Well, hello and thank you all for joining me on another
episode of the professional pricing Society podcast.
My name is Terrence and have we got a good one in store for you
all today. But before we introduce Our
Guest, I would like to remind all of our listeners that we are
actually going to be in Dallas, Texas, very, very soon.
The 34th annual spring pricing and workshop.
Conference will be held there during the first week of May,
which will be May 2nd through the 5th.
You haven't already done. So, or if you are unaware, you
can learn more about that conference and register by
visiting our website. Rising Society.com.
Now our guest today is Adam ha partner and head of the Silicon
Valley office at Simon cougar for 17 years.
Adams, career has focused on value based sales, he's gained
12 months of focus sales training at the Timken company.
It didn't worked outside in industrial cells were five
years. Adam joined Simon, kouta back in
2012 and is Consulting activities have focused on
sales. Excellence value, definition and
Communication business model. Formation.
And of course. Pricing Adam.
How are you doing today, sir? There's I am doing great.
Thank you. Been looking forward to this
conversation for a while. Good.
Good work. We're very glad to have you glad
you're here with us today. I don't want to waste too much
time. Going to go and just jump right
into our discussion. If you wouldn't mind.
You know, you worked for Simon Kuchar, a global consultancy
that's focused on driving measurable revenue, and profit
for your clients. Now, can you elaborate on what
you exactly do for the company? Company.
Absolutely. So, you know, I think you can't
have a pricing consultancy and not know about the pricing
Society. So, I've been as a partner here,
you know, I work on projects that tub all sorts of different
areas and different Industries and sectors been here for over a
decade now and we're doing pricing for more than 20 years.
I think I was mentioning that my first PPS, I went to in Chicago,
in 2003. Yeah, long time PPS.
Advocate. Yeah.
And so today you know I've had a chance to work across a lot of
different mediums and industries from a pricing perspective.
Most of what I find Most Fascinating right now is having
Industrials background. But sitting in Silicon Valley,
I've learned how to speak Industrials.
I learned how to speak software and I can put those together and
help companies that have Hardware software combinations
and how they think through those monetization challenges.
But yeah, we're at a point here in the company where a lot of
what I do is help companies. Think through their monetization
challenges, whether it's the price level.
Are we charging the right amount or more evolved about a pricing
strategy. What is my metrics?
What's my model? Am I charging the right way?
We'll use the Expression. How you charge is more important
than how much. And so, I have the luxury of
getting to work with different companies and see different
pricing projects, all day, every day, and keep my mind focused on
the top line. Laughs.
That is awesome. Well, you sound like a very,
very important man. And of course, based on your
background you have a lot of experience in this experience
and expertise really, in pricing, really a number of
different Fashions but in price and in particular so much.
So in fact that you decided to write a book and this book is
called beating inflation. Now, what made you write this
but what kind of what was the Catalyst and starting this,
this, this written piece you have?
Yeah, I think you know, when you In a firm like salmon Kuchar,
which, you know, we have published more than 40 books.
Thought leadership is sort of one of the rules that we have in
the marketplace, is where tasked with thinking about where price
is going, where pricing is going next and you know how people can
think about that in advance and get a leg up.
So, when you join you, I guess you kind of think and hope one
day, maybe you'll have a chance to write a book.
So it was always in the back of my mind.
But covid hit. And, you know, you had a handful
of us myself, Herman, Simon, who, Damn affirm and couple of
others who were really interested in just monetary
policies, currency Financial questions, and we thought to
ourselves, man. It's going to have some material
effects on the amount of stuff out there.
You're right. If you can't have as many people
in the factory capacity is going to go down, demand might go one
way or another what's going to happen?
So the seed was planted really early in the pandemic like, hmm.
