Pricing Matters: The Democratization of Pricing: How an Egalitarian Approach Drives Value
May 17th, 2021 | 28 min. read
The Democratization of Pricing: How an Egalitarian Approach Drives Value
I have a very special tenth-anniversary episode of “Pricing Matters” for you. I sat down again with Marcin Cichon, CEO and founder of Pricefx to discuss keeping ease of use as the key to adoption and a value driver and giving users access to cutting-edge AI technologies, so customers don’t just use the pricing strategies they need to seize a larger market share, they own them.
You can listen to the podcast from the embedded player below and read along from the transcript. You can also listen to the podcast on Apple Podcasts, Spotify, Stitcher, or wherever else podcasts are hosted. Want to see the conversation and not just listen? Watch it on YouTube.
AI Should Function in a Multi-conditioned Environment
Gabriel Smith 0:00
Hello, everyone, and welcome to Pricing Matters. This is our 10th episode, and it’s a special one. Today we have our co-founder and CEO Marcin Chicon.
Marcin Cichon 0:09
Thank you for having me today.
Gabriel Smith 0:10
Can you talk about how our approach to AI is different than our competitors? And what value that drives for our customers?
Marcin Cichon 0:19
Well, I guess the main differentiation is our AI approach to pricing is real, as I said before, bullshit-free zone. So we spent, I would say about two years, evaluating the artificial intelligence and machine learning capabilities in the market, but also how they are applicable to pricing and what is the best use of this technology in our unique space that has to be working in the b2b environments and b2c environments, which are so completely different. In b2c, you have a lot of data, but very noisy. In b2b, you don’t have as many data, maybe more precise, but they need a lot of interpretation. So this already established a big challenge for our own AI functionality. And it has to be applicable to multiple different use cases, right, you have to be able to optimize not only the price corridor, so the price recommendations, you have to be able to optimize discounts, rebates, any other pricing conditions, and ideally, in orchestration with each other. So there is a lot of dependencies between all of those pricing conditions or price points. And how do you apply AI to optimize them together so that in connection with each other, and they deliver the best possible approach? So there was a very challenging process. As I said, we took almost two years to evaluate our ability to develop our own solution, potentially acquire a solution or partner with somebody. And we ended up focusing our energy on Brennus Analytics, that was a French startup that utilized a university, a scientific work that has been developed at the University of Toulouse in France, that builds the artificial intelligence solution on something which is called independent or autonomous multi agent systems. So imagine, like a multiplicity of small software robots that have their own personality, and they have their own mission to fulfill. And they’re trying to get to the optimum, while they’re interacting with each other, like big groups of fish kind of swimming in the ocean, that’re changing directions and trying to find the optimal way through the ocean without being eaten by all the sharks just from learning from each other and kind of interacting with each other. That is a very, very unique system, we believe that this is going to be the best solution for us and for pricing, because it is highly applicable to the b2b and b2c environment. It is applicable to all of the aspects of pricing that I mentioned before, but also applicable to all of them in a multi-conditioned environment. And that’s why we decided to buy this solution and integrate it to the Pricefx platform capability.
Gabriel Smith 2:48
I think that multi-conditioned environment is also known as the real world. And that’s a data-driven approach. And the kind of segmentation optimization approach that many of our competitors take is solid, it’s a good starting point. But it doesn’t really reflect the real world all the time, right, and all of the potentially competing objectives and priorities, different constraints that you have within the business. And I think what the multi-agent system allows you to do is to reflect those things to come up with a more valuable, more precise and more pragmatic approach to AI-driven price optimization. And as you said, that can reflect potential outcomes as well, right? So you might be saying, your list price should do this, your discount should do that. And your rebates should do this, rather than just saying, “Hey, your discount should be this”, right. But I think also the flexibility of the model, the ease of use, and the transparency, right, understanding the clear-box approach, as we like to call it right, as opposed to a black-box approach, which some vendors take in the space where you can’t really understand causality, you don’t understand why the algorithm’s recommending what it’s recommending, you just have to trust that it knows the best. That’s really difficult, especially in b2b, to accept right in kind of more simplistic environments, some b2c might be able to take that kind of black-box approach. But one of the nice things about our approach is that it’s not like that, and it’s accessible. And it’s understandable, something that can be explained and understood, easily.
