Hello and thank you all so much for joining us for another
episode of the Professional Prices Society Podcast.
Today is a great day. We have our very special guest
with us. Jean Manuel is erect or also
known as JMI. He is going to be speaking with
us today about his latest book called Game Changer.
He also is going to be joining us in Atlanta this upcoming
October, October 10th through the 13th.
To be specific for our fall conference, he's going to be
leading a very powerful conversation and discussion.
He's actually going to be one of our keynote speakers.
So we're very excited to have him with us today.
JMI is a global leader of Boston Consulting Groups marketing,
sales and pricing practice. Jean Manuel is red.
How you doing today? Very good, Very good.
Terence. Nice to be here.
Good, good. Glad to have you.
And before we get into the meat and potatoes of this discussion,
and if you don't mind informing me as well as the listeners, how
did you first get involved in pricing?
This is an excellent question. It's a bit of an origin story.
My first job I worked at Shell and I started in refinery as an
engineer, but very quickly I was more interested into commercial
operations and so I moved to a sales job managing a set of
regions of service stations. And and part of the job was to
set the prices every morning for each of these service stations.
And and that was very instructive because every
station is in a different place, in a different corner.
You don't have the same competition and therefore you
need to really be keen on Okay. What type of customers do I
have? What type of Rd. am I on?
Who are the competitors? How are they pricing?
And every morning you make a lot of pricing decisions, which
means you could learn within a year.
With experiments with 50 stations, there's a lot you can
learn. And then I went to the
headquarters and had a more grow, a more bigger role across
all of France when I played a role in the pricing of all the
service stations and on promotions and products.
And so that was a real discovery about how you can, you could
play with pricing? And given how well assessors are
different in every in every different place, you can make a
lot more money than if you don't the average of pricing strategy.
That's a great learning ground. Yeah, for sure.
It sounds like a great foundation from a pricing
background now and that goes and that plays a large role into
this book called Game Changer. There are a lot of pricing books
out there at the moment. What inspired you to write this
one? Continuing on on the story a
little bit to explain why I wrote this book.
After Shell, I joined BCG and I started to do pricing at BCG.
And at the time, I read all of the early seminal books on on
pricing, the Strategy and Tactics of Pricing, the Pricing
Profitably by Kent Monroe and and many others.
And they were great, fantastic books.
But over the years, we've all developed new.
New strategies. We've understood how pricing has
been evolving in different markets in different ways.
Many new concepts have been introduced and all of the new
books that have been published tended to pick a topic and let's
say value based. And you have a number of books
on value based pricing and you have books on contextual pricing
and you have books on different aspects of pricing.
And I thought with all the evolution that we have seen,
that it was time. To to clean up a little bit the
complexity of all the concepts that we have and come back to
the fundamentals and think about pricing strategy and lay out the
set of approaches that are relatively simple and help the
reader and help pricing people, people that are new to the
pricing topic sift through the different strategies to pick
which one is really relevant for them.
And so that book is a way to go back at the theory.
I call it sometimes the unified theory of pricing, but it's also
a way, therefore, for people to pick up which part of pricing
they should be using, in which circumstance and where is it
going to be the best fit for them in their business.
OK, wow, sounds good. So it sounds like this is almost
a situational aspect. If I'm new to pricing, I want to
pick up this book. I can actually, you know, learn
more about not just one, I guess the aspect of pricing, but
multiple. Now that's right.
It says it in the title of the book Game Changer.
But why do you think the approach you're proposing is
such a game changer in pricing today?
Thank you. That's an excellent question.
It's actually a game changer in two ways. 1st, in order to
develop this unified theory of pricing, we try to simplify it
and we think there are seven different pricing games and
companies can choose which game they want to play.
In that sense, it's literally a game changer.
You could change your game. And so you have a cost plus
game, you have a value based game, you have a customized
game. And so I could discuss a little
bit more what these games are, but essentially companies need
to choose which game they want to play.
And therefore it's a book about changing the game and if and and
and very often you see industries evolve in ways where
the game changes over time. Take retail for example.
All the retailers started 100 plus years ago by just adding a
fixed markup. They were taking their cost and
pricing it up by a small margin and that was it.
And then they all discovered elasticity and and so these are
two different games. The Cost plus game and the
elasticity game are two different games and they changed
from 1:00 to the next today. Retailers are more
sophisticated. Some of them price dynamically,
changing prices much more regularly than they used to be,
especially etailers. And on ecommerce, that's another
change of game. And so each time an industry
evolves, it tend to change its pricing game.