This Could Be A disruption that could lead to some inflationary
effects and then in our day job, you know, we See those things
roll in and we live through that that claims of transitory
issues, some of the spike and occurrences that happen when
Texas froze years ago, some of you might remember that that
took the Americas Plastic industry offline, pricing went
crazy, that Lumber went nuts, and you started to see Supply
chains back and up and there was this whole chatter around man,
it's all going to pass. But we were getting the phone
calls. We were looking at the M1 money
supply. We were thinking About
supply-demand balances, you know, way back then and started
to reach the conclusion that this could look a lot.
Like the 70s and Herman was around back.
Then I had the pleasure of also working with a couple of other
great, thinkers Ram, Charan and others who were tasked with
beating inflation in the 70s. And this group reached the
conclusion that there might be something there.
We held a podcast a while ago, and it want to crashing.
The server is because so many people dialed in this was 20 21.
To yeah, we thought. Okay it's real.
Yeah, we started. We felt a little crazy kind of
sounding the alarm early in the process.
But then, as as the number started rolling in, I think we
had most of the content put together in the first half of
2022, right? As those inflation numbers
really took off and so it turned out to be a timely thing to
think about, hmm. Sounds like it now you know,
when thinking about this book and its readers As you know if
you can explain to us, you know who really should be reading
beating inflation and what type of Industries or businesses are
going to really benefit from from this piece.
Do you think great point? I think we put a lot of effort
into thinking through not a specific.
Here's how it would be to be person thinks about it but try
to give examples and move across all the different Industries.
I think this is a shorthand answer would be we wrote it to
cover all the different areas of a business and So candidly.
Yeah, you could say that this is not a pricing exclusively book.
It has a section on how to see if ocean think about it.
How procurement can think about this?
We tried to go across the different areas of the business.
And sit in their seats and think about it.
And then we also illustrate how Industries experience at a
different rate. So, most people now, realize
men, groceries that happened. Fast Commodities, you know, when
you got two, three, four, five percent margin, you need to move
fast then we so that was the early movers and that was that
that first signal we saw years ago then you settled into
complicated industrial manufacture Goods.
Lot of different inputs, metal labor, Transportation fuel.
But man, they couldn't, they couldn't Stave off inflation.
So they had to move and now we're seeing the later stage
companies Business Services software that may be, felt they
were immune because they didn't have a lot of metal.
They weren't burning diesel. Yeah, as the wage inflation
cycle kicks in, they're starting to feel the pressures.
So the book is structured, it kind of speak to different um,
Different roles inside the company and different industry
segments. But the reader could be anybody
who has a business interest in making sure that they can kind
of adapt to the current environment.
It's not a book that says man, take your 401k and put it into
Bitcoin. It's not about personal
investing, sure, it's not about there.
There's some others out there that get into that topic.
There's others that talk about, you know, you know, he's
inflation going to lead to the downfall of societies like
There's much more dark clouds. What are you saying?
Look inflation comes and goes It goes up and down and it's
magnitude. This is always been around.
We're going to we're going to experience something none of us
as business professionals have seen before practically
speaking. It was not a lot of people in
the workforce today who were around in the 1970s, in an
active job. And so, how can we tell the
story? How can we show folks that, you
know, here's how you can think about this and adapt.
That's good. I'm glad you clarified.
That, you know this is really For anybody who has the interest
and apparently it's been affecting majority if not all
types of Industries and in companies, according to
yourself, do you have any tips for companies or leaders?
They are trying to survive inflation with a minimal loss.
Good question. I think you've got an audience
in the PVS. That's probably our friend
Center of all this and they're being nice.
That question, right? Hey, we need to get through
this. We need to respond but we can
lose a single point of margin. We can't lose a single customer.
We can't lose a single Revenue dollar and I think framing that
up and understanding that you know what is lost look like.
And how to think about surviving this phase is really important
for your audience, whatever because they're going to be
asked to do the impossible, right?
Right. Join to get more volume, more
revenue, and more profit simultaneously because you have
all through a couple things that we were able to pin down using
examples and real world. Kind of elasticities, and
responses that idea of getting through this unscathed and
probably not the right way to approach it.
It's more of how can we accept? The next decade is going to be
totally different from the last decade.
