Preparing your pricing organisation for Black Friday 2023 with Sahin Tezsoy | Season 1 – Episode 1

03:41 RD: Amazing. So from polo shirts to cosmetics and now lighting. You started in November 2022. How was it to set up a pricing organisation? And if you could meet yourself a year ago, what kind of golden advice would you give to yourself?

ST: It’s challenging and it’s also related with change management, which is a process which lasts. 

As I joined LUQOM, there was a powerful pricing team already existing, settled in the category Management. But, to reach the next level with pricing means from my point of view taking out the pricing department out of it. We will come later back to this point, but this is also why we are talking about change management today.

Let’s start from the beginning.

Implementing new departments into an existing organization is not easy at all. Even harder if it comes to pricing. A pricing department, commercial department, Yield or Growth Management department, whatever you want to name it. It’s a departments which brings stakeholders from every pillar within the organization to the same table.  

I see Pricing as the customers voice, therefore having Pricing within the Category Management will not improve your business and the way how you approach to your customer, as you will always have internal limitations. For example with margin targets, which are pretty much common in category management, you will focus on cost plus pricing and not on the customers willingness to pay. But are your purchasing conditions of interest to the customer? 

That’s why as an independent organization you can highlight weaknesses and risks, by inside out and vice versa analysis with the intention to improve the organization with the ambition providing a better customer journey and shopping experience to the customer. Sometimes you are also challenging used habits, or you are identifying issues in other departments, which might not be seen very well from all departments. This comes also with change management. But this is actually needed to transform your business from a cost plus pricing approach to a value based pricing strategy.

Key take aways or recommendations I can share are:

First – Have a clear roadmap, target plan and picture upfront in your mind. Today, companies are looking for supervisors being hands-on or it is also in the nature or dynamics of the business. Before getting blurred from the engine room, have your roadmap in mind and use it as a guideline to double check regularly if you still follow the right path.

Second – Be Flexible. Start with the resources you have and challenge the evolution you had in mind before. It might be that the organization is already much more advanced that initially thought or topics are even more complex than anticipated.

Third – Start with the basic. Take it from there. Even if you are able to speed up with your topics, step back and take time for guiding though your listeners stakeholders. This will help you in the long run and will build trust.

Give them time to breathe and to be an equivalent travel partner with you on the common journey you have, because you need the power of all your stakeholders to be successful.

Only by sharing thoughts and being transparent with everything you have, which might be also mistakes or even bad results in the first approach, which can always happen, will help you transforming the organization.

07:35 RD: So there are people, structures and tools that you have to change as a Pricing Manager. You have to be flexible. Understand what you have. So some inventory when you come in and then, think about the change management and sort of proving other departments that this is working and it will work. I started the Marketing department at 7Learnings. It’s quite similar, to be honest, starting the department like this, but what differs, it’s the technical part. So, could you tell us more, about the structure part of change management that you brought in?

ST: You need to have a scalable system. That’s why also my recommendation would be to check the I.T. resources first. And with I.T. resources, I mean the pricing landscape, how is the process from creating prices to publish them? Review the whole End2End process.

How much time is needed and always think about if the current solution or the current setup is ready to scale by times ten. For example, I experienced a lot and I’m still in touch with former colleagues and other pricing fellows. Their businesses are growing faster than IT infrastructures. Partially, they are not even able to set up the price or to change the price within three days, just for one SKU. And this is crazy. Preparing the landscape takes time. While preparing a scalable IT infrastructure, you can work hands-on on your other pricing topics because as I just said before, you have a roadmap with different sub-projects you would like to launch. That’s why use the time until IT topic is fixed.

To go for an AB testing, for example, check and validate the ideas you had in mind. Are they working or not? Or if you need to change some setups in your pricing strategy. It’s not only about the system and scalable systems.

It also starts with processes. Processes need to be simple and fast.

09:35 RD: So, you say that it’s important to have a solution that can be scalable ten times. My solution would be just to do the cost plus pricing. Just, you know, you take the price and a little bit more on top and I can scale it 10 times and…

ST: Yeah It can work out. I would say it can work out in terms of margin, but is it state of the art? That’s the question. The customer is nowadays more and more in the focus in order to really drive top line results and also sustainable sales growth. Cost plus pricing is dealing with internal, let’s say, challenges. About what the purchasing conditions are about, etc. But is it really in the interest of a customer what your purchasing conditions are? Not really, I would say.

