Below is a summary of our interview with Maciej Kraus and Alex Galkin. You can listen to the full interview using the embedded media player below or in your favorite podcast app (e.g., Apple Podcast, Spotify and Amazon Music).
In this special episode of Pricing Heroes, we welcome back our very own Alex Galkin, who joins us for our conversation with today's guest, Maciej Kraus. Maciej is a Managing Partner at Movens Capital, a growth equity firm, where he helps companies generate more profit for their development and growth. He is also a guest lecturer at the Stanford Graduate School of Business and the author of three books, including The Future of Pricing: A Guide to the Next 10 Years of AI (get your free copy here) and his forthcoming book, Pricing Decoded: How Leading Pricing Practitioners Manage Practice to Boost Profits. Maciej is also one of the longest-serving members of Competera's advisory board.
The Inspiration Behind "Pricing Decoded"
Maciej's latest book, co-authored with Danilo Zatta, aims to share insights on how to effectively manage pricing from the inside. Maciej emphasizes that while technology and external consultants can help, ultimately, companies must do the heavy lifting themselves. He compares pricing to training for a marathon - you can have the best coach and equipment, but you still need to put in the work yourself.
The book draws from Maciej's extensive experience working with companies from various industries. He noticed that there's no single perfect formula for pricing, but there are general rules about what to do and what not to do. The goal of the book is to show how different industries manage pricing and help companies develop their "pricing muscle" to fit their unique organization, culture, and processes.
Building a Strong Pricing Muscle
Maciej emphasizes that a strong pricing muscle consists of four interconnected elements: technology, people, processes, and strategic alignment. He compares technology to a magnifying glass, capable of amplifying both good and poor practices. While crucial, Maciej warns that technology alone cannot solve pricing issues. In fact, implementing advanced technology without addressing underlying problems can exacerbate existing inefficiencies.
The human element is equally important. Maciej stresses that having the right team is essential, but the specific roles needed depend on the company's unique pricing processes. He advises against a one-size-fits-all approach to hiring, suggesting that companies first define their pricing strategy before determining the necessary expertise.
Processes form the backbone of effective pricing management. Maciej highlights the importance of seamless interaction between the pricing team and other departments such as store managers, category managers, purchasing, and marketing. He suggests that companies should map out these interactions and constantly refine them to ensure efficient pricing execution.
Strategic alignment is the cornerstone of a strong pricing muscle. Maciej points out that without clear alignment on goals, such as balancing margin versus market share, pricing efforts can become disjointed and ineffective. He recommends that companies establish clear pricing objectives that align with their overall business strategy, ensuring that all pricing decisions contribute to these goals.
Common Challenges in Pricing Management
Maciej and Alex shed light on several pervasive challenges in pricing management, offering insights on how to address them. They note that many CEOs still view pricing as a tactical rather than strategic function, which can significantly limit its effectiveness. To combat this, they suggest educating leadership on the strategic impact of pricing on overall business performance, using concrete examples and case studies to illustrate its importance.
Another common pitfall is the overreliance on the expertise of long-serving category managers. While these individuals possess valuable product knowledge, Maciej and Alex caution that they may still make basic pricing mistakes. They recommend implementing regular training programs and leveraging data-driven insights to complement and enhance the expertise of these managers.
The lack of a clear, written pricing strategy across different store formats or locations is another challenge many organizations face. This often leads to inconsistencies and missed opportunities. Maciej and Alex advise developing a comprehensive, documented pricing strategy that accounts for different store formats, locations, and customer segments. This strategy should be regularly reviewed and updated to reflect changing market conditions.
Lastly, they address the internal power dynamics surrounding pricing decisions. Pricing is a powerful tool, and those responsible for it often resist changes that might reduce their authority. To overcome this, Maciej and Alex suggest fostering a culture of collaboration and transparency around pricing decisions. They recommend involving key stakeholders in the development of pricing strategies and clearly communicating the benefits of new pricing approaches or technologies to all affected parties.
Building a Pricing Organization
Maciej recommends starting with demonstrating the value of improved pricing before requesting budget for a pricing project. He suggests showing how adjusting "careless pricing mistakes" could lead to significant profit increases.
The book includes a chapter co-written with LOTTE, a Japanese food conglomerate, detailing their journey in structuring a pricing organization. It covers analyzing existing processes, designing a future pricing organization, and selecting appropriate technology.
Navigating Sensitive Pricing Issues
Addressing recent concerns about practices like price gouging and dynamic pricing, Maciej emphasizes the importance of communication. He argues that dynamic pricing has existed for ages in various forms, from medieval markets to modern commodities trading and airline tickets. The key is in how it's communicated to customers.
Alex provides a practical example of how dynamic pricing can benefit customers, such as in the case of dark stores adjusting liquor prices on Friday evenings to ensure stock availability. He notes that customers were often more satisfied paying a slightly higher price than finding the product out of stock.
The Role of Technology in Pricing
Both Maciej and Alex stress the importance of technology in modern pricing management. While understanding the fundamentals is crucial, technology acts as an accelerator, allowing for more efficient and effective pricing strategies.
However, they caution against implementing advanced technology without the necessary organizational maturity and strategy in place. Maciej uses the analogy of skiing, where beginners might blame expensive equipment for their poor performance, when in reality they need more practice and skill development.
In conclusion, this episode of Pricing Heroes offers valuable insights into building a strong pricing organization, the importance of clear strategy and communication, and the role of technology in modern pricing management. It serves as a reminder that while tools and knowledge are important, pricing is ultimately a craft that requires continuous practice and refinement. As Maciej puts it, "Pricing is a craft and you learn it by doing."
Recommended Resources
Maciej recommends several resources for those looking to deepen their pricing knowledge:
- Value-Based Pricing by Stefan Liozu
- The Strategy and Tactics of Pricing by Thomas Nagle
- Mark Stiving’s Impact Pricing Podcast
Connect with Maciej
You can connect with Maciej on LinkedIn.