And then just think about how we need to adapt and we're going
through a transition. This 2022 2023 phase is going to
be transitory and how we adapt and evolve into it and then
we'll probably settle back into more of a profit expansion mode.
But in the short term, we do arrive at sort of a couple
high-level ratios. One being you can recover about
50% of the inflationary effect via price increase, but if you
try to do 100% forever, it's suboptimal, you know, price
elasticity is Real people will respond, they'll trade down,
they'll substitute, they'll not they'll choose not to purchase
and that is worse for you than maybe transacting at a slightly
lower price. So it is industry-specific and
it's every company has to look at their own situation.
But one message we get across is you can get about 50 percent of
your costs and inflationary costs recovered through price.
Maybe another 20, 25 percent through Cost efficiency and cost
take out, but in the short term, you're probably going to have to
absorb 25 to 30 percent just to get through this, in the, in
again, in the very short term. And I think that's the sort of
thing that's, you can see, in the stock market, businesses are
coming down in their evaluations, as they're all
realizing that they have to absorb some of it.
So that's a, that's a big mindset shift.
We talked about which is good though, it sounds like it's
necessary. Yeah, kind of having to bite the
bullet, if you will over It is and I think maybe if I give it,
give your are speaking to the audience, the PPS, right?
And knowing that you've got some people who are two years into
this. And some people who are two
months of this because different management different Paces.
The simple talking points would be First, Take Action.
Like, when we did a survey about having done inflationary price
adjustment in the first quarter of 2022.
So, a year ago, 30% of people, still hadn't done anything that
blew my mind because I've been thinking about it for years and
thought this is obvious but a third executive said still not
done and inflationary price in just twenty year ago, just
wrapped up. This year's 10% still haven't
done anything so if you're in the camp where you're trying to
get through this and hoping it'll pass We hope that some of
argumentation will help people realize it's not going away.
It's not the end of the world. We don't predict runaway 20
percent inflation or hyperinflation.
Sure, you just got our new numbers out.
Yeah, this week. It's Valentine's Day, right?
6.4. So people are like, yeah, we're
down from nine. That's still four times higher
than it's been for the last decade.
Right? Relatively down.
But, you know, it's not back to two or one and a half and so you
got to take some action, we think that that sort of the
first thing. And we talked about some of the
things you can do the very tactical people's.
So if you're just starting to take some actions, obviously
there's price adjustments, but then you get in the world of
surcharges and fees in some Industries, forgot about those
those are great deployment tool, right?
At the beginning. You can usually get around
contracts that might restrict you from making a price change
but they don't necessarily speak to surcharges.
People can point to it and say, oh, I get it, you know, few year
ago, guess gas prices are up. We understand as a fuel
surcharge, there's a lot more involved versions of that.
In different Industries, you can charge for availability for
capacity, things of that nature. But those came roaring back
again first with those commodity Goods, then with industrial
manufacturers. Now, Professional Services,
firms, or Now to do this. So those are some tactical
things prices can do the other. Real tactical thing was just T's
and C's digging into your contract.
Realizing you can do things that you haven't been able to do for
15 years. You know, anyone at the PPS,
knows the last 12 years of whatever record growth
environment, the sellers were arguably a disadvantages and the
buyers are in the damage. That pendulum is come swinging.
Back the other way really quickly.
And so if you've already done pricing moved and you've already
done some surcharges, the other place to look, early is in your
t's and C's switch that stuff in your favor, give yourself more
flexibility and adaptability there and that's some stuff that
anyone the PPS, use a front line, pricing job and you're one
of those lagging Industries. You probably think about that
now. You're on this podcast and
you're one of those leading Industries you're like, hey man,
I did that two years ago. What else you got for me?
So now for that audience, it's really more about pricing power
and getting into that topic. Yep.
Yep, that was actually just going there because in your
book, you mention this term pricing power, you know, if you
don't mind elaborate on what that is exactly for those who
may not be aware, and why it's so important to have pricing
power and you know, in your organization Yeah, so I think
the academic definition is the ability of affirmative charge
the prices at desires for its goods and services and then the
candida advantage or the candid word that you'll hear us use.