The topic about price comparisons is also increasing. I mean, in the times of digitalization, it’s super easy to compare a product and the price in the e-commerce market. That’s why the price needs to be also a hygiene factor for you as a company. The importance of the price comparisons will increase today. You have for example Google lens, You can just snip a photo from a product and you will find even comparable products, private label products in the market at different price points. To get sooner to this point of value based pricing, you need to make sure that the organisation will follow you.

There are different stakeholders in your organisation, like the CFO, the CMO, or representatives from the customer service team. So, to get them really on board and to convince them about pricing, you need to talk also in their language. Start thinking about what is the interest of a CFO? He’s looking into margin levels, maybe per category or per brand. But, with a differentiated pricing approach you might not win in all categories as the customer sets the direction. Therefore, think about how you can compensate this kind of views. Then, CMO, he’s mainly focused on his ROAS, or the representative from the customer service might be interested in how the NPS or the net promoter score and how it will change over time. So try to bring all these kinds of different KPIs together and to identify how pricing impacts those KPIs.

11:53 RD: Wow. This is fascinating and simple at the same time. We all go to work to achieve the results. It must be great for business as well, of people talking with each other instead of being in their own department.

You mentioned pricing as a hygiene factor and fairness in pricing. Customers comparing different products. We already do that in shops where we compare different prices of tea if we want to buy some. Or even if we buy something more expensive, like a lamp that you are selling, people are actually gonna go and compare. What is the fair pricing?

ST: As a pricing manager, it’s always important to put yourself into your customer’s shoes. How is the customer perceiving you as a retailer and your products? And this is where it starts. Try to isolate really what is the willingness to pay from a customer and then how to approach to your customer while finding the best price for you and your customer. So if you start thinking about how the customer sees your product, it’s easy. Let’s say google it and then you see a couple of price points. Think about what is the relevant competition you have. You are not able to follow all the players in the market because there are also great market players which are putting down the market prices: question to yourself: Is it really important to follow or consider these kinds of players in the market?

By doing some kind of AB testings, you will find an approach or an idea about what should be the price levels of the SKUs you have in your assortment for the customers. You will see how the elasticities are across your SKUs. On some SKUs you will see that a competitive pricing will work out, but on some other SKUs, there might be no elasticity given.. And on those SKUs, actually, the customer doesn’t care what the price is.

So try to find a differentiated approach actually, where you find some fair prices for your customer, where they really pay attention to, to those SKUs. And on the other SKUs, you can play around a bit.

13:58 RD: It’s about positioning too.

ST: Indeed. It’s about positioning. Finding really who is relevant in terms of competition in the market, but also about differentiated pricing approaches across your assortment. And then you need to have a look for sure in your private label assortment, your third party brand assortment. How to position private label versus trade brands. Do I have premium brands? Do I have value brands, etc? Then we are talking about also maybe cannibalization between the brands and the assortments.

14:28 RD: Looking at your cash flows or 20% of products that bring 80% of profits, maybe you said that for retro principle. You touched on cost plus pricing and the shift towards prioritising pricing over promotions, right?  Could you tell us more about that? Because a lot of companies focus on promotions, especially as we have Black Friday coming up.

ST: People are mixing up topics like, with pricing and promotion. 

Let’s start first of all about what is a promotion. If we talk about pricing, then pricing is for me a full strategy about how to approach your customer. And everything out of this strategy is actually a promotion. If you change your prices temporarily to a fixed price point, then we are talking about a promotion. Or, if you apply a coupon code, and promote this, then this is also a promotion. Today the question is: How much can you contribute or gain with pricing? Having a solid pricing strategy and hygiene prices will help you also to improve the NPS score, because prices are also easy to understand for a customer.

