Introduction
Eirini Athanasopoulou: Hello and welcome to the Retail Pricing Insights Podcast by 7Learnings. My name is Eirini Athanasopoulou and I will be your hostess for today.
Welcome to the fourth podcast episode. In this series, where we aim to improve your pricing strategies by inviting experts to discuss industry trends and share actionable strategies with you. We have access to these experts throughout our dynamic pricing community, which we have been building for almost two years. We are organising and hosting events, we also have a LinkedIn group and there is a lot of networking around it. If this sounds interesting to you, go ahead and apply for our community today. You will find the link in the description of this episode. This community is completely free of charge, but you have to apply and we are strict with our membership rules.
Today, I have the honour to speak with Florian Serr, Head of Pricing Analytics at MediaMarkt Saturn. The MediaMarkt Saturn Retail Group is Europe’s leading trading company for consumer electronics and the associated services with their interlinked online and offline offerings. They reach millions of customers every day. Florian has extensive experience in the company specialising in analytics and pricing. Today we will talk about the vital role of the pricing departments in e-commerce. If you’re ready for an episode full of insights, let’s welcome Florian.
Hello, Florian, and thank you so much for joining us today for this episode.
Florian Serr: Hello. It’s a pleasure to be here and thanks for having me.
01:50 EA: Let’s start with an introduction to your business path and how you started with pricing.
FS: Yes. Sure. Actually, how I started with pricing is kind of a random story because it was not really planned and it was not like. way that guided me there, but I somehow slided into it.
So I have actually worked already since seven years at MediaMarkt Saturn and also in somehow the pricing environment, I would say, and I started here to work in a pricing project because in these days, seven years ago, a lot of companies did not have really strategic pricing department that was only focusing on pricings.
My part was quite straightforward. I started as an Analyst, as a Pricing Analyst, right after my studies of statistics, and as I said, we set up pricing here at this company and after the first one, two years, I was working in the IT environment and I was working as a Product Owner, setting up different pricing tools and different models that we were developing in these days.
And then afterwards I took over the responsibility of the Pricing and Analytics team in Germany. And also working in some international projects also regarding pricing. So as you can hear, there’s a lot of pricing in my professional life.
03:06 EA: That’s very interesting and always open for some tips. So thank you so much.
At the moment, you are the Head of Pricing Analytics in MediaMarkt Saturn, right?
FS:Yes
EA: It would be great to give us an overview of how the pricing process looks like in your company.
FS: So I’m quite focused on Germany, but to give you a full overview, I think there are different maturity levels across the countries as probably in all companies. So depending on how far the country is already. But let’s start with a blueprint and how this actually should look like. I think you need a team of operational guys that is taking care of the operational business as the name says, but you also need a team or a group of analysts that are preparing everything around that, working on the strategy, working on ad hoc analysis, that you need to, to convince your board or something or stuff like that.
And what is needed as well, or what we at least have is an international IT team, so to say, that takes care of all the systems because without systems and without the right tools in place you do not really have a chance to work somehow efficiently, I would say. And as I’ve said already before, besides this organisational setup, it’s all very data and algorithm based to be ready for any potential changes that might come up in your market environment, because if you have only a team of operational guys, that is, I don’t know, having a look at all your products and at the competitor’s data manually, that would be, first of all, not the most efficient way. And secondly, you would not find enough people to do their job efficiently and not efficiently at all, but you would not find enough people to do that in a way that would be somehow sufficient.
05:00 EA: And how much do you follow this blueprint in your everyday work life?
FS: Yeah, we are of course trying to do that as well as possible, but I think it is in the end, you try to do everything as data based as possible. That’s for sure, somehow the cradle that we are following, but in the end, you always also make some manual decisions that you will always need people with a common business sense, as I’ve said before, to be able to make decisions the system cannot make, because there is always some input data, so to say, that maybe come via category management teams that come via other external factors or something like that, that is just nothing we can show, we can build or integrate in the data, so to say, so you always need manual decisions, but the blueprint is something we try to follow as good as possible to be able to work in this environment that is super fast and everything changes super fast. We have a lot of competition as you know, and these competitors, as well as we do, are changing prices super often and this is something where you need the setup to be able to compete.
06:03 EA: Yeah, exactly. So many challenges, and we go in the challenges immediately.
That was a very nice first deep dive in the environment that you are working on. And we said that this episode would be an episode about the vital role of the pricing departments in e-commerce. In recent months in the retail industry specifically, there have been many challenges. Now Germany is in a recession. What are the main challenges that you have been facing recently?
FS: Yes, that’s a good question and that’s definitely something that is first of all true. So there are a lot of challenges and actually over those seven years I work here now and in the field of pricing, there has always been challenges. But of course, now there are also challenges that come more from external factors. But I think what you also need to see, and this is not really only from a pricing perspective, but generally, which sounds a bit made up, but it’s also not just a challenge, but a chance because what you see right now is, If you are performing in the right way, and if you’re staying calm, and if you, if you do the business you want to do, and if you do the right job, then there will be others who might not perform as good as you, and then it might give you other chances. But of course, you need to be aware of what happens in the market.
