1 00:00:00,440 --> 00:00:02,960 Hello and thank you all so much for joining us for another 2 00:00:02,960 --> 00:00:05,600 episode of the Professional Prices Society Podcast. 3 00:00:06,120 --> 00:00:08,480 Today is a great day. We have our very special guest 4 00:00:08,480 --> 00:00:11,480 with us. Jean Manuel is erect or also 5 00:00:11,480 --> 00:00:14,000 known as JMI. He is going to be speaking with 6 00:00:14,000 --> 00:00:16,880 us today about his latest book called Game Changer. 7 00:00:17,320 --> 00:00:20,800 He also is going to be joining us in Atlanta this upcoming 8 00:00:20,840 --> 00:00:23,560 October, October 10th through the 13th. 9 00:00:23,560 --> 00:00:26,500 To be specific for our fall conference, he's going to be 10 00:00:26,500 --> 00:00:29,580 leading a very powerful conversation and discussion. 11 00:00:30,140 --> 00:00:32,220 He's actually going to be one of our keynote speakers. 12 00:00:32,220 --> 00:00:34,900 So we're very excited to have him with us today. 13 00:00:35,180 --> 00:00:39,020 JMI is a global leader of Boston Consulting Groups marketing, 14 00:00:39,100 --> 00:00:43,140 sales and pricing practice. Jean Manuel is red. 15 00:00:43,180 --> 00:00:46,060 How you doing today? Very good, Very good. 16 00:00:46,060 --> 00:00:47,260 Terence. Nice to be here. 17 00:00:47,580 --> 00:00:48,980 Good, good. Glad to have you. 18 00:00:49,340 --> 00:00:53,230 And before we get into the meat and potatoes of this discussion, 19 00:00:53,230 --> 00:00:56,350 and if you don't mind informing me as well as the listeners, how 20 00:00:56,350 --> 00:00:58,870 did you first get involved in pricing? 21 00:01:00,750 --> 00:01:04,150 This is an excellent question. It's a bit of an origin story. 22 00:01:04,989 --> 00:01:10,310 My first job I worked at Shell and I started in refinery as an 23 00:01:10,310 --> 00:01:13,150 engineer, but very quickly I was more interested into commercial 24 00:01:13,150 --> 00:01:18,390 operations and so I moved to a sales job managing a set of 25 00:01:18,430 --> 00:01:23,770 regions of service stations. And and part of the job was to 26 00:01:23,770 --> 00:01:27,570 set the prices every morning for each of these service stations. 27 00:01:29,010 --> 00:01:31,850 And and that was very instructive because every 28 00:01:31,850 --> 00:01:34,050 station is in a different place, in a different corner. 29 00:01:34,450 --> 00:01:37,050 You don't have the same competition and therefore you 30 00:01:37,050 --> 00:01:40,130 need to really be keen on Okay. What type of customers do I 31 00:01:40,130 --> 00:01:42,130 have? What type of Rd. am I on? 32 00:01:42,450 --> 00:01:44,730 Who are the competitors? How are they pricing? 33 00:01:44,730 --> 00:01:47,850 And every morning you make a lot of pricing decisions, which 34 00:01:47,850 --> 00:01:49,850 means you could learn within a year. 35 00:01:50,310 --> 00:01:53,990 With experiments with 50 stations, there's a lot you can 36 00:01:53,990 --> 00:01:55,710 learn. And then I went to the 37 00:01:55,710 --> 00:02:00,430 headquarters and had a more grow, a more bigger role across 38 00:02:00,430 --> 00:02:03,830 all of France when I played a role in the pricing of all the 39 00:02:03,830 --> 00:02:07,310 service stations and on promotions and products. 40 00:02:07,310 --> 00:02:11,750 And so that was a real discovery about how you can, you could 41 00:02:11,750 --> 00:02:15,140 play with pricing? And given how well assessors are 42 00:02:15,140 --> 00:02:18,860 different in every in every different place, you can make a 43 00:02:18,860 --> 00:02:22,260 lot more money than if you don't the average of pricing strategy. 44 00:02:22,540 --> 00:02:25,140 That's a great learning ground. Yeah, for sure. 45 00:02:25,140 --> 00:02:27,980 It sounds like a great foundation from a pricing 46 00:02:27,980 --> 00:02:31,060 background now and that goes and that plays a large role into 47 00:02:31,060 --> 00:02:34,820 this book called Game Changer. There are a lot of pricing books 48 00:02:34,900 --> 00:02:38,180 out there at the moment. What inspired you to write this 49 00:02:38,180 --> 00:02:40,510 one? Continuing on on the story a 50 00:02:40,510 --> 00:02:42,990 little bit to explain why I wrote this book. 51 00:02:43,790 --> 00:02:49,030 After Shell, I joined BCG and I started to do pricing at BCG. 52 00:02:49,230 --> 00:02:54,270 And at the time, I read all of the early seminal books on on 53 00:02:54,270 --> 00:02:58,550 pricing, the Strategy and Tactics of Pricing, the Pricing 54 00:02:58,550 --> 00:03:01,350 Profitably by Kent Monroe and and many others. 55 00:03:01,670 --> 00:03:03,590 And they were great, fantastic books. 