Marcin Cichon 4:08
Explained, understood and owned, right, that our customers can own it. And they really can do with this what they believe is right for them without dependency on us or any other consultants. Absolutely right.
Gabriel Smith 4:18
Let’s shift to pricing for a minute. This is a pricing-focused podcast, right? It’s called Pricing Matters. So I did want to talk a little bit about how we price at Pricefx. And I know we’re kind of looking at that and we don’t have to talk about anything that’s new or upcoming, but just in general, for folks that might be listening and maybe they’re moving into subscription or maybe they work for a software company. Let’s talk about the value metrics that we use at Pricefx and how you decided to use our value metrics and kind of what that process looked like in terms of going through and developing our subscription pricing model.
Connecting Pricing to the Value It Is Delivering
Marcin Cichon 4:52
Yeah, I mean, you know, pricing is the most powerful and influential lever you know, in terms of influencing the profitability or success in the business period, there’s nothing more powerful than this. Pricing is very much linked to the applicability of its power, which is typically linked to the size of the use case. And that is then linked to the revenue of which is being managed with pricing solutions. And I’m talking about pricing solutions in a broader sense, right? If you can’t be promotion management, it can be rebate management can be both in connection. We definitely from the very beginning connected the pricing of our subscription to the value that our solution is delivering. And that, as I said before, is connected very tightly to the scope of the revenue that the pricing solution is applied to. And that’s how we came up with a highly differentiated pricing model that works. Same for smaller companies. And I’m talking here mid-market in the range of 100 million euro revenue under management or less, but also works for the companies in the upper scale, moving to billions, or 10 billions, or very large enterprises. If you look at the customers portfolio of our family, how we actually prefer to call it, family of customers, you will see, you know, companies making 20/30 million euro revenue a year and successfully using our application and having implemented it in less than four weeks. And you see those very large multinationals that take a longer time to implement. And our solution works for them not just from the functionality point of view and flexibility point of view, but also from the price point point of view. So we understand the power of pricing, the power of differentiated pricing. And that’s exactly you know, how we develop our own pricing model. And what we’re offering to our customers is that they pay for the value that they receive, and not a penny more. And what’s really interesting is that we actually are tracking the value derived by our customers from our solution, in almost all cases, the companies are realizing a positive ROI from the investment in Pricefx in less than 12 months from the project kickoff, not from the go live, but from the project kickoff. So if you invest in an application like Pricefx, you will see a positive return, the investment will pay for itself in less than a year, which is absolutely unique. And that just proves the tremendous amount of value that we deliver.
Gabriel Smith 7:11
There was a G2 comparison report that came out recently about enterprise software providers. And when you look at the ROI payback period, for folks that aren’t familiar with G2, it’s from the users of the software. So it’s like Yelp for software, right? The users of the software provide these reviews, it’s completely unedited, unadulterated users speaking. So they did this comparison report recently in G2. And they looked at 10 different categories. And actually Pricefx came out as leaders in nine out of 10. But I think probably the most salient one and the most applicable one. And what we were just talking about is that ROI payback. So when you look at the other top three vendors in our space that shall remain nameless for now. But you look at their ROI payback period versus ours, their ROI payback period is 49% longer than ours. So it takes almost 50% longer, they are providing value, but because it’s more expensive, it takes longer and doesn’t provide necessarily as much value our ROI paybacks a lot different picture there. And I think that speaks to the speed and flexibility and friendliness of our model.
Marcin Cichon 8:14
There you go, the F words of Pricefx.
