Staying Resilient Through COVID-19 with Investment in Pricing
Valerie Howard interviews Bill Dudziak, Lead Strategic Consultant at PROS, on how economic downturns can drive awareness of the need for investment in pricing. Bill suggests that maintaining focus on your digital transformation strategy is just what your business needs to stay resilient and prepare for a strong emergence from the downturn.
[00:24]: Valerie introduces Bill, a pricing leader with experience from a range of well-known retailers.
[00:48]: Bill sets the stage for how to come out of a recession stronger than when you went in.
[01:24]: Bill explains the types of analytics that can help a company in a downturn, including pricing strategy and analytics and inventory solutions.
[03:20]: Bill shares perspective about the accelerating shift to online sales.
[04:18]: Focusing in on B2B, Valerie asks Bill, “What advice would you have for an organization that is used to being able to sell through a traditional sales model?”.
[06:08]: Valerie asks Bill for the keys to delivering pricing for digital channels.
[09:46]: Bill shares advice on dealing with state of emergency declarations to ensure your prices are compliant and you are not charged with price gauging.
[11:32]: Valerie asks about solutions that can help you to “be nimble” and Bill explains the key criteria to consider in your pricing hierarchy to enable agility and responsiveness to fast-changing market conditions.
[14:15]: Bill shares his final words of advice and reminds us that social distancing doesn’t require social isolation.
Valerie Howard (00:00): Thanks so much for joining us. If you've been following along, we've been having conversations with experts in the pricing arena around handling and managing your price strategy through the coronavirus crisis of 2020. I'm Valerie Howard, Solution Strategy Director at PROS and I'm joined here by Bill Dudziak, one of our Leads Strategic Consultants at PROS. Bill has a wealth of knowledge and experience coming from major manufacturers, major distributors, working with retailers such as Home Depot and Whole Foods when it comes to price strategy. Bill, I know with those experiences you've experienced managing pricing through a downturn before. Can you share with us some perspective on advice that you would give to this audience for that?...
Bill Dudziak (00:48): The things I would really concentrate on is, don't panic. And that goes for your personal life as well, but I'll set that one aside. So for retailers, it is not the time to hunker down. It is really the time to over-invest. I remember when I joined Home Depot in 2008 right in the middle of the housing crisis, they were really over-investing in analytics, and because of that, they came out of the recession stronger than they were going into it.
Valerie Howard (01:21): What kind of analytics were helpful to them in that environment?
Bill Dudziak (01:24): So, they over-invested in things like pricing strategy and analytics. They formed my group during that point, they built out an assortment team, so really looking at category insights and what products are going to drive incremental trips into the retailer, really looking at planograms, as well as looking at inventory solutions as well.
Valerie Howard (01:49): Can you help us to define what you mean by planograms?
Bill Dudziak (01:53): Oh, I'm sorry. Planograms, for you non-retailers, that is simply how products are arranged on a shelf. You can do things like, kids products typically it will go on the lower shelves. You want it at eye-level for children. The bestselling products are typically eye-level for adults, so they're on the second shelf.
Valerie Howard (02:16): Wow. That's a lot of variables to be managing for in addition to managing pricing through a crisis. You used the term over-investing why at that time did they see the need to prioritize pricing when you're in the middle of a downturn?
Bill Dudziak (02:32): Going into that crisis, even at that point, they were being out-comped by Lowe's every quarter and they realized they needed to do something different. The status quo was not going to work for them. Earnings per share growth was not going to come from new store openings, so they really needed to do something different. So that's when they really turned to analytics and started to build out their online capabilities as well. Again, it's a different way to drive earnings per share when traditional resources aren't there, like store growth, things like that.
Valerie Howard (03:10): That makes a lot of sense. Thanks so much. So you just spoke about shifting to online sales. So we're in 2020 today, but in this previous crisis where you were pricing at Home Depot, it was 2008. I'm guessing at that time the volume of digital sales wasn't quite what it is today and that was a key factor driving your success there.
Bill Dudziak (03:34): That's exactly right. So programs were started like BOPUS buy online, pickup in-store, really recognizing Amazon is a competitor. Recognizing that precious space in a store could be shifted to online, so you don't see the build-out of grills and patio furniture in the stores like you used to. People are comfortable buying those products online.
