Patrick Moorhead, CMO of Pricefx, returns to share about the evolution of digital pricing software, and where AI may be leading the industry.

 

hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});  

Danny:

– Hello and welcome to today’s IndustrialSage Executive Series. I am joined by Patrick Moorhead who is the chief marketing officer at Pricefx. Patrick, thank you so much for joining me again. This is a second—this is a follow-up interview from before, so thank you for joining me again.

Patrick:

– Thank you. It’s my pleasure to be here. I’m glad to be here again.

Danny:

– Well I’m excited to jump into this because a lot has changed, like a lot a lot, not just Covid and all that good stuff. A lot has changed for you, and I’d love to hear that. But before we completely jump into this episode, for those who aren’t familiar with Pricefx, just tell us, who are you guys? What do you guys do?

Patrick:

– Yeah, we are a cloud-native, SaaS pricing optimization and management platform. We sell to billion-dollar-plus-a-year enterprises as a B2B service. We are designed to drive profitable growth and efficiency within those large organizations by helping them better understand their transaction and customer data in the context of how they price their products helping them then implement those insights into flexible price management strategies that are executed within the software with a high degree of speed, accuracy, and flexibility and ultimately deliver the gains that you can get off of that into their distributed global sales organizations through profitability solutions like CPQ, like rebate management, channel management, et cetera, et cetera.

We’ve built what we believe is the leading SaaS pricing platform. We are one of the only companies that is a pure SaaS cloud offering. A lot of pricing software providers offer hybrid solutions that, at some level, require customers to install hardware in their facility that require custom coded, hard coded software solutions. Ours is completely configurable and 100% delivered online which makes it very flexible and speedy. And apparently the industry likes that because our growth has been significant. In fact, our growth has ranged from 70 to 80% year over year for three years running, even through Covid.

Danny:

– Wow, that’s fantastic. It sounds like there’s a win. As a follow-up to that real quick before we’ll jump into a little bit more stuff here, but from a very basic, fundamental level, how does that work? Let’s say from a manufacturing standpoint. Is it plugging into, like taking ERP data and customer data and looking at trends and whatnot?

Patrick:

– Yes, yes, that’s exactly right. Another way to think about Pricefx is it’s sort of a middle-office management layer. We’re able to ingest a significant amount and variety of data, so we can ingest and do ingest ERP data. We ingest CRM data. We can ingest data from financial services systems. For some customers we ingest data from web scraping services. In the case of one customer in Europe we even ingest and interface weather data as relates to their lift ticket business. So we’re very data-omnivorous, and then we’re able to transform that data by pooling it into data marts or lakes as the industry would call them to generate insights that then can lead into centralized, flexible price management. You’d be surprised to find out that in our estimation somewhere between 30 and 50% of enterprises above a billion in revenue manage their pricing via spreadsheets. That is obviously not the intention of spreadsheets, and it creates very difficult and complex pricing adjustment and pricing management situations inside those large organizations.

So Pricefx is really designed to sit in the middle of ERP and sales as an ingestion point, but then also deliver prices that are optimized around willingness to pay or cost of goods sold against inflation or index pricing on commodities. There’s a whole range of strategies that can be deployed into the software that give the business the control to understand how to take price adjustment or how to offer promotions to customers without compromising their profitability and margin and then be able to deliver those into the hands of the ground force sales and customer relationship managers in a way that gives them autonomy to action that centralized insight without, again, compromising visibility and transparency into how deals go to customers and ultimately creating win-win situations for sales in the market of keeping customers happy but also maintaining profitability for the organization as a whole.

Danny:

– Obviously this isn’t exclusive to consumer products from a B2C verse. There’s a real strong play here, B2B if you’re dealing with distributors.

Patrick:

– That’s right. We’re primarily a B2B sales organization. Some of our customers are B2C, and so we work in sort of a B2B2C way in the retail genre or in the case of ticket sales, for example, and customers like that. We also have a good portfolio of customers in distribution which is kind of a hybrid world. We increasingly are building a business in and around food and beverage, not so much in the CPG manufacturer area, but more in the supply chain owners or industrial food suppliers.

Danny:

– The Syscos of the world.

Patrick:

– Yeah, companies like that who, again, anybody that’s managing a highly complex set of products and product pricing on a massive transactional volume where orders are configured in the multiple millions of dollars per order where you have customer relationships where there’s an ongoing cycle of new ordering but rebate conditions that need to be accounted for, existing inventory at the customer, and those are highly complex estimations to think about managing in the context of a spreadsheet.

So we bring this full automation to that function inside an organization that helps them trim down the amount of time it takes for them to respond to and generate quotes. It can help them really calibrate pricing on a product portfolio level. It can calibrate around regionality rights, so by country or by continent. They can calibrate different pricing schemas based on the business unit and help business units in really large organizations understand the pricing of their partner business units in the context of one universe of logic. What’s new in that is optimization, and that’s probably one of the big changes for us as, in the time that’s passed since I spoke to you last, is the introduction of a next-gen, world class price optimization that’s powered by artificial intelligence as a core component of our product offering.