56 00:03:04,710 --> 00:03:08,270 But over the years, we've all developed new. 57 00:03:08,720 --> 00:03:11,880 New strategies. We've understood how pricing has 58 00:03:11,880 --> 00:03:15,280 been evolving in different markets in different ways. 59 00:03:15,280 --> 00:03:18,600 Many new concepts have been introduced and all of the new 60 00:03:18,600 --> 00:03:24,040 books that have been published tended to pick a topic and let's 61 00:03:24,040 --> 00:03:26,200 say value based. And you have a number of books 62 00:03:26,200 --> 00:03:29,400 on value based pricing and you have books on contextual pricing 63 00:03:29,840 --> 00:03:33,040 and you have books on different aspects of pricing. 64 00:03:33,520 --> 00:03:36,520 And I thought with all the evolution that we have seen, 65 00:03:36,520 --> 00:03:41,270 that it was time. To to clean up a little bit the 66 00:03:41,270 --> 00:03:45,110 complexity of all the concepts that we have and come back to 67 00:03:45,110 --> 00:03:48,910 the fundamentals and think about pricing strategy and lay out the 68 00:03:48,910 --> 00:03:51,830 set of approaches that are relatively simple and help the 69 00:03:51,830 --> 00:03:54,550 reader and help pricing people, people that are new to the 70 00:03:54,550 --> 00:03:59,070 pricing topic sift through the different strategies to pick 71 00:03:59,070 --> 00:04:00,870 which one is really relevant for them. 72 00:04:01,470 --> 00:04:05,510 And so that book is a way to go back at the theory. 73 00:04:05,850 --> 00:04:09,450 I call it sometimes the unified theory of pricing, but it's also 74 00:04:09,450 --> 00:04:13,170 a way, therefore, for people to pick up which part of pricing 75 00:04:13,170 --> 00:04:15,810 they should be using, in which circumstance and where is it 76 00:04:15,810 --> 00:04:18,130 going to be the best fit for them in their business. 77 00:04:18,570 --> 00:04:22,570 OK, wow, sounds good. So it sounds like this is almost 78 00:04:22,570 --> 00:04:26,410 a situational aspect. If I'm new to pricing, I want to 79 00:04:26,690 --> 00:04:28,810 pick up this book. I can actually, you know, learn 80 00:04:28,810 --> 00:04:33,160 more about not just one, I guess the aspect of pricing, but 81 00:04:33,160 --> 00:04:34,880 multiple. Now that's right. 82 00:04:35,080 --> 00:04:37,520 It says it in the title of the book Game Changer. 83 00:04:38,200 --> 00:04:41,400 But why do you think the approach you're proposing is 84 00:04:41,400 --> 00:04:43,160 such a game changer in pricing today? 85 00:04:44,040 --> 00:04:45,920 Thank you. That's an excellent question. 86 00:04:46,200 --> 00:04:50,380 It's actually a game changer in two ways. 1st, in order to 87 00:04:50,380 --> 00:04:54,860 develop this unified theory of pricing, we try to simplify it 88 00:04:54,860 --> 00:04:59,260 and we think there are seven different pricing games and 89 00:04:59,980 --> 00:05:02,580 companies can choose which game they want to play. 90 00:05:02,980 --> 00:05:05,500 In that sense, it's literally a game changer. 91 00:05:05,500 --> 00:05:09,670 You could change your game. And so you have a cost plus 92 00:05:09,670 --> 00:05:14,150 game, you have a value based game, you have a customized 93 00:05:14,150 --> 00:05:16,550 game. And so I could discuss a little 94 00:05:16,550 --> 00:05:19,550 bit more what these games are, but essentially companies need 95 00:05:19,550 --> 00:05:22,110 to choose which game they want to play. 96 00:05:22,830 --> 00:05:27,390 And therefore it's a book about changing the game and if and and 97 00:05:27,390 --> 00:05:31,390 and very often you see industries evolve in ways where 98 00:05:31,470 --> 00:05:34,830 the game changes over time. Take retail for example. 99 00:05:34,910 --> 00:05:38,590 All the retailers started 100 plus years ago by just adding a 100 00:05:38,590 --> 00:05:41,150 fixed markup. They were taking their cost and 101 00:05:41,150 --> 00:05:43,910 pricing it up by a small margin and that was it. 102 00:05:44,270 --> 00:05:48,950 And then they all discovered elasticity and and so these are 103 00:05:48,950 --> 00:05:51,310 two different games. The Cost plus game and the 104 00:05:51,310 --> 00:05:54,630 elasticity game are two different games and they changed 105 00:05:54,870 --> 00:05:58,520 from 1:00 to the next today. Retailers are more 106 00:05:58,520 --> 00:06:01,240 sophisticated. Some of them price dynamically, 107 00:06:01,520 --> 00:06:04,200 changing prices much more regularly than they used to be, 108 00:06:04,200 --> 00:06:07,200 especially etailers. And on ecommerce, that's another 109 00:06:07,200 --> 00:06:10,120 change of game. And so each time an industry 110 00:06:10,120 --> 00:06:13,040 evolves, it tend to change its pricing game. 111 00:06:13,440 --> 00:06:16,000 And it's really helpful for people that are in a particular 112 00:06:16,000 --> 00:06:21,480 game to change to understand how they could change the game going 113 00:06:21,480 --> 00:06:24,240 forward for the benefit of the company and sometime for the 114 00:06:24,240 --> 00:06:27,790 benefits of the entire markets. So that's the first aspect about 115 00:06:27,790 --> 00:06:30,590 why this book is a game changer. It helps you change the game. 116 00:06:31,350 --> 00:06:34,910 But the second aspect of this is, this is a book about pricing 117 00:06:34,910 --> 00:06:37,470 strategy. And what I mean by pricing 118 00:06:37,470 --> 00:06:42,150 strategy is we're trying to help people go beyond the numbers. 