And I think what is most important is not to drive crazy too fast if something’s not going the way you want to have it because. As you said, there is a recession, there are decreasing markets for months, months, and then again and again. So if you see that you’re losing sales, or if you see that, I don’t know, your daily forecasts will not be met, you need to be calm and you need to say, okay, actually the strategy I am performing is the one I want to have. I’m now talking about pricing. This is not the only topic, but the prices that I have are the ones that I want to have. I am following a price strategy that I’m convinced of and not to be, just stay calm, I would say, because there might be a market issue that might be a general market decrease of sales and it has nothing to do with your prices.
And then if you are trying to be overaggressive and then you are maybe not losing sales, but at the same time, winning a lot of market shares by investing a lot of money that you might not be able to afford. And then a month later, you need to do it the other way around. So this is not the best. It makes you steady. And this is, I think, important not to do that. And therefore to be able to have this steady business also within pricing. I think stakeholder management is crucial because you need to keep everyone in the loop of what’s happening within pricing because a lot of people and most of what’s happening in this pricing system is kind of a black box. So they only see that there is in the end on their own page, there is a price and this is what they see. And then they see maybe a competitor price that is higher or lower or whatever. And then they’re asking yourselves, why is that? Why do we have this price? So I think it is super important to have all your stakeholders on your side so that they are aware of what is happening. Why is it happening? What is the rule we are following? Because if they are trusting you, they also trust you if we have some days or maybe even a month of not the sales we are expecting, but we still know that the pricing strategy we are following is the right one, so not to drive too fast and not to drive crazy too fast.
Always try to be close to your stakeholders and let them know what is happening with the pricing so to make sure that there is no black box. And in the end, if you have your stakeholders on your side and they trust you, so to say, then you will have a more steady pricing strategy. And that will also help you in a very long term run to give the customer some kind of feeling of trust and security, because it’s not like this month, super aggressive next week, super defensive and so on and so on. And therefore, I think also for the customer these days, it’s super important to have some kind of steadiness. And this is what we not alone can reach for the pricing, but where we can be at least a little hard.
10:03 EA: Wow. So many things, challenges, solutions, points of view, and I confirm what you say about the black box attitude that many people and companies have. That’s something that we also experienced from our side, but I really want to keep the sentence you said, that tt’s not only a challenge, but a chance, that seems like it is an attitude that you follow in your work, right?
FS: Yes, and I think you need to do that and this cannot be easily reached. So when you set up the pricing or when you start on the pricing journey with a company, I think in the very beginning, it is super tough to have everyone on your side because usually other people were responsible for pricing before, and kind of a more manual process in most of the cases, and then they are also trying for prices that are not correct in their eyes, so to say. And therefore, as I said twice already, super important is to always explain and make clear and take the time to convince the people, because these are the ones that will in the end support you. If there is, for example, that happens in this world, if there is a mistake, then maybe these people will have you to figure out as soon as possible, as quickly as possible and get rid of something like that.
11:20 EA: That is very nice. And thank you for repeating that. It is very important to highlight it. So in this fast changing environment, how do you develop a pricing strategy that meets the needs and the goals that you have in your e-commerce business?
FS: That’s a very good question. I think in general it is important. First of all, you need to know who you are. So it is not always the same answer depending on what kind of company you are. So either you are, for example, I don’t know if you’re an online player or you are an omnichannel player or I don’t know, you can be a market leader, you can be a follower, you can be someone new in the market. Also, depending on what your brand positioning is, either you stand for the best prices or you stand for the best quality the world has ever seen. So based on a lot of factors, you need to decide in what kind of direction you want to go. But besides all these factors, of course, you need to put your assortment that you have in the end into different buckets.
And the server in different buckets will help you to differentiate between the assortment, because depending on a lot of things, it’s probably everyone who listens to such a pricing podcast is aware of. So when we talk about elasticity and stuff like that, this is of course a main factor. So depending on the elasticity, you want to be more aggressive for a specific assortment or less aggressive on the other hand, it might be an inelastic product, and this is how you can differentiate between the products. But still, I think you first need to know who you are as a company, as a retailer and, and what you want to show who you want to be, so to say.
12:57 EA: Very nice. In pricing, did you have any pitfalls that you would like to share with us? I know that you had, but what you would like to share with us today and of course, how you overcame them, this is very important for everyone, I think.
FS: So we only know each other for some weeks and you already know that there will have been a lot of pitfalls. That’s good, but it’s maybe not too wrong. Yes. Actually, what I say now quite often, what is important is something we did not do in a perfect way in the very beginning. So, when we started with a more advanced pricing approach. In the very beginning, we started with some basic rule based pricing, which is for everyone easy to understand. Everyone knows that if competitor A and B is doing that, then competitor C is doing that, and then we’ll do that, whatever. And this is easy to understand for everyone that it works, but at some point we wanted to be a bit more fancy.