And it's really helpful for people that are in a particular
game to change to understand how they could change the game going
forward for the benefit of the company and sometime for the
benefits of the entire markets. So that's the first aspect about
why this book is a game changer. It helps you change the game.
But the second aspect of this is, this is a book about pricing
strategy. And what I mean by pricing
strategy is we're trying to help people go beyond the numbers.
Very often people see pricing as a tactical numbers exercise.
I'm just going to determine what the price the reality is before
you have the make the decision of determining what price you're
going to charge. There's a lot of decisions that
you have to make before that. You decide what unit are you
pricing the offer that you have, What is the offer itself?
What are the choices you give to customers?
What is the pricing model? Are you offering the
subscription or are you offering a one time purchase?
There's all sorts of decisions that are made before you decide
on the number and when you go to this level of strategy,
strategic pricing. You get to a different
understanding of where your market is and you can have even
more impact than just by moving the numbers up over there.
And that in that sense, that's a game changer because you can get
more impact for longer periods of time.
Wow. So there's a several concepts in
this book that you know, we can learn a lot about, a lot from a
lot of different insights in this book.
And you know there's a lot of different thoughts that goes
into what a game changer is, the different types of games prices
can play. Essentially one of the things
you mentioned is you know how companies should leave money on
the table. You know, if you don't mind kind
of expounding, expounding on that for us, what do you mean by
companies should leave money on the table?
So it's there's also a few parts of this book that are a bit
provocative. And I and we hear in pricing,
people tend to say you need to price as much to get as much
price as you can. And in many circumstances that
makes sense. And and derivatively people say
should never leave money on the table.
Well, if you never leave money on the table, then why would
customers work with you? Pricing is an exchange of a
product or service between a customer and and someone selling
that product and that service. There needs to be value and that
is on both sides of the equation.
The customers need to find some good value and of course the
seller needs to find some good value.
And the balance between that value is what I like companies
to think about. And so when you leave a little
bit of money on the table. You could get a longer term
relationship, you could get more loyalty from your customers and
that in that in turn can enhance your marketing and strategy
positioning. And so sometimes thinking about
how do you create more value than your competitors and how do
you leave that value in the hands of the customers as
opposed to trying to getting paid.
Everything today is is is a game changer and help people think
differently about about the market okay.
So essentially, this is a like any great thing, this is a
balancing act it. Is a balancing act.
And so you could think about for instancewhensalesforce.com
launched at the beginning, they were trying to differentiate
themselves from traditional software and traditional
software. The pricing model was pay
upfront. And the companies like Oracle
were trying to get paid as much as they could.
upfrontandsalesforce.com implicitly start with a really
low price points, very easy to come on.
Instead of buying the software for all the enterprise, you
could just buy it for a few users.
Which is why they're pricing model on pay per user per month
was much more accessible. They were literally living money
on the table initially. But they were leaving money on
the table to create loyal customers and then eventually
upsell them to better products and larger and get the entire
sales force on board with their product.
But they didn't ask the customers to buy everything
right away. At the beginning, I'm
caricaturing a bit the situation.
That's a good illustration of when you set up a new business,
you want to do something for your customers that your
computers are not doing. You want to leave a little bit
of money on the table and you want to create.
That value over time in your shared spirits between your
customers and what you do for that good, that's really good
okay. So you wanna create that
environment in which the customer finds value in whatever
your service or product is and of course you want to continue
to gain their trust over the upcoming years thereafter.
Now, does that kind of tie into this concept of pricing
fairness? It does.
And fairness is a really like how to be fair in the world.
It's really complicated thing but but there is a lot of
discussions about is it a fair price and and what does a fair
price means and and we've thought a lot about that and
different situations different things can be can be fair and so
from a pricing standpoint. If you say is it fair that two
people get the different price on the same thing, you're going
to get everybody saying absolutely, that's not fair.
Why? Why should he receive a lower
price than me? I'm not happy with the price
because I know now that he received the lower price than my
price for the same thing. You tend to be upset about this.
That's unfair, OK? But if you ask people, is it
fair to give a discount to grandpa and grandma everywhere
in the world? People will say, of course we
need to give some relief to grandpa and grandma.