119 00:06:42,550 --> 00:06:46,590 Very often people see pricing as a tactical numbers exercise. 120 00:06:46,710 --> 00:06:50,510 I'm just going to determine what the price the reality is before 121 00:06:50,510 --> 00:06:54,710 you have the make the decision of determining what price you're 122 00:06:54,710 --> 00:06:57,370 going to charge. There's a lot of decisions that 123 00:06:57,370 --> 00:07:00,610 you have to make before that. You decide what unit are you 124 00:07:00,610 --> 00:07:04,650 pricing the offer that you have, What is the offer itself? 125 00:07:04,650 --> 00:07:06,610 What are the choices you give to customers? 126 00:07:06,850 --> 00:07:08,930 What is the pricing model? Are you offering the 127 00:07:08,930 --> 00:07:13,090 subscription or are you offering a one time purchase? 128 00:07:13,330 --> 00:07:16,010 There's all sorts of decisions that are made before you decide 129 00:07:16,010 --> 00:07:20,890 on the number and when you go to this level of strategy, 130 00:07:21,690 --> 00:07:24,760 strategic pricing. You get to a different 131 00:07:24,760 --> 00:07:27,400 understanding of where your market is and you can have even 132 00:07:27,400 --> 00:07:30,040 more impact than just by moving the numbers up over there. 133 00:07:30,880 --> 00:07:34,080 And that in that sense, that's a game changer because you can get 134 00:07:34,080 --> 00:07:35,840 more impact for longer periods of time. 135 00:07:37,480 --> 00:07:40,730 Wow. So there's a several concepts in 136 00:07:40,730 --> 00:07:44,690 this book that you know, we can learn a lot about, a lot from a 137 00:07:44,690 --> 00:07:46,170 lot of different insights in this book. 138 00:07:46,370 --> 00:07:48,410 And you know there's a lot of different thoughts that goes 139 00:07:48,410 --> 00:07:52,450 into what a game changer is, the different types of games prices 140 00:07:52,450 --> 00:07:54,570 can play. Essentially one of the things 141 00:07:54,570 --> 00:07:57,930 you mentioned is you know how companies should leave money on 142 00:07:57,930 --> 00:08:00,890 the table. You know, if you don't mind kind 143 00:08:00,890 --> 00:08:03,690 of expounding, expounding on that for us, what do you mean by 144 00:08:04,130 --> 00:08:05,930 companies should leave money on the table? 145 00:08:07,790 --> 00:08:12,830 So it's there's also a few parts of this book that are a bit 146 00:08:12,830 --> 00:08:16,110 provocative. And I and we hear in pricing, 147 00:08:16,270 --> 00:08:20,510 people tend to say you need to price as much to get as much 148 00:08:20,510 --> 00:08:23,670 price as you can. And in many circumstances that 149 00:08:23,670 --> 00:08:26,950 makes sense. And and derivatively people say 150 00:08:27,110 --> 00:08:28,750 should never leave money on the table. 151 00:08:29,350 --> 00:08:32,710 Well, if you never leave money on the table, then why would 152 00:08:32,710 --> 00:08:38,200 customers work with you? Pricing is an exchange of a 153 00:08:38,240 --> 00:08:42,840 product or service between a customer and and someone selling 154 00:08:42,840 --> 00:08:47,040 that product and that service. There needs to be value and that 155 00:08:47,040 --> 00:08:48,840 is on both sides of the equation. 156 00:08:49,440 --> 00:08:52,840 The customers need to find some good value and of course the 157 00:08:52,840 --> 00:08:54,520 seller needs to find some good value. 