Archive for month: June, 2015
Pricing Study 2015 in the Press
Overview of the coverage of the PFH Pricing Study 2015 in the press:
23.06.15 / Finanznachrichten.de – Significant profit potential lies dormant in Pricing
23.06.15 / nachrichten.de – Study: Significant profit potential lies dormant in Pricing
23.06.15 / Presseportal – Significant profit potential lies dormant in Pricing
24.06.15 / Haufe.de – Companies without a Pricing Strategy
24.06.15 / Absatzwirtschaft – Corporate Strategy: Too few Pricing Departments and Pricing Managers
26.06.15 / Brand article – Pricing in German companies not professional enough
L-TUR: Competitive Pricing Plays a Big Role for Us
As part of the Pricing Study 2015, Prof. Dr. Hans-Christian Riekhof conducted an interview with Stefan Baumert, Board Member of L’TUR.
Stefan Baumert is a member of the board of L’TUR Tourism AG and is responsible for pricing, tourism purchasing for flights and hotels, and the associated IT applications. After studying business administration at PFH Göttingen, he started his career in 1999 at TUI Germany and was responsible for various areas, including yield management, planning & pricing, and hotel purchasing. Since January 2014, he has been the product manager at L’TUR.
Prof. Riekhof: Are there any research results from our 2015 study that particularly caught your eye, that you did not expect?
Stefan Baumert: Two results particularly struck me: Firstly, that only 24 percent of the companies surveyed have a pricing department or a pricing manager, although 48 percent of those surveyed consider this to be sensible. Secondly, the fact that 64 percent of respondents stated that the operational pricing decision-making authority lies at the management level, with just as many respondents considering their company’s pricing structure to be complex or very complex. In my opinion, these statements reinforce the meaningfulness and necessity of dedicated pricing resources, even if not all operational pricing decisions necessarily have to be made in this function.
Riekhof: Are there pricing strategies and pricing processes in your industry that you consider to be a special feature and that probably do not exist in other industries or not in the same form?
Baumert: Due to various price comparison portals for package tours, there is a very high price transparency for the consumer. Therefore, competitive comparisons play an even greater role than in other industries. Another special feature is that tour operators usually work with travel agencies in the commercial agent model. This means that the sales outlets usually do not have pricing authority and there are the same sales prices in all sales channels. Therefore, there is no price advantage on the Internet for package tours per se, and tour operators do not differentiate their sales prices according to the costs of the respective sales channel.
Prices change faster today than 10 years ago
Riekhof: What changes does pricing in your industry undergo? Is there a certain dynamic of change or are prices established today in the same way as 10 years ago?
Baumert: Prices today are subject to a much greater rate of change than 10 years ago. Service providers (airlines, hoteliers) have increasingly established their own yield management, and so there are increasingly daily prices, which tour operators also have to deal with. This places high demands on the IT systems used, as millions of data records have to be processed within a short time, and it also increases the pressure to make one’s own pricing even more intelligent and sophisticated, as price margins are also increasingly being exploited by the service provider. Seasonalities are already much more strongly reflected in the purchase prices today than was the case 10 years ago. Due to meta searchers and other comparison portals (e.g. holidaycheck, check24), there is also a higher product/price transparency today, which also places higher demands on one’s own pricing competence.
Riekhof: What are the prices in your company mainly based on: costs, competition, or the customer?
Baumert: Since the purchasing costs make up a large part of the sales price, they naturally play a very big role. In addition, sales prices are very much based on competition. All customers basically receive the same sales price, but personalized discounts already play a certain role today and will do so even more in the future. While action or CRM discounts are still distributed “with a watering can” today, the future will be about playing out discounts much more targeted to certain customer groups (e.g. children’s discounts only to families, loyalty discounts to customers who are about to book and have already researched several times on the website, etc.).
A few special features beyond the usual
Riekhof: Are there pricing management tools and procedures in your company that you would describe as groundbreaking? Or does pricing in your company – for good reason – rather follow industry-standard rules and customs?
Baumert: Since we are in direct competition with almost all of our products, as the hotels are also offered by other organizers, competitive pricing and thus the usual industry practices play a big role. However, there are a few special features beyond the usual, such as a price comparison discount, which is deducted before booking if the product is found cheaper on another homepage, or the possibility of limited price adjustments in the shops (so-called Local Pricing) to exploit individual price readiness at the customer level.
Riekhof: Are there special tools or instruments in your company with which you ensure the implementation of the pricing strategy?
Baumert: Our Data Warehouse offers detailed reporting options on all transaction data and thus on price and margin development on a daily basis. To a limited extent, it also offers the possibility to evaluate price comparisons automatically.
The pricing itself is done via percentage mark-ups on the purchase costs and is completely rule-based, which makes it possible to price an almost unlimited portfolio of hotels and flights with a small team of three to five people. The rules can be prioritized among each other, so that we can control from a rough level, for example a 20 percent mark-up on all products in a destination, to a very detailed level, for example advertised corner prices for a specific offer. Demand, price comparisons and margin development are constantly monitored, and the rules are continuously adjusted accordingly.
Riekhof: To what extent have you already exploited the value creation potentials in your company that lie in professional pricing?
