The recurring theme in my career
Pricing is psychology in numbers. Subtle changes can have immense impact on revenues.
In the corporate market, pricing is a tactical play with the competition. In the SME it is the game of transparency versus hidden price increase.
Pricing offers everything that fascinates me, complex puzzles, technical possibilities, interests of several parties, hard facts and psychology.
I keep an eye on the essence when experts drown in nuances and exceptions. Although one needs to understand possible outcomes of exceptions, it is imperative that the price proposition is understandable and appealing to customers.
Price fighter Tele2
Introduction of Tele2 mobile in a saturated small and medium enterprise market demanded differentiation on price. We introduced a low and simple price mechanism by using the tariff of 7 cents again and again. I developed this pricing concept, whereafter the pricing manager introduced it.
My team also took care of tailored tender pricing. I especially focused on a few large deals with the government, for which we have built a specific cost and pricing model.
In these cases everyone tends to add costs and the model bulks with details, whereas there are just a few real drivers. I focused on substantiating these drivers. And developed a benchmarking model with the lowest allowed price level of the incumbent. When the incumbent dropped below that level, we took legal action after losing the deal, whereafter we won.
Wholesale at KPN
I introduced tariffs for fiber to the home for KPN. We had to choose between skimming the market for high bandwidth or set off a penetration strategy, To encourage wholesale customers to use our complete services instead of only renting the infrastructure we decided for low prices, with guarantees for future pricing.
I introduced fiber to the office at KPN. Until then last mile connections were copper based. We wanted other telecom providers to use our network and discouraged them to build their own networks by keeping our wholesale prices low.
This is not necessarily the best scenario for the retail department, therefore company wide business cases were made and internal negotiations took place, before we set off with this strategy. When we finally introduced our fiber proposition (low prices, lots of guarantees for future pricing) revenues immediately boomed.
The psychology of thinking and doing, at KPN consumer market
When introducing the directory number 1888 (this was in 2006), market research indicated a consumer preference for a fixed tariff per call (no surprises!). In practice however, customers preferred a lower price per minute to a higher fixed price per call, even though the average call duration was such that they paid more.
This taught me that what people say is not necessarily what they do. When faced with a commodity people think fast, not slow, and go for face value. We then decided to follow the market with a price per minute. Both marketshare and revenues increased.
KPN from monopoly to competition
After the telecom market was liberalised, competitors of KPN started fierce price competition. Lowering prices would cut revenues sharply. Still we decided (in cooperation with McKinsey) to lower prices significantly, to shape the market ourselves instead of giving our competitors the chance to grow their marketshare fast thanks to being fed with fat margins while still being cheaper than us.