Valerie Howard (04:00): Oh, how interesting. Even though it's a large sort of spend product probably relative to the average at Home Depot spend.
Bill Dudziak (04:07): That's exactly right. Yep. They were comfortable in buying online or going into the store and seeing and trying out the products and then ordering online and having it delivered.
Valerie Howard (04:18): We've talked a lot about a consumer perspective, a retail perspective. I'm really curious about your perspectives and experience from the B2B side because what we know, right, a lot of B2B companies still use a heavy emphasis on traditional sales channels A lot of product sales or service sales happen through the negotiation with a sales rep as opposed to that buyer finding that product online and being able to purchase it directly from that website. What advice would you have to an organization that is used to being able to sell through that traditional model and may not have that catalog or may not have that pricing easily enabled? They may not have that realistic pricing right now on their website.
Bill Dudziak (05:04): I really think you're going to have to take learnings from people working at home right now. More and more people are working from home during this time. I don't think that that's going to entirely shift back when the virus kind of abates. Right. So people are now used to working at home. They have more time because they're not investing in the commuting and things like that. People will now have the infrastructure to work from home where maybe they didn't before. So I think things like that are now a fundamental change in the way we're doing business. If you are not web-enabled now for people to order through a website, I would say you need to do that. Right. And I saw a meme on LinkedIn yesterday and it said, "Who is deciding your digital transformation strategy? Is it your CEO? Is it your CIO or is it the COVID virus?" Right. And for a lot of us, it's the COVID virus that is really defining that transformation and has accelerated it more than ever before.
Valerie Howard (06:08): Absolutely. I know we spoke a little bit with Craig on this in our last conversation about how what we were anticipating was that businesses and buyers were expecting that a majority of their purchases were going to start moving to digital channels within the next couple of years. But right now for a lot of businesses, they're either having to interact virtually with their salespeople or maybe they've done a shift to enabling the self-serve buyer. Let's talk a little bit about, because you have the experience from the retail side and from the B2B side, what are some of the keys to a good digital experience when it comes to pricing for that?
Bill Dudziak (06:47): So honestly, it is making it very, very easy. And, you need to have a consistent view across your different platforms, whether you're phoning into a salesman, whether a salesman is in front of you at your desk or you're online. That has to be a very consistent experience. I'm not saying that the pricing necessarily has to be consistent, but it has to be deliberate in your differences. So don't let any differences between your channels happen by happenstance or circumstance. Be deliberate with any of those differences if they are going to be so.
Valerie Howard (07:25): One of the pieces of research that we recently did was better understanding of what buyers are seeking from their vendors. And we went out and did a survey with about a thousand professionals and we asked them what was important in your relationship with your supplier. And a lot of that had to do with transparency and trust with their vendors. Sophisticated vendors are able to even stand up personalized prices for their clients where they can log in and maybe get their contract price or some sort of special rates, right? Because they also want to be able to transact quickly, but the dynamic nature of that also gives a sense that you can trust that. Can you speak a little bit to that?
Bill Dudziak (08:09): That's exactly right. I've seen a lot of people put pricing online and they're not very thoughtful as to that initial price. So, a company that we are working with, they have the ability to put their contract pricing online, but for anybody else who is calling in, they're getting just a list price and it is so out of the realm of possibility that it really turns anybody off. So that is not a good portal for those customers coming in for the first time to that company.
Valerie Howard (08:42): Absolutely. It definitely seems as though if you're putting that unrealistic price up there, you may have interested buyers that never make that call to you.
Bill Dudziak (08:51): That is exactly right. And they're expecting with that rack price that's out there, they're expecting people to call in and negotiate. I'm just afraid that that price is so out of the welcome of the market that it's going to turn them off and they'll never engage further at that point. And so while that may not hurt their pro business much, it's the average consumer who's coming in and sees a ridiculous price and they'll just go somewhere else.
Valerie Howard (09:18): Absolutely. Let's talk a little bit about dynamic pricing for eCommerce because we know maintaining competitive pricing is a challenge, especially in today's environment where a lot is shifting, right? Your cost indices may be shifting, your supply may be shifting. Can you comment a little bit on what is a pricing team to do when maybe they had realistic pricing, but that was a yesterday's condition.
