Maciej Kraus, Partner at Movens Growth Equity, Pricing Guru, Ph.D., and Guest Lecturer at Stanford, is sharing his insights and observations on how pricing strategies and approaches changed over the last two decades and how to get the best out of pricing and succeed in a current highly challenging environment.
You are a pricing expert with a profound experience in the field who keeps a pulse on many industry players. Could you shed light on how the approach to pricing changed over the last decade?
I did change profoundly. When I started in 2004 with the Nestlé Market Research team, I remember there wasn’t a single person within the corporation responsible for pricing. But during my university years, I have learned the simple profit equation: price is the strongest profit lever. That’s when I thought pricing is definitely something worth investigating and focusing on and will be of much interest to a lot of companies. And obviously, I wasn’t mistaken. I remember back in those years, all of my university colleagues would want to apply for jobs within the Big Four, but I wasn’t very good at accounting. So I understood I had to search for my own path, and it was pricing.
I also noticed that when I started, pricing was a very sales-driven topic, meaning the Head of Sales was mainly responsible for pricing. It happened so as salespeople were at the forefront of the interaction between the company and the market. When a salesperson insisted on a specific price, even the CEO couldn’t negotiate it.
But everything changed when the software, data availability, and pricing analytics significantly improved over the last two decades. Now pricing has become more of a C-level topic, and with the use of pricing software, it’s no more a guessing game as it used to be. Lately, I’ve encountered the statistics that less than a quarter of Fortune 500 companies have pricing teams of more than 20 people. Twenty years ago, there was just a handful of them. So definitely, pricing is a topic that is growing, and the importance of pricing is increasing.
With the retail environment being shaken by surging inflation, supply chain disruptions, etc., what significant changes do you anticipate in the retail space?
Lately, I had a very interesting discussion with the Head of Sales and Data Analytics of one of the biggest grocery chains in Europe. He said all our pricing approaches built over the years failed over the last half a year. Why? Because of a rapid change in customer preferences, price elasticities of the products, and customers’ decision patterns. And retailers are required to adjust quickly. For certain products, price elasticity has decreased, and for others, it increased heavily. This is why retailers need tools to quickly adjust their pricing strategies to the changing environment, both on the supply and demand sides.
And this is where I see the biggest change: retailers are now in desperate need of tools, approaches, and processes that allow swift price adjustments.
What strategy would you recommend to retailers who want to thrive in these ever-changing conditions?
The main strategy would be to revise the pricing process internally and make price management more efficient. It means revising the processes, data used, people involved, and tools employed in pricing and improving it in the next cycles. I see a huge potential there.
What is the future of pricing? Is personalized pricing in it?
It all depends on what kind of retailer you are. For some industries like fashion and apparel, the transition to personalized pricing will happen quicker. For others like DIY or food & beverages, the adoption will be slower and more gradual. There are a couple of reasons behind it. One of them is legal constraints. For example, in the EU, retailers are forbidden to price discriminate against customers in accordance with GDPR. Anyway, I see the future of pricing as a shift from rule-based pricing to using data analytics and dynamic pricing. However, I also think that adopting personalized pricing is still yet to come.
What would be your advice to fellow colleagues who start their careers in pricing?
I remember when I was starting, pricing wasn’t much data-driven. Of course, it implied a data component but was mainly focused on market research and behavioural approach. On the contrary, nowadays, one cannot be a pricing manager without a very strong backbone in data analytics. Anyways pricing is not only about data analytics. Currently, I see many people failing in pricing because they believe it’s a matter of pure science, e.g., if you have perfect tools, then you can calculate the right price, and that's it. But it’s not the case.
Soft skills are highly important as well. Pricing managers should be able to sell and promote their pricing strategy within the company and know how to communicate it with the board members. This is why managerial skills allowing pricing managers to sell pricing strategy internally within the organization are highly important. All in all, if you want to be a C-level pricing specialist, you cannot limit yourself to data whisket.
Could you share advice on pricing resources that inspire you?
Nowadays, there is a ton of good literature around pricing. Still, probably the person who inspired me the most was my former manager, and a person I hugely admire is Professor Hermann Simon, a founder of Simon, Kucher & Partners. His books were my huge inspiration.
Recommended pricing readings. Here are my recommendations from the books that I’ve read.
All the books by Mark Stiving, Ph.D. e.g
Books by Stephan Liozu. e.g
Best book on behavioral pricing
My humble book on behavioral pricing
Other good pricing reads