It's fair to give a discount to the seniors and to all the older
generations. You find this across all product
categories in Japan, in the US, in France, Germany, We did
studies. Everybody agrees on.
OK. It's good to give a discount and
to have a lower price for certain categories of people,
particularly people that are the seniors.
Okay. Now let's flip the the the
question and ask is it fair to give a discount to the students?
Student doesn't have that much money.
It's on the other side of the 8 spectrum and on that you find
very big splits. You have some people in in
different countries that will think differently depending on
how students are helped by the the States and society.
And so suddenly you find some in the US where students have to
pay for college and so on. You can have a lot of people
saying, hey, students need to be help.
It's okay to give them some discounts early.
But then not everybody agrees. And what you find is as people
get older, some older people don't want to give discounts to
young people because like, hey, you know, I had a tough life.
This is it. They need to start like
everybody else. And why would they get a
discount? There's a good logic for that.
When you ask people about who, when you look at who they are
and why they don't want that, you tend to find that
conservatives are less willing to give discounts to students,
while people that are more progressive tend to be on the
side of giving discounts to students.
Suddenly, fairness depends on who you are and the way you look
at society, and so you have all sorts of situations that then
could arise in different markets.
And I think the concept of fairness, understanding that it
varies depending on people and that companies have a role in
explaining why when they give a discount, they think it is fair
to give that discounts to people.
So for instance, we're giving discounts in a cinema, in a
movie theater early on because the the room is not as full and
would like to encourage people to come earlier.
That that can can make sense. We give the discounts to people
who lower our costs. So give a discounts if we can
directly ship you the product as opposed to going through a store
for instance. That makes sense.
So you have all sorts of reasons that you could give different
prices to different people and that can seem fair, but that
needs to be explained and companies have a choice in how
they explain that. And over time you can get people
to get used to more price differentiation that they might
be at the beginning. Early on 30 years ago when the
airline started to give different prices to everyone in
a particular airplanes, a lot of people are complaining my
neighbor has a lower price than me, like how is that fair?
But then progressively, we understood that actually having
different prices depending on whether you book early or not
also corresponds to the types of.
Passenger you are if you're in business and you want to to
travel right away, you're going to be willing to pay more
because your company is going to pay for the same trip.
Whereas if you are a tourist and you can plan your your vacation
for three months or six months or nine months ahead of time,
maybe you can deserve to have a lower price points.
And that overall has allowed us to have much more air travel and
to have people going around and to discover all their.
People, the societies and so on, all sorts of good benefits from
traveling around and therefore having different prices in the
airlines is now quite accepted by most of the customers.
Even though some people still ask questions, but it's much
more accepted than it was 30 years ago.
And so the points that I'm trying to make here is fairness
is complex, but you have some principles about what is fair
and what is not fair. And companies, by explaining
what they do and why they do things, can be can help
customers see what they think and what they do as being more
fair than otherwise. They ought to explain to people
why their pricing is fair. Wow, that's a lot to think
about, but it's actually kind of simple.
But the concept of fairness when it comes to a business
standpoint does sound like it can be a complex phenomenon.
I mean, you have some certain companies that have reward
systems and if you purchase a certain number of products, you
could get a discount on the next product or whatever.
The case is something similar to that.
That's exactly that. The very often one important
thing point about fairness is. Procedural fairness is the
process by which things were decided that some people would
treat differently. Was that process a fair process?
And so in the example, people get discounts not because they
look good. People get discounts because
they bought more products and anybody who buys more product
will get the discounts. Everybody will feel this is
fair. This is really excellent
example. OK, interesting.
That's good to know. Now you say in the subtitle that
strategic pricing shapes society in addition to businesses and
markets. If you don't mind, elaborate on
that a little bit for us. Yes.
So we all know we've all bid in the in the world of pricing and
we will know that we'll know that a good pricing strategy can
shape the business and can shape the market.
I gave the example of Salesforce.com that invented
software as a service by changing the pricing model to a
price per user per month as opposed to upfront.
And perpetual licenses, but very often the structure of pricing
can also shape society in a in a broader way and in a way that we
forget because it's always been this way and we don't really
realize it. These are decisions about the
pricing structure and not just the price points.
Let me take an example. Think about tipping in the US We
all know that tips tend to be higher than they are in Europe.
And there are some cultures where there's no tipping at all.
So how much you tip is a choice that not only you make as an
individual but also you make as a society?
