no one ever stopped to ask, is that good? Is that right? What should I be thinking? Where did this come from?

Speaker A: Yeah, when we enter any company we

Speaker D: just start with asking those questions. Why do you give this customer a, ah, 30% discount?

Speaker A: The very common answer still these days is that, I don't know, it's always been like that. Someone set it up this way. I think of ages ago.

Speaker D: Yes.

Speaker A: And he was in a 30% bracket and that's it. So this is the reality that a

Speaker D: lot of B2B companies still face today.

Speaker C: When I think about how businesses are sort of generally, if they're attempting to move forward at all, right. In their, in their pricing process, which I think more and more are, quite honestly, there's more attention, right. Coming from the C suite. Often there's sort of two main branches in their thought process. Uh, one is around the technology and that gets a lot of attention. I spend time there because I work for a pricing technology company. The other side might be around process or people. I wonder what you're seeing Maciej what's the balance? Is there an order of operations going on here? Are people getting it right? Are they missing the boat? What do you think?

Speaker D: So my other comparison is, I compare those two things like technology and the people, processes and organizations to let's say

Speaker A: deciding which wheel in your bike is

Speaker D: more important, the front or the rear wheel.

Speaker A: Now really think about it.

Speaker C: I love it.

Speaker A: One will not go without the other. Of course you can just be, you know, uh, try to, to balance on one wheel, but it's not really efficient. And I think, you know, this analogy is very true to this, you know, subtle balance, technology versus organization, people and everything. Because I've seen like a lot of companies, they, for instance, they want to

Speaker D: throw technology at the problem.

Speaker A: Let's just hire like, you name a company and spend seven, eight figure, uh, amount on the technology. And then, you know, we are just secured and settled and obviously the technology company would just come to the, to the client asking all those questions. So what's your strategy? How do you want to set up your discount system now? How do you want to speak with your customers? And then there is just emptiness so, so, so this is one thing. The other thing is no, let's hire those, you know, uh, clever consultants. They gonna figure out how to do the pricing. And the consultants, they are amazing at some things in particular making nice slides. And then you know, you end up with those nice slides and you don't

Speaker D: know how to implement it.

Speaker A: So that's why I think you just need to have this internal pricing resource that would be the engine for, for the pricing change. Integrating all the best things and elements from all those different, you know, external uh, parties and external resources as well as the internal functions. So how do you integrate pricing with your financial team, with your sales team, with your marketing? So, so this is, I think this subtle balance. And, and I also compared pricing to, to pizza. So like there is no right or wrong way of making pizza. You know it probably as well as I do. There are all sorts of different ways of making pizza. Of course there are some general rules how to do it, but then you have to find your own, let's say perfect pizza recipe. And this is exactly how it should be with pricing. There are some general rules and technologies that gonna help you, but you need to kind of build your pricing function that will fit you. Not the pricing function that you've seen somewhere at Amazon or I don't know, a B2C business or your competitor. No, it never worked this way. You can get inspirations from them, but you have to do it your own way.

Speaker C: I think this is a great point. You know, inspiration's fine, imitation is flawed. Right. We're going to have to be organic, uh, and relevant and tailored to the business in which we're operating. I'd love to get your perspective on what if someone in the audience today says I'm in one of those organizations where we don't have the dedicated pricing team or the intentional pricing team. Perhaps the role that they're in is doing something related to pricing, but not with a seat at the table and this ability to start thinking the bigger thoughts. Do you have ideas for them on how to raise the visibility of, maybe even raise the seniority or the importance of this pricing function inside the organization? How, how might they go about it?

Speaker D: Okay, so my experience with really quite a few organization I've worked with is that this, let's say pricing initiative is

Speaker A: always a, uh, top down. It's never a bottom up. I've never seen the head of sales or the, the head of marketing coming to a CEO, CEO saying dear CEO, I think we know we, we are not that good at Pricing, we should

Speaker D: get better at it.

Speaker A: I've never seen a head of sales

Speaker D: saying that

Speaker A: all the sales rep or anyone else or someone from controlling, they're always fine. That's why it. First of all, you have to secure the executive buying without this, any pricing initiative or I haven't seen a successful pricing initiative without securing executive, you know, buy in. Then obviously it's about just doing the right diagnosis or explanation. So, so what's the status quo of your pricing today? Because like you have different parties engaged in the process and then they have a different view on the, on the thing. And what I've seen is that like, first you just need to understand to draw a map of your pricing territory and agree on the map. And this is sometimes already quite, um, quite a challenge.

Speaker C: Yes, I would say so.

Speaker A: So first, you know, I would start with just drawing this, this, this exploring the, your, your pricing landscape and drawing a map that you all agree that this is our pricing status quo. Because without this it's difficult to agree on what are the priorities for the change, what is it that we actually lack? What is it that we need? So like this is what I um, really start with, with the executive buy in and with doing that and agreeing of what's our pricing status quo. M and where we want to be.