158 00:08:54,800 --> 00:08:57,640 And the balance between that value is what I like companies 159 00:08:57,640 --> 00:09:00,400 to think about. And so when you leave a little 160 00:09:00,400 --> 00:09:03,440 bit of money on the table. You could get a longer term 161 00:09:03,440 --> 00:09:06,800 relationship, you could get more loyalty from your customers and 162 00:09:06,800 --> 00:09:10,280 that in that in turn can enhance your marketing and strategy 163 00:09:10,280 --> 00:09:14,080 positioning. And so sometimes thinking about 164 00:09:14,880 --> 00:09:17,600 how do you create more value than your competitors and how do 165 00:09:17,600 --> 00:09:20,600 you leave that value in the hands of the customers as 166 00:09:20,600 --> 00:09:21,960 opposed to trying to getting paid. 167 00:09:21,960 --> 00:09:28,160 Everything today is is is a game changer and help people think 168 00:09:28,160 --> 00:09:31,580 differently about about the market okay. 169 00:09:31,860 --> 00:09:35,580 So essentially, this is a like any great thing, this is a 170 00:09:35,820 --> 00:09:38,780 balancing act it. Is a balancing act. 171 00:09:39,060 --> 00:09:42,300 And so you could think about for instancewhensalesforce.com 172 00:09:42,300 --> 00:09:45,500 launched at the beginning, they were trying to differentiate 173 00:09:45,500 --> 00:09:48,900 themselves from traditional software and traditional 174 00:09:48,900 --> 00:09:51,580 software. The pricing model was pay 175 00:09:51,580 --> 00:09:54,430 upfront. And the companies like Oracle 176 00:09:54,430 --> 00:09:56,550 were trying to get paid as much as they could. 177 00:09:56,590 --> 00:10:01,390 upfrontandsalesforce.com implicitly start with a really 178 00:10:01,390 --> 00:10:04,030 low price points, very easy to come on. 179 00:10:04,350 --> 00:10:08,070 Instead of buying the software for all the enterprise, you 180 00:10:08,070 --> 00:10:09,710 could just buy it for a few users. 181 00:10:09,990 --> 00:10:13,350 Which is why they're pricing model on pay per user per month 182 00:10:13,670 --> 00:10:17,390 was much more accessible. They were literally living money 183 00:10:17,390 --> 00:10:20,620 on the table initially. But they were leaving money on 184 00:10:20,620 --> 00:10:24,300 the table to create loyal customers and then eventually 185 00:10:24,300 --> 00:10:28,260 upsell them to better products and larger and get the entire 186 00:10:28,260 --> 00:10:30,700 sales force on board with their product. 187 00:10:30,900 --> 00:10:34,100 But they didn't ask the customers to buy everything 188 00:10:34,100 --> 00:10:35,660 right away. At the beginning, I'm 189 00:10:35,660 --> 00:10:37,340 caricaturing a bit the situation. 190 00:10:37,340 --> 00:10:41,780 That's a good illustration of when you set up a new business, 191 00:10:42,060 --> 00:10:44,580 you want to do something for your customers that your 192 00:10:44,580 --> 00:10:46,580 computers are not doing. You want to leave a little bit 193 00:10:46,580 --> 00:10:48,940 of money on the table and you want to create. 194 00:10:49,100 --> 00:10:51,700 That value over time in your shared spirits between your 195 00:10:51,700 --> 00:10:55,620 customers and what you do for that good, that's really good 196 00:10:55,980 --> 00:10:57,580 okay. So you wanna create that 197 00:10:57,580 --> 00:11:02,100 environment in which the customer finds value in whatever 198 00:11:02,100 --> 00:11:04,980 your service or product is and of course you want to continue 199 00:11:04,980 --> 00:11:08,980 to gain their trust over the upcoming years thereafter. 200 00:11:09,140 --> 00:11:12,940 Now, does that kind of tie into this concept of pricing 201 00:11:12,980 --> 00:11:16,460 fairness? It does. 202 00:11:17,250 --> 00:11:20,330 And fairness is a really like how to be fair in the world. 203 00:11:20,330 --> 00:11:24,290 It's really complicated thing but but there is a lot of 204 00:11:24,290 --> 00:11:28,170 discussions about is it a fair price and and what does a fair 205 00:11:28,170 --> 00:11:31,930 price means and and we've thought a lot about that and 206 00:11:31,930 --> 00:11:35,690 different situations different things can be can be fair and so 207 00:11:35,690 --> 00:11:38,690 from a pricing standpoint. If you say is it fair that two 208 00:11:38,690 --> 00:11:42,250 people get the different price on the same thing, you're going 209 00:11:42,250 --> 00:11:44,730 to get everybody saying absolutely, that's not fair. 210 00:11:44,730 --> 00:11:46,970 Why? Why should he receive a lower 211 00:11:46,970 --> 00:11:49,170 price than me? I'm not happy with the price 212 00:11:49,450 --> 00:11:52,370 because I know now that he received the lower price than my 213 00:11:52,370 --> 00:11:55,370 price for the same thing. You tend to be upset about this. 214 00:11:55,370 --> 00:11:58,850 That's unfair, OK? But if you ask people, is it 215 00:11:58,850 --> 00:12:03,850 fair to give a discount to grandpa and grandma everywhere 216 00:12:03,850 --> 00:12:07,310 in the world? People will say, of course we 217 00:12:07,310 --> 00:12:09,430 need to give some relief to grandpa and grandma. 