And if you've been to some PPS events, you may have seen in
some of our Keynotes. You know, Warren Buffett, said
about a decade ago, if you can raise prices, 10%, without
worrying, and losing sleep, you've got a great business.
If you have to have a prayer session before changing prices
1%, You've got a lousy business, so that's another way to just
look at pricing power. It's one of those sort of
nebulous things, but now, the company generally knows, hey
man, we got to go out there. We're the leader, we got to
move, it's going to be uncomfortable.
Customers aren't going to like, but we're gonna get it done.
Company, has that mindset and about 30% in our surveys respond
that way. And then the companies where
it's like, oh my gosh, we can't do that, we can't ask for it,
everything's going. We're going to go over a cliff
tomorrow, everyone's gonna run away.
That's an indicator of a company that doesn't believe.
They have pricing power and I think that sort of gets to the
core of where we are right now is if we believe the next decade
is materially different from the last decade in the books.
And Actually get to join you all in Texas in May where I'll be
giving kind of the keynote flavor of this and you'll see a
lot of numbers and statistics about if you had a dollar in
your pocket, at the end of the start of 2010, 10 years later it
inflated to a dollar 17. If you had a dollar in your
pocket at the start of 2020 and the first three years of this
decade is already inflated $2.13.
So its up 68% of inflation in just thirty percent of the time
and if we keep Going and I assume a 5% rate which is lower
than where we are right now, that dollar is going to go up to
a dollar 63 by the end of this decade.
And the important number is, are the 63 verse the 17th.
So, we're on track for about four times the inflationary
effect and that's where pricing power becomes.
Super important that a lot of companies really don't
understand what their position is.
I think many of them learned in these last two years.
Man we went out and did that price increase.
We never thought was going to never thought possible and it's
stuck. Hmm.
Right. So one of the listeners is in
that camp, you have more pricing power than you give yourself
credit for and I would argue the vast majority of businesses.
Have more power than they understand and or comfortable
flexing. And so, I think that's what the
game is going to be here. In the next decade of the 2020s,
is systematically figuring out, how to understand your current
position. The only way to do that is get
comfortable talking to your Market collecting information,
and forming an opinion on where you are.
And then once you believe and it's never accurate, right?
It's kind of like, Like elasticity is a concept, not a
point, I'm sure, you know, where you are in a market.
It's more of a range, not a engineered solution, but
companies got to get good at saying.
This is where we are. Once they can take a stand on
where they are, they can understand what their options
are in the short term for exploding pricing power and then
they can start asking the bidding question.
Which is what I think 2020 is are all going to be about is how
do I build and sustain pricing power over time?
I can go deeper into any of the stuff.
A good tip. If you feel like it's going the
right direction for you, but that sets up the basics of
maybe, what pricing power is the balance.
Some people have versus perception and How they can be
thinking about it and your audience, the PBS thinking about
2023 and the years ahead, and the name of the game I think is
really going to be pricing, power pricing power, a very
notable Jim from mr. Adam himself.
Now you also alluded to it previously.
But you know what should Business Leaders do to further
protect their businesses against some of the different effects of
inflation? You you kind of tease it before
but not sure if you Have. Any other actionable steps?
Yeah. The Hallmark there, or the, the
tagline there is going to be about agility and so from a
pricing perspective, you guys are living in this day-to-day.
Your audience, right? So long gone are the days of
once a year price adjustments and that what used to be once a
year is now once a quarter, he used to be one supporters once a
month. I bet you've got people on your
audience, to their experience. In 2022 is used to do once a
year. I just Six price adjustments
last year, it's crazy and that's not going away.
So what we're seeing right now is a lot of people trying to
systematize that agility. So instead of and I think your
audience would appreciate and we are broadly of the opinion that
sort of investment in the pricing function might have
atrophied in the 2010s, you know, money was free.
