Is it D-Day for Pricing in Europe? Has pricing fever landed in Normandy?

2019-09-30
IPF (June 2019)

After participating in the largest gathering of pricing minds in Paris (#IPF2019), which occurred last week coincidently on the 75th anniversary of D-Day, I caught myself asking: has Pricing finally landed on the beaches of Normandy? Have European board rooms and executive committees caught up with America’s pricing fever?

Well, while European companies may not be spending in pricing expertise and tools quite as much yet as American companies (I predict that day is not very far), I can safely say that there is on this side of the Atlantic as much pricing talent, passion and thought leadership as on the other side. Looking for a proof? Look no further than the panel of the heads of pricing of #Philips, #Pernod-Ricard, #SchneiderElectric, and #PPG that I had the privilege to moderate last week during IPF 2nd edition. Attendees came from across Western Europe to learn first-hand how world class leaders deconstruct customer value, monetize intangibles, provide confidence to their sales force, shape the innovation cycle, boost the bottom line, enhance brand equity and manage to build sustainable pricing power against the relentless forces of commoditization and deflation. Laurent, Ann-Sofie, Loon and Jean-Christophe are starting to have as much impact in their organizations as their counterparts at my former US based clients such as #Microsoft, #Walmart, #UnitedAirlines and #GeneralElectric. As a European-born pricing pioneer who went up the Gulf Stream two decades ago to eventually become the founder and global leader of pricing and profitability practices of #Deloitte and then #Accenture, I had to wait that long to see this day.

All four panelists have demonstrated strong, often spectacular, results. They have CEOs that “get it”, investors that start to make the connection between #pricingpower and sustainable #shareholdervalue. They also have salespeople that think twice before discounting value propositions that are now better crafted, all of that while immersed in an unforgiving new world of digital price comparisons that bring #pricetransparency to B2B2C and blur traditional boundaries between B2C and B2C. Interestingly it is not just by generating significant margin increases or double digit ROIs that world class pricing directors turn heads; equally importantly, they bring together marketing, sales, finance, supply chain and IT, across the divisions and across the global operations, by embedding true #PricingGovernance permanently into the organisation. After starting with cross-functional pricing committees at the operational level, they quickly add the decisional level, for strategic arbitrages between growth and profit, between control and empowerment… When I challenged them to share with the audience concrete quick wins along with visionary plans, their rich responses reflected their personal and palpable passion for value Creation, value Communication and value Capture, what I call the 3 Cs of Pricing and Value.

Beyond my panel itself and throughout the rest of the conference (organized by the Club du Pricing Francais with the theme of “Quick Wins: Big Picture, Baby Steps, Huge Impact”) it became clear that virtually every Pricing Director, Chief Pricing Officer, Revenue Growth VP or Commercial Excellence Executive that I chatted with has been hiring people, investing in tools and embarking into ambitious transformation programs. Previously I had only witnessed that fever in San Francisco, in Chicago, in Atlanta and in Las Vegas, where the American pricing conferences have been taking place for 20 years… Some European leaders have now been applying #ArtificialIntelligence (with incidentally a fertile soil in France) to pricing. Others are first focusing on making their pricing rules more consistent and more transparent… Regardless of their first steps, full fledged pricing departments have now been created where, two years ago, there were often only part-time, neglected and overworked pricing managers. They no longer need to fight to get higher visibility from the C-Suite. Be careful what you ask for, you may get it! Senior executives now walk into the pricing directors’ offices because they in turn are getting higher attention from shareholders on that topic. Here is a very meaningful fact: a few years ago, I researched the proportion of times that a pricing related question gets asked by financial analysts during the quarterly earnings conference calls of Wall Street. What is your guess: 1/10? 1/4 of the time? Try again: two thirds of the time! No wonder CEOs get “interested” in the topic… By the way, does any of my 11000 followers want to research the equivalent statistic for CAC 40 of FTSE 100 companies? It would be an interesting metric to track.