218 00:12:09,790 --> 00:12:13,470 It's fair to give a discount to the seniors and to all the older 219 00:12:13,470 --> 00:12:15,990 generations. You find this across all product 220 00:12:15,990 --> 00:12:20,230 categories in Japan, in the US, in France, Germany, We did 221 00:12:20,230 --> 00:12:22,670 studies. Everybody agrees on. 222 00:12:22,830 --> 00:12:24,870 OK. It's good to give a discount and 223 00:12:24,910 --> 00:12:28,070 to have a lower price for certain categories of people, 224 00:12:28,790 --> 00:12:30,790 particularly people that are the seniors. 225 00:12:31,370 --> 00:12:33,970 Okay. Now let's flip the the the 226 00:12:33,970 --> 00:12:38,330 question and ask is it fair to give a discount to the students? 227 00:12:38,530 --> 00:12:41,650 Student doesn't have that much money. 228 00:12:41,690 --> 00:12:46,290 It's on the other side of the 8 spectrum and on that you find 229 00:12:46,290 --> 00:12:50,930 very big splits. You have some people in in 230 00:12:50,930 --> 00:12:54,010 different countries that will think differently depending on 231 00:12:54,010 --> 00:13:00,010 how students are helped by the the States and society. 232 00:13:00,390 --> 00:13:04,830 And so suddenly you find some in the US where students have to 233 00:13:04,830 --> 00:13:06,990 pay for college and so on. You can have a lot of people 234 00:13:06,990 --> 00:13:08,870 saying, hey, students need to be help. 235 00:13:08,870 --> 00:13:11,070 It's okay to give them some discounts early. 236 00:13:12,190 --> 00:13:16,350 But then not everybody agrees. And what you find is as people 237 00:13:16,350 --> 00:13:21,150 get older, some older people don't want to give discounts to 238 00:13:21,270 --> 00:13:24,310 young people because like, hey, you know, I had a tough life. 239 00:13:24,310 --> 00:13:25,590 This is it. They need to start like 240 00:13:25,590 --> 00:13:27,270 everybody else. And why would they get a 241 00:13:27,270 --> 00:13:29,350 discount? There's a good logic for that. 242 00:13:29,690 --> 00:13:32,970 When you ask people about who, when you look at who they are 243 00:13:32,970 --> 00:13:35,810 and why they don't want that, you tend to find that 244 00:13:35,810 --> 00:13:39,450 conservatives are less willing to give discounts to students, 245 00:13:39,770 --> 00:13:44,010 while people that are more progressive tend to be on the 246 00:13:44,010 --> 00:13:45,770 side of giving discounts to students. 247 00:13:45,770 --> 00:13:50,730 Suddenly, fairness depends on who you are and the way you look 248 00:13:50,730 --> 00:13:56,490 at society, and so you have all sorts of situations that then 249 00:13:56,490 --> 00:13:58,050 could arise in different markets. 250 00:13:59,250 --> 00:14:02,050 And I think the concept of fairness, understanding that it 251 00:14:02,050 --> 00:14:05,210 varies depending on people and that companies have a role in 252 00:14:05,210 --> 00:14:08,250 explaining why when they give a discount, they think it is fair 253 00:14:08,250 --> 00:14:09,730 to give that discounts to people. 254 00:14:10,050 --> 00:14:13,290 So for instance, we're giving discounts in a cinema, in a 255 00:14:13,290 --> 00:14:17,930 movie theater early on because the the room is not as full and 256 00:14:17,930 --> 00:14:20,010 would like to encourage people to come earlier. 257 00:14:20,560 --> 00:14:24,800 That that can can make sense. We give the discounts to people 258 00:14:24,800 --> 00:14:27,640 who lower our costs. So give a discounts if we can 259 00:14:27,960 --> 00:14:30,720 directly ship you the product as opposed to going through a store 260 00:14:30,720 --> 00:14:32,200 for instance. That makes sense. 261 00:14:32,200 --> 00:14:34,560 So you have all sorts of reasons that you could give different 262 00:14:34,560 --> 00:14:38,440 prices to different people and that can seem fair, but that 263 00:14:38,440 --> 00:14:40,720 needs to be explained and companies have a choice in how 264 00:14:40,720 --> 00:14:44,240 they explain that. And over time you can get people 265 00:14:44,240 --> 00:14:47,760 to get used to more price differentiation that they might 266 00:14:47,760 --> 00:14:50,770 be at the beginning. Early on 30 years ago when the 267 00:14:50,770 --> 00:14:54,210 airline started to give different prices to everyone in 268 00:14:54,210 --> 00:14:56,810 a particular airplanes, a lot of people are complaining my 269 00:14:56,810 --> 00:14:59,410 neighbor has a lower price than me, like how is that fair? 270 00:14:59,930 --> 00:15:02,770 But then progressively, we understood that actually having 271 00:15:02,770 --> 00:15:05,410 different prices depending on whether you book early or not 272 00:15:05,850 --> 00:15:07,650 also corresponds to the types of. 273 00:15:08,380 --> 00:15:11,220 Passenger you are if you're in business and you want to to 274 00:15:11,220 --> 00:15:14,460 travel right away, you're going to be willing to pay more 275 00:15:14,460 --> 00:15:16,380 because your company is going to pay for the same trip. 276 00:15:16,580 --> 00:15:19,700 Whereas if you are a tourist and you can plan your your vacation 277 00:15:19,780 --> 00:15:22,340 for three months or six months or nine months ahead of time, 278 00:15:22,340 --> 00:15:24,820 maybe you can deserve to have a lower price points. 