You want to grow a business, will take out some debt and grow
volume and the idea of profitability and profitable
growth and price. Defense might have been
secondary to just pure volumetric expansion in a low
borrowing, environment 2020 2020.
These are going to be all about paying attention to margin.
I think pricing as a job and as a function is going to get a lot
more attention. This decade.
And last, which is great. Great for your, your membership
and your audience. And what they're trying to do is
is system Eyes that agility. And so we're seeing people
calling up saying, how do I build the backend systems that
let me do pricing refresh, faster?
How do I build out the teams in the people that make sure I can
do this in a thoughtful way, not just overwhelm the two people in
the room that have to reprice the sheets globally, Alderman by
themselves and then practically for your audience.
I think if you're setting prices or your stereo, Earring deals
and negotiations on the client interaction face.
It's Contracting right now. Can you get out of five year
deals for one year deals? If you think your product is
adding value? 90-day alerts before a price
increase or becoming 60. Then 30 can you retroactively
reprice? Your backlog.
I bet you've got some members who actually did that, we're
seeing that come back and so having the Contracting
flexibility to operate in a more agile world.
I think that shaken out right now, while companies are also
building out the systems in teams to enable this agility,
yeah now kind of stretching on that.
Question. You know, do you feel that most
or a lot of companies today have that contractual flexibility?
I don't and it's not kind of a finger pointing comment or
thought it's more of this happened so quick.
Right. It's 2019 and people are
growing, they're signed a multi-year contract.
Sellers are on their heels, everyone's fighting for share,
so you were setting up contracts If you think most economic
Cycles are like seven years, that was a 11-year run.
Yeah, so that was an extended period of time to make weaker
weaker contracts are contracts, that were more favorable to the
buyer, an abnormally long, economic cycle, then Ian covid
and everyone sort of freaked out and at first it was just kind of
keep the lights on am I going to survive and so you would cut a
deal if someone called you in April of 2020 and said I want to
buy some stuff you might give them some end.
Normal Contracting and you might lock in a contract because you
didn't know what was going to happen next month.
So I think there was a couple of anomalous, things that resulted
in Contracts that might not be the ones you'd like today, and
those are just have to work through the system.
We spent a lot of time with people, there's probably been an
abnormal and a record amount of kind of force, majeure, and
contract breaking in the last two or three years, because of
covid. I think that's going to come to
a close. And, you know, if you have to
break a contract, now, it's just because you regret a contract,
you signed and Tony Stewart. But what you will see is more of
this as contracts for rolling and renewing, you have got to
remember like the power of the pendulum has swung in your favor
and it's a part of pricing. So you can get economic
advantage through the price levels through the fees and
surcharges bore the Contracting terms and leveraging that for
through the pricing Department in team to really push, and
ensure your business is doing well, during the cycle, that's
going to be different. Okay.
Alright, well, hey Adam, I really do appreciate your time
today and he does have his latest book out beating
inflation. If you do have interest, I would
highly recommend it. You I'll take advantage of that
Adam. If you don't mind, we're can
listeners access this book or maybe learn more about you and
Simon culture. Oh, well we try to make it easy
for all of you. So you've got Amazon is a great
place to find it. You could also go to beating
inflation.com. Pretty simple to remember.
Or Simon Kuchar website, Simon Dasha future.com.
That's an easy place to find us. And if you attend the PPS event,
May, I'll be there. Personally will have a booth.
I don't think you can go to the PPS and not bump into skp.
So we're tied at the hip or I bet if you did a fast Google
search on, you know, business pricing and pricing Simon
cutural, come up pretty quick. So there's a lot of different
Avenues. We try to make ourselves pretty
easy to, to contact and get in touch with.
Good. Good.
As Adam said, just as a quick
reminder, he will be one of our keynote speakers, very excited
for the upcoming 34th spring and pricing Workshop conference, we
have in Dallas, Texas. Again, you can register for that
conference and pricing Society.com.
Adam. Thank you so much for your time.
Until next time you guys have a good one.
Bye, bye.