Here are some examples of the pricing questions your CEO or CFO are being asked: « how are you getting ready for when #AmazonBusiness enters your high-margin B2B market? Can you demonstrate the pricing power of your brand? How will you respond to pricing wars? What is the portion of subscription and predictable revenue in your sales? How are you planning to monetize data and customer relationships? How fast will the company you just acquired be brought in line with your current pricing practices? Etc… » My question to you: what are YOU doing to help your executives answer those questions?

Yes, pricing has landed in board rooms, executive committees and digital platforms near you… But is there more ground for pricing to cover in Europe? Absolutely! Want examples? Too few CEOs and Pricing Directors, in my view, are fully aware how #BehavioralPricing, #PersonalizedPricing, #DynamicPricing, recurrent #SubscriptionRevenue and #BusinessModelInnovation, to name a few, are inexorably coming to THEIR industries, often through entrepreneurial disrupters or large platforms who, unlike large incumbents, actually use pricing innovation as the foundation of their business model, not just as a competitive competency or, as it is too often the case, as an after-thought.

How fast will European CEOs (or global CEOs for that matter) embrace the new levers of growth and monetization that investors expect, omni-channel customers adopt, competitors leverage and technology now enables?…The next few years will help sort out winners and losers. But one thing is already sure: Pricing is a solid beach head for the rest of the battle… and will be there to help win the war.

Happy Pricing D-Day!

https://www.linkedin.com/pulse/d-day-pricing-europe-has-fever-landed-normandy-augustin-manchon/

Behavioral Pricing gets the Nobel Prize!

2017-10-09

To all innovative leaders out there who have been trying to persuade your CEO to believe in the spectacular benefits of behavioral pricing, congratulations, your initiative should get a big boost with today’s recognition of Richard Thaler, one of the fathers of Behavioral Economics, as the 2017 Nobel Prize Laureate.

When I organized the first Innovation and Monetization Summit in North America, in February last year, there were still too many companies who had never heard of it. here is the advice I gave to the 150 attendees: If you and your team want a clear introduction then read « The Last Mile » by Professor Dilip Soman (one of the speakers at my conference). If you want to focus on the psychological implications, grab « Nudge » by Richard Thaler. If you want to collect dozens of fascinating stories, then go no further than « Payoff » and « Predictably Irrational » by Dan Ariely. However no practical book has yet been published on the emerging and more specific area of behavioral pricing… You can start to find consultants on the B2C side of it, where it started. The experts of B2B Behavioral Pricing are few and far between. too bad because that is where the biggest potential is…

View Article

Webinar: The Profitability Safety Net and the Role of Pricing

2011-07-26

Augustin Manchon hosted a webinar July 27, 2011 entitled: « The Profitability Safety Net and the Role of Pricing Technology » with Doug Fuehne Vice President of PROS Inc, the world leader in pricing optimization software.

White Paper: The Profitability Safety Net No CFO Should Be Without

2011-06-09

Manchon & Company published a white paper about the « The Profitability Safety Net No CFOs Should Be Without ». Where most companies still fall short and why the CFOs need to take the lead.

Augustin Manchon Co-moderated the First Ever Pricing Roundtable of CFOs in New York

2011-01-30

CFOs are taking an increasing role in sponsoring pricing initiatives.

 

Augustin Manchon Ranked “Top 20 Influencer in US Pricing Marketplace” (Slipstream, 2010)

2010-12-01

Augustin also recognized in the Top 10 in expertise, persuasiveness and thoroughness.

Augustin Manchon was Keynote Speaker for Pricing Executive Conference in Chicago

2010-07-27

Pricing Scorecard: Aligning Pricing and Analytics from the Board Room to the Front Lines.

Augustin Manchon interviewed by Rick Spence of The National Post

2009-06-30

It doesn’t pay to have one price for all

Package product to meet a variety of clients’ needs

Rick Spence, Financial Post 

Remember the days when everyone paid the same airfare to Winnipeg, no matter which airline you flew? Today it’s a 30,000-foot free-for-all, with nobody but the booking computer knowing whether you paid US$90 for your flight or US$900. (Either way, you may still have to pay for a pillow.)