279 00:15:25,260 --> 00:15:30,100 And that overall has allowed us to have much more air travel and 280 00:15:30,180 --> 00:15:33,980 to have people going around and to discover all their. 281 00:15:34,400 --> 00:15:38,040 People, the societies and so on, all sorts of good benefits from 282 00:15:38,040 --> 00:15:42,640 traveling around and therefore having different prices in the 283 00:15:42,640 --> 00:15:47,080 airlines is now quite accepted by most of the customers. 284 00:15:47,080 --> 00:15:49,000 Even though some people still ask questions, but it's much 285 00:15:49,000 --> 00:15:51,160 more accepted than it was 30 years ago. 286 00:15:51,680 --> 00:15:55,120 And so the points that I'm trying to make here is fairness 287 00:15:55,120 --> 00:16:00,440 is complex, but you have some principles about what is fair 288 00:16:00,440 --> 00:16:03,260 and what is not fair. And companies, by explaining 289 00:16:03,260 --> 00:16:08,300 what they do and why they do things, can be can help 290 00:16:08,300 --> 00:16:12,540 customers see what they think and what they do as being more 291 00:16:12,580 --> 00:16:15,340 fair than otherwise. They ought to explain to people 292 00:16:15,340 --> 00:16:19,780 why their pricing is fair. Wow, that's a lot to think 293 00:16:19,780 --> 00:16:22,060 about, but it's actually kind of simple. 294 00:16:22,060 --> 00:16:24,540 But the concept of fairness when it comes to a business 295 00:16:24,540 --> 00:16:27,770 standpoint does sound like it can be a complex phenomenon. 296 00:16:27,770 --> 00:16:30,850 I mean, you have some certain companies that have reward 297 00:16:30,850 --> 00:16:35,090 systems and if you purchase a certain number of products, you 298 00:16:35,090 --> 00:16:37,490 could get a discount on the next product or whatever. 299 00:16:37,490 --> 00:16:39,330 The case is something similar to that. 300 00:16:39,890 --> 00:16:43,170 That's exactly that. The very often one important 301 00:16:43,170 --> 00:16:46,930 thing point about fairness is. Procedural fairness is the 302 00:16:46,930 --> 00:16:50,170 process by which things were decided that some people would 303 00:16:50,170 --> 00:16:53,450 treat differently. Was that process a fair process? 304 00:16:54,090 --> 00:16:57,970 And so in the example, people get discounts not because they 305 00:16:57,970 --> 00:17:00,010 look good. People get discounts because 306 00:17:00,010 --> 00:17:03,370 they bought more products and anybody who buys more product 307 00:17:03,370 --> 00:17:06,849 will get the discounts. Everybody will feel this is 308 00:17:06,849 --> 00:17:08,250 fair. This is really excellent 309 00:17:08,250 --> 00:17:10,210 example. OK, interesting. 310 00:17:10,930 --> 00:17:14,550 That's good to know. Now you say in the subtitle that 311 00:17:14,550 --> 00:17:19,190 strategic pricing shapes society in addition to businesses and 312 00:17:19,230 --> 00:17:21,550 markets. If you don't mind, elaborate on 313 00:17:21,550 --> 00:17:23,589 that a little bit for us. Yes. 314 00:17:23,589 --> 00:17:26,550 So we all know we've all bid in the in the world of pricing and 315 00:17:26,550 --> 00:17:31,070 we will know that we'll know that a good pricing strategy can 316 00:17:31,070 --> 00:17:33,230 shape the business and can shape the market. 317 00:17:33,230 --> 00:17:36,190 I gave the example of Salesforce.com that invented 318 00:17:36,190 --> 00:17:40,750 software as a service by changing the pricing model to a 319 00:17:40,750 --> 00:17:43,550 price per user per month as opposed to upfront. 320 00:17:44,410 --> 00:17:49,690 And perpetual licenses, but very often the structure of pricing 321 00:17:49,690 --> 00:17:54,090 can also shape society in a in a broader way and in a way that we 322 00:17:54,090 --> 00:17:57,370 forget because it's always been this way and we don't really 323 00:17:57,370 --> 00:18:00,450 realize it. These are decisions about the 324 00:18:00,450 --> 00:18:03,410 pricing structure and not just the price points. 325 00:18:03,410 --> 00:18:09,010 Let me take an example. Think about tipping in the US We 326 00:18:09,010 --> 00:18:12,370 all know that tips tend to be higher than they are in Europe. 327 00:18:13,460 --> 00:18:15,500 And there are some cultures where there's no tipping at all. 328 00:18:16,060 --> 00:18:20,780 So how much you tip is a choice that not only you make as an 329 00:18:20,780 --> 00:18:23,740 individual but also you make as a society? 