Do you know when the US starting tipping differently than Europe
and having tips be a bigger part of the income of all the service
workers? Versus when it was in in Europe.
In Europe, for instance, people tipping, the word for tipping is
for what it just says. It's for you to drink on the
Friday evening. It's not to pay for your roof
and the and the food for your kids.
It's just a nice to have as a compliment.
Whereas in the US we all know that if we don't tip service
workers as much like they it's their income mostly depends on
the tips. Do you know when that started?
I have no idea when that started.
OK, you might guess it started maybe 50 years ago, maybe 100
years ago. Well, it happened to start to
date from the days just after the Civil War.
Wow. And with the abolition of
slavery, to make things pretty simple, a set of companies still
didn't want to pay number of service people and they
basically decided to say, oh, what if we let the customers pay
for the service people? That'd be great.
And Pullman were one of the first companies to establish
this as a rule about the customers should know that
they're the one with their tips paying for the the entire salary
and the entire income of the service workers and over time
that that expended to all kinds of services and so on.
Right. The outcome of this is that we
now have a lot of potential discrimination that happens.
In say, the restaurant industry has been well documented.
We we all know that women, for instance, face some
discrimination. We all know that people of color
may face some discrimination. People tend to tip more people
that look like them, right? That's just a buy of society.
By deciding to have the tip being a separate thing from the
meal that you pay, you basically decide that the company is not
responsible for the discrimination that is going to
happen by essentially customers tipping people different
amounts. That shapes society and that's
the shape of society that we still have 150 years later is
still happening and is still shaping how the outcome is
working out. Now that shaping of tipping goes
also all sorts of ways, right, because of the I talked about
the biases and discrimination for for different customers.
But think about what happened in the last three years with COVID,
with the swivel of the terminal when you are not only in the
restaurants but in sometimes a shop.
You know even the orthodontist now has some tipping and and
that could be surprising and and and you see the screen the
screen in front of you is giving you a choice about how much you
tip and all people behind you in the line are going to be able to
see it too. So.
So tipping that was a private act for years and years is now a
public act and that has forced some people to tip more than
they would have otherwise. And so and then you have some
backlash against that. But then many companies have
benefited from it and actually get more tips because of we've
all wanted to tip people more doing doing COVID because we
wanted all the businesses to survive, right.
And so the fact that you have the tip as a separate item and a
big item, not just two to three to 5% but 1520 thirty percent is
something that really shapes essentially how we make
decisions and how we companies get paid and and how society
works. It's just an example.
It's a structural pricing decision that has multiple
implications in all sorts of directions and it shapes
society. That's funny you mentioned that
because I've been at certain, I won't say the name of the
restaurants, but I've been at certain, you know, little cafes
just to get maybe a drink or or a coffee or something very
miniscule and just not that large in price.
But when they turn that swivel, swivel around and show the
screen, there are times where I'm, I almost feel bad for not
tipping even though there was not much service for you know,
provided that's that's exactly right.
So the the psychology, we know that psychology plays the key
role in and by changing the psychology, the swivel is
actually changing the amounts that people turn out to pay and
that's a structural decision and that's what I wanted to
highlight. And so the psychology of humans
works in all sorts of different ways and and it's really
important in as you make pricing decision to think about how that
can impact your customers and you'll brown.
Sure, absolutely. Jean Manuel Isret, also known as
JMI, it was a pleasure to speak with you today.
We're going to use this podcast as a teaser for your speaking
engagement. That is going to happen in
Atlanta this October. Very excited to have you, very
excited to hear about your expertise and your inside in the
realm of pricing as well. Before I let you go, do you mind
just kind of sharing with our listeners where you know any
kind of resources you have available where they can find
more information about you and maybe the different things
you've done over the course of the years?
Sure. First, thank you, Terrence.
It was a great discussion. Thank you for having me.
I'm looking forward to seeing everybody at the conference in
Atlanta in October. People interested in learning
more can type game changer and pricing and and their Google and
they will have it. There is also a web page on our
BCG website about the about the book.
There is an interactive a page that allows people to discover
more of the concept that I was describing and to play with it.
And I hope that in a in a few weeks we will be able to come
out with the bots that we'll be able to respond to any questions
people will have about the book and that that should be quite.
That'd be nice. That sounds fun.
Well, thank you so much again, Sir, for your time.
And until next time, we'll see you guys later.
Bye. Bye.