Bill Dudziak (09:46): Right. So the first thing you really got to worry about is when your governor declares a state of emergency. And so I'm not going to get into a lot of details here because the products that are covered during a state of emergency vary by state. But it is important when your governor declares a state of emergency that you adhere to those rules so you don't get charged with price [inaudible 00:10:13] The last thing you want to happen during a crisis like this is to have a very public battle over trying to raise your prices when it's not warranted. And besides the fine, the turnoff to your consumers is going to linger far longer than the virus will.
Valerie Howard (10:32): If you're in a situation where you may have had realistic pricing as of yesterday, it sounds like you need to have controls to quickly adapt. I know we work with a lot of clients who are managing pricing across multiple channels. What's your advice to them for getting some control over that?
Bill Dudziak (10:51): Really it's all about being nimble. And it's not just about being nimble in the time of a crisis, you've got to be nimble at any point, right? So you don't want the market to shape your competitive price strategy. You don't want your competitors to shape your price strategy. You really want to have the price strategy set internally and then have the tools to execute efficiently, effectively, and without errors. And that's what I would preach during any time, not just this time of crisis.
Valerie Howard (11:23): Do you have some perspective on maybe criteria that you would consider and what kind of solutions can help you with that?
Bill Dudziak (11:32): I would think about pricing on non-contiguous parts of your hierarchy. So when I was a practitioner, I always preached a flexible and extensible hierarchy that could be rearranged for different usages. But nobody has a country source of manufacturing as a node in their hierarchy, so have a tool that is able to look through your attributes and then price by attributes, so things like, I have parts that are being sourced in China with the virus. It seems like tariffs have now taken a back seat in the news. But two months ago everybody was worried about tariffs and products coming out of China you would want to price 10% higher. I'm making the numbers up. You don't want to have to go through each part and check the attributes of whether to raise the price or not. You want a tool that's able to look through all those attributes, do that immediately. We have seen that if you are able to shorten your cycle time from two weeks to two days of updating your price lists, that that is worth 10 to 15 basis points that flows right to the bottom line.
Valerie Howard (12:49): That's very interesting and very good points there. Right now, we're in these times where waiting two weeks to update your prices just doesn't feel tenable in today's situation.
Bill Dudziak (13:00): Exactly.
Valerie Howard (13:01): When we get into those situations where updates take a long time, there's a perception from the customer, sometimes businesses are slow to update pricing when it serves them to be slow. One of the key pieces of research from our work with Hanover on understanding the purchasing professional was that two-thirds of them actually said they would switch for a vendor that was offering real-time dynamic pricing, which I thought was really interesting because maybe I had an outdated perspective that dynamic pricing was still a little bit scary to a lot of buyers, but it seems as though we've passed that hump.
Bill Dudziak (13:43): That's exactly right. And that's two-thirds of people who even came back and saw a lower price later, they had already executed the PO by that point and were willing to stay with the slightly higher price that came back immediately.
Valerie Howard (13:59): Well, thanks so much, Bill. It's been really helpful to better understand what it takes from a large enterprise's perspective to be able to deliver pricing through digital channels to help support this major shift that a lot of companies are seeing. Do you have any final words of advice to pricing teams offered today on managing through this crisis?
Bill Dudziak (14:21): Really, I'm going to just a shout out to people. I am a introvert so it's like I've prepared my whole life for this and I'm doing okay. But for a lot of colleagues and friends, they are extroverts and they are struggling with the lack of human interaction that they had at the office. Just reach out to your friends and neighbors, make sure they're doing okay. They don't have to be part of the people susceptible to the virus to be struggling. Just make sure everybody is in a good mental health place.
Valerie Howard (14:50): Thank you, Bill. I love those words of advice to all of us. I know we can all use some connection in this time of social distancing.
Bill Dudziak (14:58): Right. Social distancing does not mean social isolation.
Valerie Howard (15:03): Great point. And it's great to be able to talk to you through this medium and connect with you here. I know for all of you viewers out there, if you're perhaps looking to connect with somebody who can offer you some pricing advice, we've got our team here, members like Bill Dudziak, Craig Zawada, and someone who you'll hear from soon, Josh Bardell, who can help you in better understanding how you need to be approaching your price strategy in such a dynamic time. So if you have questions you'd like to see answered, go ahead and reach out at the link below. We'd love to connect with you. Talk to you soon. Thanks. Thanks so much, Bill.
Bill Dudziak (15:38): Thank you.