330 00:18:25,860 --> 00:18:32,300 Do you know when the US starting tipping differently than Europe 331 00:18:32,660 --> 00:18:36,260 and having tips be a bigger part of the income of all the service 332 00:18:36,260 --> 00:18:39,940 workers? Versus when it was in in Europe. 333 00:18:39,980 --> 00:18:43,980 In Europe, for instance, people tipping, the word for tipping is 334 00:18:44,220 --> 00:18:47,660 for what it just says. It's for you to drink on the 335 00:18:47,660 --> 00:18:50,140 Friday evening. It's not to pay for your roof 336 00:18:50,260 --> 00:18:52,060 and the and the food for your kids. 337 00:18:52,340 --> 00:18:54,660 It's just a nice to have as a compliment. 338 00:18:54,820 --> 00:18:57,700 Whereas in the US we all know that if we don't tip service 339 00:18:57,700 --> 00:19:01,740 workers as much like they it's their income mostly depends on 340 00:19:01,740 --> 00:19:04,820 the tips. Do you know when that started? 341 00:19:05,320 --> 00:19:06,760 I have no idea when that started. 342 00:19:07,560 --> 00:19:11,760 OK, you might guess it started maybe 50 years ago, maybe 100 343 00:19:11,760 --> 00:19:14,680 years ago. Well, it happened to start to 344 00:19:14,680 --> 00:19:18,800 date from the days just after the Civil War. 345 00:19:19,880 --> 00:19:22,800 Wow. And with the abolition of 346 00:19:22,800 --> 00:19:25,800 slavery, to make things pretty simple, a set of companies still 347 00:19:25,800 --> 00:19:29,240 didn't want to pay number of service people and they 348 00:19:29,240 --> 00:19:32,400 basically decided to say, oh, what if we let the customers pay 349 00:19:32,400 --> 00:19:34,280 for the service people? That'd be great. 350 00:19:34,880 --> 00:19:37,320 And Pullman were one of the first companies to establish 351 00:19:37,320 --> 00:19:41,320 this as a rule about the customers should know that 352 00:19:41,320 --> 00:19:46,840 they're the one with their tips paying for the the entire salary 353 00:19:46,840 --> 00:19:50,040 and the entire income of the service workers and over time 354 00:19:50,040 --> 00:19:54,120 that that expended to all kinds of services and so on. 355 00:19:54,200 --> 00:19:58,240 Right. The outcome of this is that we 356 00:19:58,240 --> 00:20:02,920 now have a lot of potential discrimination that happens. 357 00:20:03,370 --> 00:20:06,170 In say, the restaurant industry has been well documented. 358 00:20:07,330 --> 00:20:11,290 We we all know that women, for instance, face some 359 00:20:11,290 --> 00:20:13,490 discrimination. We all know that people of color 360 00:20:13,490 --> 00:20:17,690 may face some discrimination. People tend to tip more people 361 00:20:17,690 --> 00:20:21,210 that look like them, right? That's just a buy of society. 362 00:20:21,410 --> 00:20:24,730 By deciding to have the tip being a separate thing from the 363 00:20:24,730 --> 00:20:28,770 meal that you pay, you basically decide that the company is not 364 00:20:28,770 --> 00:20:31,730 responsible for the discrimination that is going to 365 00:20:31,730 --> 00:20:35,880 happen by essentially customers tipping people different 366 00:20:35,880 --> 00:20:41,800 amounts. That shapes society and that's 367 00:20:41,800 --> 00:20:46,400 the shape of society that we still have 150 years later is 368 00:20:46,400 --> 00:20:50,480 still happening and is still shaping how the outcome is 369 00:20:50,480 --> 00:20:54,160 working out. Now that shaping of tipping goes 370 00:20:54,160 --> 00:20:57,280 also all sorts of ways, right, because of the I talked about 371 00:20:57,280 --> 00:21:00,200 the biases and discrimination for for different customers. 372 00:21:00,480 --> 00:21:05,080 But think about what happened in the last three years with COVID, 373 00:21:05,320 --> 00:21:09,280 with the swivel of the terminal when you are not only in the 374 00:21:09,280 --> 00:21:11,680 restaurants but in sometimes a shop. 375 00:21:11,800 --> 00:21:15,880 You know even the orthodontist now has some tipping and and 376 00:21:15,880 --> 00:21:18,640 that could be surprising and and and you see the screen the 377 00:21:18,640 --> 00:21:21,700 screen in front of you is giving you a choice about how much you 378 00:21:21,700 --> 00:21:24,220 tip and all people behind you in the line are going to be able to 379 00:21:24,220 --> 00:21:25,900 see it too. So. 380 00:21:25,900 --> 00:21:30,380 So tipping that was a private act for years and years is now a 381 00:21:30,420 --> 00:21:34,220 public act and that has forced some people to tip more than 382 00:21:34,220 --> 00:21:37,140 they would have otherwise. And so and then you have some 383 00:21:37,140 --> 00:21:40,500 backlash against that. But then many companies have 384 00:21:40,500 --> 00:21:44,820 benefited from it and actually get more tips because of we've 385 00:21:44,820 --> 00:21:48,760 all wanted to tip people more doing doing COVID because we 386 00:21:48,760 --> 00:21:50,720 wanted all the businesses to survive, right. 