Speaker C: Maciej it occurs to me that this may be one of the best times ever to try and get that attention in B2B. And I'll explain why and I would love to get your feedback on it. I think for many years, through the 2000s and the 2010s and so on, many senior executives just believed or assumed that pricing was operating as it should and operating well. If they even thought about pricing at all as something to be managed or as versus something that just sort of happens accidentally in the selling process. But the pandemic years and a result of all the many things that happen there with cost volatility or uh, quantity, uh, shortages and supply chain disruptions and other things. I think it brought to the surface pricing in a way that people hadn't seen before when they suddenly started asking questions like, why are our margins tanking? Well, because our costs have gone up 12 times. So we'll just change price. Oh no, Let me tell you the hidden thing. You didn't know it takes four months to get a cost. I mean a price change pushed through to the business. An executive said, what? So I think there was a visibility, uh, moment that's still with us. Um, that hasn't happened before for many years. And I think there's an awareness now at the exact level that pricing, what they've experienced is, when done poorly, without an intentional group, without a defined process, has many negative consequences. It shouldn't be too hard to pivot to if we do it right. Think about the upsides and the benefits. One, does your experience align to that or do you have a different point of view? And two, what might be some of those messages that if there were someone listening on this call, they say, I want to be that advocate, I want to be that catalyst inside my organization. Are there some particular value propositions they could carry to the organization on? Why should we draw this map? Why should we talk about our current state and plan for the future?

Speaker D: Okay, so starting with your first question, I think no, this is the perfect time to just change your pricing and

Speaker A: change your pricing, uh, approach. I don't mean changing your pricing levels or something, just changing your pricing mindset

Speaker D: philosophy however you want to, however you want to call this.

Speaker A: And still a lot of B2B companies, as you rightly said, didn't change, care about pricing because they didn't have to. You just do the cost plus pricing old school. You just add whatever, 50, 70% markup on your cost and you are fine. And as you said, these days it doesn't work for a lot of companies that uh, didn't work perfectly for really like generations.

Speaker B: Yes.

Speaker A: So definitely this is the perfect time to make the change. Why? Because just you have, you have a gun, you know, against your head and you have to do something. There is no, like the old way doesn't work. And um, this is the best, you know, I would say incentive to make a change. And then answering your second question, you know, why just having this, this map makes this important. Pricing change is a, ah, based on my experience, successful pricing change is an evolution and not a revolution. Like the patient has to survive the procedure.

Speaker D: Really think about it.

Speaker C: Yes.

Speaker A: Like we have to just carry on our operations, serve our clients, send the invoices, make customer calls, you know, acquire new customers, everything as uh, as it was but changing this pricing in the background. That's why I would always say that pricing change is an evolution, not a revolution. I think a lot of companies, they have this fear that, oh no, like making this change, we're not going to survive. The main priority for the pricing change is for the, for the patient to survive.

Speaker C: Great advice, Maciej. It's our privilege to have you present at our annual Mindshare European conference coming up in Amsterdam this November. And will, will Attendees hear more things like this from you. Are you speaking on similar topics? There's.

Speaker A: Yeah, this is exactly what I want

Speaker D: to speak about and where I want to share my experience is on uh, building the internal, efficient internal pricing organization. And together with my, my colleague Vojek, I told you about that. We work with each other for over 10 years. We coined this, um, spot on pricing methodology.

Speaker A: Spot comes from S for strategy. So your pricing is a tool. It has to have a direct link to the strategy. Like pricing is like a hammer. If you don't know what you want to do with the tool, like no hammer will help you and you can just hurt yourself. So as is for strategy. No really, then P is for process. So really how to implement this robust pricing processes that consider market dynamics, customer value and all those things that surround and how to integrate different functions of your, of your company into the pricing process. Who should do what, who should be

Speaker D: responsible for what, and those kinds of things.

Speaker A: So this is P4 process. Then is the organization. So who do we want to have in our pricing bus? What kills do we need? And here again, uh, my experience is that it's easier to teach pricing to someone who knows how the company operates than to get an external pricing expert that was a successful pricing manager at, uh, you know, prestigious company and then getting them to our company. My experience is really if you want to have a, uh, sustainable pricing change is, I would say a mix of those, but you need to have those internal people who understand how the company operates. So this is, this is about the organization, something I'm going to touch upon

Speaker D: more in depth in Amsterdam.

Speaker A: And the last very important element is the tools and the technology. So like, no, really the most clever people, the most ambitious, and they will not be efficient without the right technology. So this is another element that I will also discuss and I'm very much looking forward to this meeting. And uh, I'm absolutely sure we're going to have tons of interesting and insightful

Speaker D: conversations in the room and after the session. So can't wait.

Speaker C: That's exactly right. It's going to be a very valuable session. Um, especially I sense the action orientation that you have. So companies will get a lot of benefit out of hearing your ideas and applying them in their business as it stands today. So I'm looking forward to that. Maciej, I'll give you the last word. Anything else you want to share with our audience before we close up?

Speaker A: Yeah, we, we had this conversation around, you know, technology versus the people. Like, which one should go first? I would like. The only thing I want you to remember is this bike analogy. It's not the choice, you know, front versus the real wheel. It's, you know, how to assemble those two into your frame that you have the organization to just go faster. And this is what we want to build.

Speaker C: So we need both. They're not in competition.

Speaker A: Exactly, exactly. We need both. They're complementary and, you know, there can be amazing synergies if you know how to set them up together.

Speaker C: I love that. And once again, thank you, Maciej Kraus, for sharing your insights today.

Speaker A: It's been a pleasure. Very much looking forward to see you

Speaker D: in Amsterdam in November, and I want

Speaker C: to thank each of our podcast listeners for being with us. Please check out the show notes for a link to register for Mindshare Europe 2024, taking place in Amsterdam on November 5th and 6th. We're committed to your success and if you need any assistance, please reach out to us@zilii.com would you do me a favor before you go? And please rate and review the show in your podcast app as it helps us to continue to put out great free content. Until next time, have a great day.