Baumert: Many aspects are already well established, the next step is to expand personalization, for example through discounts and automation. For example, it is conceivable that pricing rules are automatically adjusted based on price comparisons or the conversion development on the homepage, or at least automated suggestions are made to the pricer and opportunities are pointed out. This makes it possible to identify margin potentials in a pot with several billion offers. Since we work with completely dynamic, daily updated purchase prices, speed plays a big role, so there is no way around system support.
Media-Saturn: Same Prices Online and In-Store
As part of the Pricing Study 2015, an interview was conducted with Florian Welz, Media-Saturn E-Business Concepts & Services GmbH. The interview was conducted by Prof. Dr. Hans-Christian Riekhof.
Florian Welz is COO of Media Saturn MultiChannel / E-Business GmbH and is responsible for Store, Multichannel Concepts and the Saturn brand. Welz has been with the company since 2012, he is responsible for the overall project of the Roll Outs Electronic Price Tags (ESL) and the associated pricing issues of Media Saturn. Previously, the graduate engineer worked for about ten years in various management functions for BMW and a Bertelsmann subsidiary.
Prof. Riekhof: Are there research results from our 2015 study that particularly caught your eye, that you did not expect?
Florian Welz: When reviewing the research results, I noticed that 40 percent of companies see themselves as high-priced – this looks very different in our industry, retail. And a large proportion of the companies surveyed say that price only has a medium importance, which surprises me. Because there are a number of potentials that can be leveraged through systematic and professional pricing. For us, the price is extremely relevant, but this is of course also influenced by my industry view.
Riekhof: Are there pricing strategies and pricing processes in your industry that you consider to be a special feature and that probably do not exist in other industries or not in the same form?
Welz: First of all, it is important that we basically want to have the same prices online and in-store, so everything that can be ordered online is at the same price in the market. We adjust our prices once a day in the morning for relevant parts of the range. There are still operational differences in the countries that are included in the daily pricing. Not all countries have electronic price tags on the shelf yet. Even in the future, it is conceivable that we will only adjust the prices once a day, possibly across the entire range. Whether this will happen will be seen and depends on many influencing factors. But we will definitely not adjust the prices inflationarily. This is fatal in communication to the customer and cannot be conveyed. We also find that the absolute number of price changes per day is declining in those countries where our new system has been rolled out. The competitive landscape is becoming much more transparent for our customers and compared to the competition.
Pricing will become more dynamic overall
Riekhof: What changes is pricing subject to in your industry? Is there a certain change dynamic or are prices today determined in the same way as 10 years ago?
Welz: CE products (Consumer Electronics) are very easy for customers to compare in terms of price, as many providers sell the same products. In the CE area, the proportion of products bought online is also very high, which means we are fully in competition with online retailers and other multi-channel providers. Pricing will become more dynamic overall, across all range components. Price and selection are hygiene factors for the purchase decision, they must definitely be right.
Riekhof: What are the prices in your company mainly based on: costs, competition or the customer?
Welz: The effort we put into obtaining information about competitive prices is high, especially in multi-channel retailing this is very relevant and is still greatly underestimated by some market participants. In addition to the competition, of course, the customers are decisive. We ask ourselves: How do we fit into the customer’s world? What does the customer journey look like? The customer has a clear influence on our prices. Just as he knows in the LEH what the butter and bread cost, so he knows exactly what certain image items such as the iPhone 6 or the Samsung Galaxy cost. The price knowledge of the customers is extremely relevant, and we must consider competition and customers together. Value-oriented pricing, as practiced by some industries, is not really relevant for CE retail. We have commodities that are comparable. The market is simply price transparent.
Riekhof: Are there tools and procedures in your company as part of pricing management that you would describe as groundbreaking? Or does pricing at your company – for good reason – rather follow industry-standard rules and customs?
Welz: We are currently introducing a pricing tool. The pricing rules are very different per country, depending on online affinity, our market positioning etc. We derive them largely empirically based on our own experiences, but we also look at the competition. The tool we use is a central pricing tool, but it also reflects local influences and can be controlled individually per country. We are currently defining the future price strategies for each country – and thus also the pricing organization. We want to have the electronic price tags as quickly as possible in every market. The price-related control of the countries is carried out from the headquarters, taking into account the different market maturity levels and positions.
Sellers are proud to be able to offer the best price in the market
Riekhof: Are there special tools or instruments in your company with which you ensure the implementation of the pricing strategy?
Welz: The implementation of the pricing strategy naturally plays a major role in the organization of pricing. This is handled differently in our respective countries. In some countries, we have established pricing managers and pricing teams, in other countries, pricing is more anchored in purchasing. In the future, it can be expected that we will increasingly decouple the pricing department from traditional category management. We have not created a special incentive system for the implementation of the price strategy on site, and we do not plan to do so. Employees must know that our pricing at the POS offers the customer the best possible price. If the employees know this, it greatly facilitates the sales conversation. The local sellers are proud when they can tell the customer that they can offer him the best price in the market. A central role for implementation is of course the IT landscape. We do not yet have comprehensive support from our IT systems. But that will change massively. We will move to IT-supported pricing, especially because of the complexity of pricing in the future.
Riekhof: To what extent have you already exploited the value creation potentials in your company that lie in professional pricing?
Welz: We are currently in the process of identifying these potentials. We are much further along than many other companies, but we are only on the first 30 percent of the journey. If you can convey a very clear pricing strategy to the customer or if the customer has understood that he always gets the best price from us, then this will have a massive influence on the price perception and the image of the brand, especially if you take on a clearly recognizable pioneering role here.