Gabriel Smith 8:16
Let’s talk about the F words, because we’ve kind of talked about those a little bit. But the F words when I started they had a little bit different version of the F words, right. But I think it was the same thing. And I think dialing it into the F words has really helped us from a messaging and marketing standpoint. But can you talk about how you came up with those founding principles, so to speak, and why they’re important to our success?
Marcin Cichon 8:38
Yeah, absolutely. And you know, they are anchored in the founding story. Actually, we didn’t come up with this from the very beginning. But the three kind of religious founding principles that we established at the very beginning, was simplicity, relevance and commercial fairness. Simplicity was really meaning how simple it is to deal with us as a company and how simple our solution is to adopt, to learn, to use, to implement, and we measured the simplicity in time terms, you know, the quicker you’re able to get into contact or business with us, without going through any legal hurdles. I mentioned them at the very beginning the entry barriers. And the quicker you can implement the solution, the quicker you can learn how to deal with this, and you can roll it out, the better right? So the time was the definition of the simplicity. That over time turned into fast. The second one, which I already talked about was the relevance, the relevance of our R&D, the relevance of everything we’re doing. And we very quickly learned that the key to the success was the adoption, and the adoption directly dependent on the flexibility of the solution, but also the flexibility of us as a provider. How flexible we are in our solution is to adapt to the changes in our customers’ environment, which is the new given, the new normal, and that’s how relevance kind of turned in terms of the one word capturing all these aspects into flexible. And then lastly, the commercial fairness that I also mentioned, being customer centric, being loyalty based, and not binding people through contracts and agreements turned into this friendliness, right. And I think that that really reflects who we are, extremely resonates with our customers in the market. We are known for the F words, we’re carrying them on our T shirts, sometimes. People are like “F words, isn’t it offensive?” And we’re like, “No, it’s not because it’s fast, flexible and friendly.” “Oh, gotcha. I like that.” So that that’s how F words have been born. And that’s, you know, how they’ve been working for us really, really well.
Gabriel Smith 10:34
I like to say only one has four letters, and none of them are bad, right. I think part of the friendly culture is also like we’d like to have fun, you know. I think it’s a very fun culture. That’s been harder to experience over the last year. But we certainly like to have a lot of fun, both internal as well as with our customers. And we’ve had a lot of fun over the years. And hopefully, things will come back to normal. And we continue to have more and virtually until then, right. I wanted to ask you a couple of other questions. So one is, I think we’re onto something big at Pricefx. And I think, you know, you were talking a little bit about at the beginning. Do you remember a time where you kind of had that realization that we’re on to something big and that when I first joined, you know, there was this kind of debate of which, are we more of a lifestyle company that’s just going to do things the way we want to do things and not worry about becoming a powerhouse in the industry? Obviously, that’s evolved over time and what you were talking about before is kind of much more indicative of the opportunity that a lot of us see and think exists. Do you remember a turning point in your own mind?
Marcin Cichon 11:35
I think there were two and one of them I talked already about, you asked me the question about the “pee in the pants innovation”, right? I, I literally, I’m serious when I saw this Excel performing as a front end. And us being able to load 1000s of rows of data in the matter of minutes or hours. And kind of setting up the application that it can really perform its duty as a demo system, or even almost a ready to go live application within, you know, weeks and not months or years. At that point, I really, that’s why I freaked out, there was the revelation. I thought this is it, right? Nobody has it, we are the first one to do it. This in combination with our native cloud architecture, and the super friendly SaaS approach. If we break through the barrier of overcoming the data challenges with this simple but powerful innovation, we’re going to make it and that was really true. We made very quick progress in Europe, we acquired several customers, and we proved that it is possible to go live in less than a month. And we did celebrate our many go lives in a shorter time. The second moment of truth that I thought, okay, we really are going to make it was the decision we made to move into the US. And that was the time when you and I met for the first time and as a part of the conversation to you to join Pricefx. And you messed up my blender and you did everything possible not to be hired. And I still hired you. Which I never regretted for a second. But it was an interesting interview process. To be serious, the move to the US. When we decided to test the waters in Europe, we were doing well. But US, you know this big market, higher maturity, much bigger willingness to adopt and pay for pricing solutions, you know, awareness of the value resulting from it. It was just incomparable with what we’ve seen in Europe. And we did this move. And guess what? Within the first five months, we acquired six customers, and there was not just some small, you remember, you were part of those sales cycles. How people were amazed about what we bring and how unique we are, was just very, very special. And that’s where we decided to go and raise money for the first time because between 2011 and 2015, the company was bootstrapped. It will self-financed, you know, we put our own money and our own time into everything we do. From the moment when we moved to the US. And we saw this tremendous success. We started raising money. And we went since then through three very successful financing rounds, we raised a total of north of 130 million dollars. And I think that I’m really very, very happy and proud of what we accomplished. And I think those two moments were kind of like the turning points in the history of the company.
