Okay Martin, good morning. How are things? Good, doing fine. Very good. This course is all about scaling, but before I ask you specifically about pricing and scaling, could I just ask you in general terms about pricing? What do companies most get right and most get wrong about pricing? It's actually easier to talk a little bit about what they get wrong and very often, what they actually get wrong as they focus on cost-based pricing. They actually use as a starting point, what is my cost of production? How much does it cost me to deliver the product to the customers? Then it just add a slight margin on top of that in order to end up with the right price. Obviously, this is a little bit short-sighted. Because you typically have customers out there in the market who are willing to pay significantly more than maybe your cost-plus pricing might actually suggest and as a consequence, you're going to leave a lot of money on the table. At the same time actually, there's always a little bit this chicken and egg problem. You have to have a feeling about what's the quantity or what is the volume I'm likely going to sell of my product in the future. But that is obviously inherently dependent on what price I'm going to charge. We actually see a little bit of Catch-22 and actually applying cost-based pricing as well. Nevertheless, we still see many companies try to use that as the main way or the main method to set prices. Things like sticker shock for instance, and the idea that there's an emotional attachment to a number. Do you think that's something all companies should consider? Absolutely. It's really about that but obviously, there are psychological factors, like a certain thresholds as well. But at the same time, we could argue as well that obviously consumers always have a certain perceived value about a product. That should actually determine what is their willingness to pay, not necessarily what is the intrinsic costs. Imagine only because you are very inefficient production process which is going to drive your cost doesn't mean that at the same time your customers will be likely to pay more. We see a clear disconnect between cost and the action value perceived and the willingness to pay of our customers. Let's turn to the growth phase. Companies that are in their growth phase, we've talked in this course a lot about how difficult it is when you start off, how you don't feel you have control. But once you start to get some attention from customers, you have a chance to actually look at pricing in that way. How would you differentiate a growth company versus a company that's starting off? I think with a startup company, typically we see they have maybe one product. I don't think it's a very simple organization that basically is still trying to figure out what is actually my business model, how can we monetize my products and services? In a scale-up company, as the name already implies, I'm trying to grow. I'm trying to bump up my entire business. This is the perfect time to actually think a little bit more holistically about my product portfolio and at the same time as well about price. Maybe now it is the time to not only think about one price and one product but actually think about how can I actually come to the market with multiple offers? Obviously, we can think of horizontal product portfolio. I'm I think of it's not really a scale-up company. Let's think of Apple when they actually launched the iPhone, and then it have different colors all of them basically priced at the same level but at the same time, trying to target different customers or trying to reach out to different customer segments. But at the same time, what they've tried to do as well is they had as well very much vertical pricing. They try to do that with actually the built-in storage of the iPhone. Basically, having higher storage, commanding a higher price and then obviously less storage, and obviously, being charged or their phones being charged at lower prices. This is something that we should be thinking of scale-up companies as well. What's the product portfolio that we can launch to the market and what are the respective prices? I guess the lesson with Apple is that they simplify the number of products they had. That's one of the things that while you want to go from one minimum viable product to maybe four, you don't want to go to 10. Apart from Apple, what other companies, whether they're scale-up companies or established companies, do you say have done their pricing very well? It's actually interesting just when you mentioned this example that Apple tried to be simple. Actually, there's something called the paradox of choice. What we always should keep in mind as well, if you just offer too many options to consumers, the problem then is they always feel like I might be making the wrong decision. As a consequence, what we actually see and research has proven that is keep it simple, only keep it to a certain set of alternatives so that customers still feel comfortable in making that choice. But really coming back to your question about what other companies have done a great job and scale-up. It was obviously better to look at that in retrospect and obviously, one good example is, for instance, LinkedIn. I pick out LinkedIn for one particular reason, because what they have tried to do is really try to understand in the startup phase but also in the scale-up phase, what are the features that customers are actually using and try to figure out as well is what is maybe the value to attach to these different features? That actually allowed them to understand much more in detail of what features should go into the premium package where they can charge premium prices, and what is maybe some of the features that are really basic? What they have done nicely is really look at the customers and try to understand what these guys value and as a consequence, not only personalized the product but obviously, draw implications as well for the pricing strategy. Value is basically, instead of being like pricing, in charge of pricing, it's value. That's the number 1 thing you have to identify. Then I guess finally, who's in charge of pricing? Should the CEO, should the Head of Sales, should the Head of Marketing? We see always the tension between sales and marketing when the sales guys want something that they can go with and attract attention, whereas the same time, the CEO has to look at more money is coming in than is going out. Who should be in charge of pricing? I think you already responded to some extent. Because so many pricing is not only about pricing but is actually as well about value. The question is as well, who controls value? That really depends a little bit on each company. But typically, marketing has a very important stake in determining value because I'm setting the brands, I'm creating the image out there in the market. But obviously, as well the CEO with the global vision and where do I want to take that organization obviously has a significant impact not only on the value side but at the same time as well, how do we actually want to structure our business model? Obviously, pricing is a key component of the overall business model. What we actually have seen is that the most successful companies, what they do is, there are two different roads. Either you essentially have one person in charge of pricing but is really a horizontal role, trying to connect with all the different departments of the organization. Or the other alternative which typically works in a scale-up phase much better is that you actually have a cross-functional team trying to jointly take these decisions, taking into consideration and how can we approach pricing? Should we bring up prices? At the same time, how can we add a little bit more value to our customers? How does it fit and how does that reflect our positioning out there in the market and so forth? It is important to have this cross-functional, this holistic view, absolutely key. We see that in a lot of areas and that's the dream. It's like the adult supervision where instead of going from a survival stage that we go through a cross-functional team where we all come to the table with the inputs. That was absolutely fascinating work and thank you very much for your time. Thank you. It was a pleasure. Thank you. Thank you.
