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25.09.2017 │Gera – Lecture “First the Price, then the Profit”
Intelligent pricing strategies are the topic of the marketing lecture “First the Price, then the Profit” by Prof. Dr. Hans Christian Riekhof. The Marketing Club of East Thuringia invites you to the event on Monday, September 25, in Gera at the Pentahotel Gera, Gutenbergstraße 2a. The start is at 7.30 pm.
Further information at: www.mc-ostthueringen.com/jahresprogramm/
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.