Dynamic pricing, which is based on when you buy, your customer history or the leg room you need, has long since taken over the friendly skies. In most industries, however, dynamic pricing is still awaiting takeoff. Sure, some restaurants offer lower prices at noon than at dinnertime, but by and large Canada remains the land of fixed prices founded by Timothy Eaton, whose 19th-century brand promise was, « in selling goods, to have only one price. »

That’s why Augustin Manchon of Toronto-based Manchon Consulting contends dynamic pricing provides an opportunity to grow your business, as well as to distance yourself from less adroit competitors.

He says dynamic pricing is just starting to catch on: « A lot more businesses are looking at pricing as a flexible and creative business tool, » he says. « Interest in pricing is growing, even in small business. »

A former managing partner in Accenture’s marketing sciences practice, Manchon still seems to lament Coca-Cola’s reluctance a few years ago to establish temperature-based pricing in its vending machines that would have customers pay more on hot days. Understanding why that idea failed, however, is key to understanding dynamic pricing. « People felt gouged, because everyone knows the price of a Coke, » Manchon says.

In small business, you don’t have that problem: « People don’t know for sure what the prices are. »

Dynamic pricing stems from knowing your customers. It’s about understanding the maximum value of your product or service, and your own marginal costs, so you can offer the best possible value to different customer segments.

The simplest example of price agility is to take your typical product or service, make sure it’s priced appropriately for your prime customer, and then break it down into secondary products that offer fewer features or benefits at a lower price.

« You can have your baseline product or service, and then create other products on two or three levels for different market segments, » Manchon says. « Products that just a small portion of your customers will gravitate toward. »

A consulting company, for instance, might offer mini-reports, based on less-intensive research effort, just as local courier companies charge less for next-day delivery. « You have lowered the price, but not the margin, » Manchon says.

Another tack is to identify higher-value services customers will pay a premium for, and charge for the extra quality, convenience or security. For instance, a Web designer might offer to build complete Web sites, as a convenience for well-heeled clients.

« Add value in a modular way, » Manchon recommends. « But price it so if they buy all the bundles, they pay more. » Voila! You have raised your prices without disaffecting your core customer.

Be creative. Consider a downtown printing firm that posts its prices for all to see. Those rates are based on average overall costs, plus markup. If an order comes in late in the day and requires overtime work, the company may not be recovering those costs. One solution would be to charge more for jobs late in the day, but Manchon urges business owners to think bigger.

Why not offer a package for good customers? You might dangle a 5% discount to a client that consolidates its business with you. But higher-cost items (say, rush orders, or orders placed on weekends) wouldn’t be included in the bundle. That way you benefit from increased customer loyalty, but don’t have to include low-margin services.

A few more pricing tips from Manchon:
* If clients question your prices, be prepared to explain why they’re appropriate. If customers still insist on a discount, request a quid pro quo. Example: ask the customer to commit to buy bigger quantities, or to buy a second product they have not purchased from you before.

* Transfer costs to the customer. Swedish retailer Ikea makes you assemble your own furniture, while Ticketmaster and the airlines promote printing out your own tickers as a convenience.

* To maintain your margins, drill down on your products and services to make sure you understand all the costs involved in producing them. Include costs such as selling, customer support and inventory. Weed out low-margin moochers: « Every business has unprofitable customers and unprofitable deals. »

* If you’re a retailer offering promotional flyers, coupons and specials, don’t make them available in-store. Why encourage bargain-hunting customers any more than you have to?

* If you get a chance, advise your competitors to hire a pricing coach. He’s being only slightly self-serving. « Once people adopt agile pricing, there’s less pressure to use low price to build sale. It’s a better environment for everyone. »

Rick Spence is a writer, consultant and speaker specializing in entrepreneurship. His column appears weekly in the Financial Post. He can be reached at rick@rickspence.ca

Augustin Manchon in PMA Magazine

2009-06-29

Value creation and best practices in vendor – retailer relationships (July-August, 2009)

Augustin Manchon invited to give a 3 hour keynote address

2009-06-22

on Pricing at a special executive event of the Canadian Marketing Association.

www.the-cma.org