Bringing the Power of Pricing to the People
Gabriel Smith 14:19
From a cultural standpoint, one of the other things that we sometimes talk about, I think it’s made it into our mission statement, right, is this idea of bringing the power of pricing to the people. Can you talk about that and how we view the democratization of pricing and pricing software pricing excellence to and really expanding the market?
Marcin Cichon 14:37
I talked about this notion of this idea that we had, let’s not bind people with us with agreements. Let’s not ask for millions of euros or dollars to subscribe to the software or buy it perpetually and spend a ton of time and effort and money on implementing, right. We saw that in the past decades before we incepted Pricefx. Pricing was elitist. It was only limited to big corporations, only companies that could afford this. And were brave enough to take a lot of risk, right. And we wanted to break this. So we declared Pricefx to be the solution for the people. And that means that the solution is non-elitist, that its power can be made available quickly, can be implemented very quickly, it is adaptable, means the flexibility, we talked about this before one of our F words, if things are changing, environments are changing, requirements are changing, you can adapt the application very quickly. It should be user friendly, because the user friendliness is a key to adoption, adoption drives value. It should be value adding and above all, it should be affordable. That’s what was our approach to democratization of pricing and bringing pricing to the people. All of this kind of finds its high point, I would say, there is a better word to say it, in the F words, right. That’s really where we, where we explain our uncompromised customer centricity. The relevant R&D, good karma, is just, you know, the icing on the cake, in the cloud-native architecture. All of this makes the application as I said before, non-elitist, adoptable, very powerful, quickly implementable and delivering a lot of value. That’s what democratization of pricing means to us.
Put On Your Red Shoes…
Gabriel Smith 16:18
Let’s shift gears a little bit. Let’s talk about some personal history. The red shoes are part of your signature, right, so for and a lot of folks know the story behind them, but I thought, you know, let’s capture it. Here.
Marcin Cichon 16:29
I am the freak in the red shoes. That’s how people and the market knows me because I really wear only red shoes. And that is probably since 2013. So it’s a long time. It’s seven or eight years and imagine how difficult and challenging it is to always wear red shoes, no matter if it rains, if it snows if you go skiing.
Gabriel Smith 16:48
How many pairs of red shoes do you have?