And we started with some more advanced approaches when it comes to machine learning or artificial intelligence or whatever the modern fancy names for that are. And when we did that, we were like in our machine room and we were super happy with what we had developed and everything was great and everything worked out. And we were happy with the results and it was robust and statistically significant. So we’ve been super happy saying, Hey, now we can finally have a rollout and this is going to be awesome. Here you are. Now I’m a bit black and white and these are the new prices. Have fun with that.
And then everyone was like, okay, but if someone’s asking, like, how is the price actually set up and why is that the price? And I don’t understand that and I won’t be able to explain it to a customer if you ask me. And we have that actually, we missed the part that I explained before of doing something cool is not enough, but you also need to explain what you’re doing and you need to make people understand and you need to make them understand, like you need to make a lot of people understand and therefore you need to explain it in a very easy way. And this is quite often something that sounds easy, but it is maybe the most difficult part. So you can have a lot of code lines and you can do something super complex, crazy working well, but still sometimes the hardest part is to explain it in a very easy way and to convince people that this is something that will bring us further and therefore they need to understand it somehow. And this is something we did not do in the beginning and therefore it took us more time than needed until our solutions were accepted, so to say.
15:26 EA: That’s great learning and, now you are in a position to share this with us and maybe others that are in this situation at the moment can consider that. I think that was a very valuable experience from what I am hearing now. Let’s now go to our last question for this episode and go a bit in the future. Because we talked about the past, about the current challenges, and now I would like to know, how do you see the role of pricing departments evolving in the future of e-commerce? And of course, if you have any emerging trends or technologies that will impact pricing strategies in the e-commerce sector, in your opinion, of course.
FS: Well, I think the role of pricing at retailers generally gains more and more importance, which can be seen by, for example, the high amount of companies or startups that are entering the market, trying to offer some pricing solutions. And so there’s coming more and more. And I think if you are pricing responsible, you definitely know that because you get a lot of messages from those new companies that are trying to conquer the market, which is one thing that shows them, but on the other hand, also within the company, within the retailers company, pricing gains from what I hear, not just from the company I work for, but also from others, pricing gains more and more importance because people understand that this is a lever, that is actually a very important one and that can cause a lot of damage, but at the same time also can make a lot of good things with your KPIs.
So it’s a lever that you can push or pull whenever you want to, and you will see immediate impact, which is something that is not often the case. But of course, it is also a very sensitive lever, I would say, because what you can do easily is destroy your pricing image by, I don’t know, making wrong decisions, but what you cannot do that easy is to repair that pricing image again, because one thing might take you a weekend and the other thing might take you a year to repair it again.
So this is something that showed already that and why it is super important. Also, if you just have customers like you, what do you see when you go to an online shop and when you shop online, you see the product and you see the price. And this is the main two things you are interested in. Also from a customer perspective, it is a very important topic and I think for a retailer in the end that uses, because it is so important, any of those solutions, any of those pricing solutions doesn’t matter whether it’s from a third party company or whether it’s something that developed in house, but let’s assume it’s a modern solution when it comes to pricing. I think it’s also important to have some adjustments that you make for your company within those solutions, because if every player in the market is using the same solution, that would probably not lead too far and you need to differentiate somehow.
But maybe one more thing that is important to say. That’s compared to earlier times, at least from my experience, it needed much more people to do pricing because it was a much more manual job. So I think, as I’ve said before, you will still need people to make these adjustments within systems, but you will need not as many people as before, because you have systems for that, you have algorithms for that, that can do it much more effectively or efficiently than people could do it.
And I think the skills of pricing professional needs are also changing because in the past it was rather important to know something about the product, you know, something about all those specifications, the product and now it’s becoming more and more important to understand the data behind and to understand the systems behind and to be able to make analysis to work with the data and make the analytics in the end. So I think the role of a pricing professional also changed drastically in the past years and is also going to change in the future.
19:28 EA: That is a great overview. And as you said, actually people that are working in pricing, the sooner they will understand this need of updating their skills and their mindset all the time, the better it will be for them and their company, of course.
Thank you so much, Florian, for joining us today. It was great having you and we are very happy that this is the first podcast episode we had about more of the pricing organisation value and the challenges of the stakeholders management that you mentioned and you touched on. And thank you so much for sharing all this with us today.
FS: Thanks for inviting me again. It was my pleasure and have a good day.
EA: This was the Retail Pricing Insights Podcast. From now on, you will receive one podcast episode straight to your inbox if you subscribe to our newsletter. So go ahead, use the link in the description and subscribe to the newsletter. As well as mentioned at the beginning of this episode, I would love you to be part of our dynamic pricing community.
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Thank you very much for tuning in today to the fourth episode of the Retail Pricing Insights Podcast by 7Learnings. More pricing content is coming. See you soon.