Once you start with the coupon code promotion, customers try to type the code in and then they see that it’s not applicable. And this is something you see then also in the net promoter score. That’s why it is much more efficient having a solid pricing strategy while the impact of the promotion should come on top. Promotions should be event driven where you have Black Friday, Mother’s day, Valentine’s day, Father’s day, you can use them from the tactical point of view, because with pricing you can easily drive top line. But sometimes also customer behavior is changing. Maybe you need to act a bit differently. And this is also how sometimes you need to make use out of coupon code promotions and the mixture between pricing and promotion is also maybe interesting for the customer. This is how to retain customers to have a fresh and dynamic system and also a changing offer to the customer.

RD: Amazing. So building a price is a way to build trust with the customer.

ST: I totally agree.

16:35 RD: As we are already going to the end, I wanted to ask you a very relevant question today. What would be your three actionable tips to prepare for Black Friday? And actually, could you tell us when do you even start preparing for the Black Friday?

ST: It starts with the last Black Friday because you start with the evaluation of your Black Friday campaign. It’s important to see what worked and what did not. Check also what the competition did in the market. Maybe it is also worth trying the same things as a competition.

I see Black Friday not as one day. I just claim that the whole of November is actually a Black Friday and this helps you getting some pressure out of the business and not to focus on just one day.

Starting in February, march the year with testing for the right strategy for Black Friday, but keeping the eyes open because also some other retailers in the market might change their habits or the pricing promotion set up.

So this can also give you an indication about if they are also going to change their promotion structure for Black Friday. So this is something you need to always keep in mind. And, as actionable points for Black Friday, I would advise to be prepared. And what does it mean?

The first point: try to define some targets. Maybe it’s about the financial KPIs, but maybe not and more about outbeating the competition and gaining market shares. These kinds of targets have also implications on your financial results and where the interaction between the KPIs starts.

Once you have the clear targets, you can really focus on the KPIs, monitor and steer for them during Black Friday, which helps you also to put other measures into place in case needed. And here we are talking also about maybe starting into a Black Friday with a realistic approach or the setup, which you are convinced about given the testings you did across the year.

But if you see, for example, that you don’t meet your targets, you need to have other scenarios in your box, which are probably more competitive and ready. With readiness, I mean, have your prices ready, which you would like to put into life if you don’t hit your performance. Or also having other promotional campaigns already ready with visuals, etc, which you can easily activate with just one click.

So this is about readiness in the long term for sure. And if we talk about these scenarios, they are holistic scenarios, changing the whole setup of a pricing and promotion strategy during Black Friday. But I’m not a big fan of changing everything at one scratch because you don’t really know if it will go in the right direction. That’s why also, doing tiny technical adjustments will help you even. So keep your eyes open in the market and define some baskets. Maybe you can obtain it in the market. You have different SKU baskets and you check regularly.

Are there any offers in the market? Is it worth following? Yes or no? Checking your own basket versus the competition, but also checking the other way around; what is the offer of the competition and what are their top SKUs. Maybe these are the ones in their assortment, which are super important for them and where you need to be competitive as well. these SKUs might bring you to the point where you gain actually market share from your competition. So, not just focusing on your important SKUs, but try to find the important SKUs from your customer and attack that.

20:19 RD: How much innovation is there every Black Friday in pricing, would you say?

ST: Well. Black Friday is the same topic for years. You try to be prepared and to have chosen the right setup while anticipating also what the market and your competition will do. You do a lot if it comes to price and promotional elasticities and also predictive modeling, by the way 7Learnings is having a solid solution here, but what you cannot predict is the customer behavior, which differ also to your non busy-season.

We are in a time where we have high volatilities in the market, high uncertainties. People are not willing to pay the money they used to pay a couple of years ago before the pandemic. That’s why Black Friday might be not always about the strategy, but also about tactics while considering for example other offers, or stock situations in the market or in your own warehouse. It’s about preparation, the fine tuning of your tactical measures and having a dynamic framework in place anticipating implications in the short run as in the mid- or long run in order to guarantee the trade off for the investments you do.

21:02 RD: Especially for the past few years where there were so many changes.

Well, thank you so much for joining us today.

ST: Thank you for having me here. Thanks a lot.

RD:  Thank you, Sahin, for sharing your pricing insights with our listeners. This was the Retail Pricing Insights Podcast. My name is Ruta Donovan. I would like to say thank you to 7Learning’s team who helped to produce this podcast, especially to Eirini and Reka, who contributed in recording and producing this specific podcast episode.