Marcin Cichon 16:50
A lot. Don’t ask. My wife thinks that I am worse than every woman on the planet. Our shoe closet is full of my red shoes, right, and partially also our basement. But to be honest, to be serious, you know, it was an accident. And but it started as an accident. And it became a pretty cool thing, I think and habit, and the kind of signature of myself. So, as I said before, you know, we bootstrapped the company. And we were poor as in mice as at the beginning church mice, right, we started the company literally with 25,000 euros, the three of us. We increased the capital of the company over time to 100,000, and a little bit more. So we’ve been putting our own money, our savings, and we’ve been working for free. So there was not much money to spend on travel, and we had to go and acquire business. So the only way that we could really do this was to utilize our cars from the past that we still had, and drive 1000s of kilometers a week across Germany, Switzerland, Austria, France. It was a lot of driving, you know, it was so much driving sometimes we’ve been sleeping in those cars, I think it’s not untypical for the startup. And because of this lot of driving, I was having always with me very comfortable racing shoes from Puma. Maybe you know those, right, with the soles in the back kind of rounded and with the signs of the Ferrari on the side. And they are red, like really red. One of the trips that I took to the customer, I just forgot my regular shoes. And I had to walk into the meeting with those freaking red shoes that caught everybody’s attention right away. They started asking what the hell’s going on here? And I just explained, well, I’m the guy in red shoes, right. And he was a good icebreaker. And it kind of stayed with me. And the other part of the story was that, you know, in the early days, as I said before, Martin and Marcin. Martin Wricke’s one of the three co-founders, and Martin and myself, we have very similar names. Marcin is the Polish version of Martin. And people were confusing, it he was kind of hard to kind of say Martin, Marcin, Marcin, Martin, so they kind of just gave up and “Let’s just call them M&Ms, right? Because they’re anyway, always together. They traveled together. They were the commercial face of the company for years.” And they called us M&Ms. So then we came up with this thing. “Okay, since we are M&Ms and I’m always wearing the red shoes, I will be red”, and Martin became yellow. So my nickname right now in the company is red, and my signature is red shoes. And that’s how this stayed with me for the last seven years. And I have to say, I really enjoy it.
Gabriel Smith 19:23
Did you ever wear red shoes when you were a competitive dancer?
Marcin Cichon 19:26
Hell, you know me too good! And you know me so long, that’s really not cool. But yes, you know, not many people know that, that I actually was a competitive dancer and a ballroom dancer and the answer is “no”, back then I did not. I was wearing actually pitch-black dancing shoes. I started dancing in the early teenage years. In Poland, where I was born and grew up, being a male ballroom dancer was a quite competitive advantage with girls. You listen to me before I said you know competitiveness and being different was kind of important in my life. So if you know what I mean, and overtime, I really became extremely competitive. I actually, I didn’t like to dance, I still don’t. But I love the competitive ballroom dancing, maybe because of the show, maybe because of the theater that was attached to it, and the music and the emotions, and everything. So, I’ve been dancing for a long time about 15 years in total, started in Poland, finished when I was in my early 20s. Because mainly because of finishing my college education and going to work. And I was actually not bad at this. My biggest accomplishment was winning the Swiss championship in the category, in the class in which I was competing at that time. It’s a very long time ago. But I was pretty good at that. And there was the Latin American ballroom dances.
Gabriel Smith 20:49
So one of the things you mentioned, there was theater. And I know that you’re also very much into film. And I think some of that’s come through in some of the video production that that we’ve done over the years, I think that’s really come to be a defining aspect of the company and the brand. So you’re able to kind of allow some of that, your love there and your focus, you know, come through into our culture. Did you major in film?
Marcin Cichon 21:10
Thank you for the compliment, Gabe, I appreciate that. And yes, I did major in photography. So yeah, I was my college education started in mathematics and informatics or computer science, I very quickly realized I’m completely useless, programming was not my thing. So I decided to move to something else. And that something else was economics. And because it was quite dry and boring, I figured I want to do something fun on the side. And I and I graduated also with photography. So I was very much into from the very beginning. I loved photography, and in terms of film, it’s less film, it’s more cinematography. And, you know, when I say cinematography, I mean the very unique combination of picture, music, and mood, and the mood can be story or just feelings or emotions. If those three things come together, mainly thanks to phenomenal directors and photographers or camera people, then what is the result is a film and the film can be just breathtaking, right? But this is the combination this is the thing that is really I’m into, the cinematography, and that’s why I would never watch a movie on the airplane. I think that everybody who watches a movie on airplane is just killing the art. And you cannot do this, you have to have a special mood, you have to be alone with somebody who you like or love. Yeah, it has to be dark. It has to be great sound, you have to, you know, have the right impression. That’s why cinematography is really one of my key hobbies. And I definitely really like it and one of my dreams I’ve managed to make some money out of what I’m doing right now is to hopefully produce at least one film cinematographic production in my life.