387 00:21:51,280 --> 00:21:54,440 And so the fact that you have the tip as a separate item and a 388 00:21:54,440 --> 00:21:59,920 big item, not just two to three to 5% but 1520 thirty percent is 389 00:21:59,920 --> 00:22:02,680 something that really shapes essentially how we make 390 00:22:02,680 --> 00:22:07,320 decisions and how we companies get paid and and how society 391 00:22:07,320 --> 00:22:08,960 works. It's just an example. 392 00:22:08,960 --> 00:22:12,200 It's a structural pricing decision that has multiple 393 00:22:12,200 --> 00:22:15,440 implications in all sorts of directions and it shapes 394 00:22:15,440 --> 00:22:18,800 society. That's funny you mentioned that 395 00:22:19,160 --> 00:22:22,800 because I've been at certain, I won't say the name of the 396 00:22:22,800 --> 00:22:26,280 restaurants, but I've been at certain, you know, little cafes 397 00:22:26,440 --> 00:22:30,640 just to get maybe a drink or or a coffee or something very 398 00:22:31,280 --> 00:22:34,240 miniscule and just not that large in price. 399 00:22:34,600 --> 00:22:36,960 But when they turn that swivel, swivel around and show the 400 00:22:36,960 --> 00:22:40,920 screen, there are times where I'm, I almost feel bad for not 401 00:22:40,920 --> 00:22:44,520 tipping even though there was not much service for you know, 402 00:22:44,520 --> 00:22:47,530 provided that's that's exactly right. 403 00:22:47,530 --> 00:22:51,050 So the the psychology, we know that psychology plays the key 404 00:22:51,050 --> 00:22:55,890 role in and by changing the psychology, the swivel is 405 00:22:55,890 --> 00:23:00,330 actually changing the amounts that people turn out to pay and 406 00:23:00,330 --> 00:23:03,010 that's a structural decision and that's what I wanted to 407 00:23:03,010 --> 00:23:05,210 highlight. And so the psychology of humans 408 00:23:05,210 --> 00:23:09,370 works in all sorts of different ways and and it's really 409 00:23:09,370 --> 00:23:13,210 important in as you make pricing decision to think about how that 410 00:23:13,210 --> 00:23:16,030 can impact your customers and you'll brown. 411 00:23:16,590 --> 00:23:20,790 Sure, absolutely. Jean Manuel Isret, also known as 412 00:23:20,790 --> 00:23:22,910 JMI, it was a pleasure to speak with you today. 413 00:23:23,190 --> 00:23:27,630 We're going to use this podcast as a teaser for your speaking 414 00:23:27,630 --> 00:23:29,600 engagement. That is going to happen in 415 00:23:29,600 --> 00:23:33,200 Atlanta this October. Very excited to have you, very 416 00:23:33,200 --> 00:23:35,840 excited to hear about your expertise and your inside in the 417 00:23:35,840 --> 00:23:39,680 realm of pricing as well. Before I let you go, do you mind 418 00:23:39,880 --> 00:23:42,920 just kind of sharing with our listeners where you know any 419 00:23:42,920 --> 00:23:45,760 kind of resources you have available where they can find 420 00:23:45,760 --> 00:23:48,280 more information about you and maybe the different things 421 00:23:48,280 --> 00:23:49,800 you've done over the course of the years? 422 00:23:50,880 --> 00:23:52,680 Sure. First, thank you, Terrence. 423 00:23:52,680 --> 00:23:55,020 It was a great discussion. Thank you for having me. 424 00:23:55,260 --> 00:23:59,100 I'm looking forward to seeing everybody at the conference in 425 00:23:59,100 --> 00:24:02,260 Atlanta in October. People interested in learning 426 00:24:02,260 --> 00:24:09,220 more can type game changer and pricing and and their Google and 427 00:24:09,220 --> 00:24:12,220 they will have it. There is also a web page on our 428 00:24:12,220 --> 00:24:14,780 BCG website about the about the book. 429 00:24:15,020 --> 00:24:19,680 There is an interactive a page that allows people to discover 430 00:24:19,680 --> 00:24:22,600 more of the concept that I was describing and to play with it. 431 00:24:23,040 --> 00:24:27,800 And I hope that in a in a few weeks we will be able to come 432 00:24:27,800 --> 00:24:31,520 out with the bots that we'll be able to respond to any questions 433 00:24:31,520 --> 00:24:35,480 people will have about the book and that that should be quite. 434 00:24:36,080 --> 00:24:37,240 That'd be nice. That sounds fun. 435 00:24:37,680 --> 00:24:39,560 Well, thank you so much again, Sir, for your time. 436 00:24:39,560 --> 00:24:41,680 And until next time, we'll see you guys later. 437 00:24:42,000 --> 00:24:42,280 Bye. Bye.