Gabriel Smith 21:12
I’d like to see that so I’ll look forward to it. And let me just say, on behalf of the Pricefx family that we’re pretty glad that you don’t like to watch films on airplanes, because I think we’d be a lot less productive as a company if you did. We’re about to wrap up. But let me just ask you a couple things on a personal note. You talked about films and cinematography, would you mind sharing a couple of your favorites?
Marcin Cichon 23:15
There are so many. My God, you know, you really caught me off guard, but you know, it’s across the board. Ultimately, I am huge fan of science fiction, right? You know, when I was 17, I saw Star Wars, you know, in a theater, it was just breathtaking. You know, imagine that the special effects that they had back then already was kind of, today, when you see it, it’s like, oh my god, this is so old. This is so crap. But you know, that’s definitely one of the films that changed my life. Films like, like The Green Mile, right? Based on Stephen King that I’m reading recently, a lot. Not the scary stuff from him, but really the good stuff. When Harry Met Sally, right, you know, phenomenal film, not book, more on the romantic side, which I am a little bit, I have to admit. You know, there are so many phenomenal movies, I could just go on and on and on. But you have no time for this. So I think we’ll leave it at that.
Gabriel Smith 24:06
What about any more business focus, blogs, websites, articles, books that you would recommend to the listeners about? Whether it’s about pricing or just business in general, or leadership or anything like that, anything that you’d care to share there?
Marcin Cichon 24:21
Right now I am really into reading. And that’s mainly because of the COVID situation and the fact that I’m staying at home all the time, and my wife has control over me, like 100% control. So she is very, very clear about this what I need to do and what I should do and not do. So I’m living right now under a very, very strong and strict regime. Five o’clock, wake up. One hour reading in the morning, every day with no exceptions. One hour walking the dog in the morning before I start, I cannot touch my telephone to take a look at the emails. Then having breakfast with her and then I can start working. And then I have to move more in the afternoon, and I have to do a little bit of sport. So man, my life has changed, you know, COVID has to go away so I can start traveling again and be a little bit, you know, out of this regime. But the very nice thing you know about this is that I really am spending quite a lot of time, every day reading. And, you know, from the business books, what I did read recently is Simon Sinek’s, The Infinite Game, which I really liked, so strongly recommending, and this is something what we play as a company, the infinite game is the game of Pricefx. Absolutely. So I found a lot of reconfirmation in this book, compared to what we do in our company. I also started reading Michael Rothchild’s Bionomics: Economy as Ecosystem. Michael is, you know, co-founder and CEO of one of our partners, Profit Velocity, that is actually working with us or cooperating with us with Velo, you know, very large deal negotiation framework based on value estimations. He wrote the book that is kind of was inspirational for the creation of his company. So, very interesting book, I haven’t read to the end, but I’m reading through it. But I’m also reading quite a lot of fiction and it’s actually more exciting to me right now. I said before, I’m extremely into Stephen King lately, not the scary stuff. They’re really very non-scary stuff. I mentioned The Green Mil, the movie is one of my favorite movies, but also the book is phenomenal. Another fantastic book that I just recently read from Stephen King is 112263. This is a story about the JFK assassination. But from the extremely unexpected time traveling point of view, highly recommended. And, the book that I just finished reading was Phil Knight’s autobiography, Phil Knight is the founder of Nike. The book’s title is the Shoe Dog. And I found quite a lot of interesting parallels between his founding story of the Blue Ribbon, that is the pre successor company of Nike in the early stage and Pricefx. So, highly recommend those books.
Gabriel Smith 24:49
Well, thanks so much for sharing some of your personal story as well as insight into the company. Is there anything else that you’d like to share with the audience? Before we wrap up here?
Marcin Cichon 27:25
You actually, you know, revealed some of my deepest secrets here. So I think, that’s enough.
Gabriel Smith 27:31
All right. Well, thank you very much Marcin.
Marcin Cichon 27:33
Gabriel Smith 27:33
And thank you all for tuning into Pricing Matters.