Danny:

– That’s fantastic. It sounds like, I would imagine, you said there was a stat, was it 30 to 50% of companies that were a billion or above, that they’re managing their prices based off of a spreadsheet. I totally can see that. I would imagine that there is a lot of margin that is left on the table that is able to be picked up. Say, hey listen, we didn’t realize it over here, looking across these two different departments or even the same department but across multiple territories or whatnot. And there’s lots of complexities.

Patrick:

– Yeah, there’s a lot of, in B2B still to this day around the world, there is a tremendous amount of pricing decision-making that gets made on the ground by the seller and the relationship manager. Well, I know what they like to buy, or I know how they like to buy it or generally try to keep things the same and keep the relationship stable. A lot of that relationship work tends to involve gut pricing, so the instincts of the salesperson pricing a deal which isn’t necessarily bad, although it can quickly get out of whack when you have an organization that is attempting to manage global profitability or maintain global margin targets, et cetera, et cetera.

The advantage the software brings is efficiency to the business from a centralization point of view with a high degree of flexibility so that price changes and price strategy changes can be modeled, can be experimented with, and ultimately deployed pretty quickly, but then delivering all of that directly into the hands of the field sales organization so that as a customer’s order is being configured, and again with that optimization in place, the seller can actually receive guidance in the order itself that says hey, watch out for this discount, or you could be charging more for this based on this which, for any salesperson finding out that they could reliably probably charge more for something means better commissions, and there’s a lot of opportunity there as well.

Danny:

– Absolutely. No, it sounds like pretty interesting software. And I can imagine why you were having the kind of experience and the kind of growth rates that you have consistently, year over year. I can only imagine that the pandemic has added to that as it’s another massive variable across the board from spikes in demand to supply chain issues to labor issues to all kinds of things that are affecting price. Where do we give up on margin? How much are we going to absorb versus now we’ve got to pass it on? How have some of these challenges that the pandemic has brought altered your business and your customers?

Patrick:

– Yeah, I think each customer is unique, and there’s no one size fits all. I think we’re still overall in business grappling with what the long-term effects of the pandemic are going to be. In the early innings of the pandemic in 2020, I would say the primary pricing challenge that was brought about was speed of adjustment. It forced into the light the idea that a lot of companies philosophically believed it would become necessary someday to develop a rapid and reflexive or flexible approach to how they price and reprice and adjust pricing for their business, but it wasn’t a high priority. And the pandemic created a black swan event where if you weren’t able to rapidly and flexibly adapt your pricing strategy, you probably felt some pain.

In 2020 I think there was a heavy interest from industry around, okay, I’ve got to find a way to get more flexibility in the way that I manage my pricing so that I can be more adaptive to the world because the world is now changing in ways we hadn’t anticipated, and it’s happening really fast. I think as we’ve gone along in 2021 that is still true, but I think now we’re seeing some of the additional pressures from the knock-on effects of the pandemic. The current one is inflation where you’ve got the long-term butterfly effect of supply chain disruption which is affecting commodity goods pricing. It’s affecting distribution and logistics. And all that is having a real tangible impact on, how do products get priced? Not only products that consumers on the shelf, but business to business products. You could look at the global microchip shortage.

You could look at the bicycle industry as another example. While we don’t have any customers in the bicycle industry yet—maybe I will after your show—the bicycle industry is one that we talk about a lot because there is a very self-contained universe of how the pandemic brought on this massive demand spike where everyone’s stuck at home, and so I’m going to get a bike because I need to go out and exercise that the industry was not ready for, and so inventory went down. Meanwhile the ability of the manufacturing of bikes to supply parts that were necessary at the volume to meet demand wasn’t there. It’s still not there. You saw a similar thing in the auto business. Now it’s not only about hey, can we adjust our pricing and pricing strategy to effectively and rapidly respond to the necessities of the market, but also how do we, on an ongoing basis potentially account for these fluctuations in sectors of the market that we haven’t had to account for before like massive shortages in commodities or in the availability of industrial parts?

Danny:

– Yeah, absolutely. It’s been incredibly complex, and I don’t know that there are any manufacturers right now that have not been affected by this at all.

– That’s right.

Danny:

– I’m hearing all kinds of stories, hey, I’ve got all these orders. I don’t have any bodies to actually go—any people to help to go do this or obviously automotive is at a big—I’m just hearing this across the board. GE refrigerators in between supply chain and labor, they normally run three shifts. They can’t do it. They’re down to one and a half.

Patrick:

– Yeah, and you look at the container ship situation that’s going on in the west coast of the United States as another symptom of the same problem. You have manufacturers that are succeeding in building and delivering goods, but then the goods can’t make the last mile because of capacity issues in the supply chain. And so then how do you account for spoilage, slippage, or late delivery? Trying to account for all that stuff via cells and tabs in a spreadsheet, it quickly is obvious that it doesn’t make sense. This isn’t to say that pricing software is going to solve the problems of the world. But I think it has drawn a sharp focus around the idea that pricing and price management, pricing optimization in the context of things like ERP and CRM and how orders get configured and delivered to customers needs to become a critical core competency for large enterprise, because now this potentially is the new normal where you’ve got to have this adaptability to say, “We’ve got to make a different decision about pricing or price management in this region of the world than we do in this region,” or “We need to make a different decision about this tranche of our catalog versus this tranche.” How do you find growth?

That’s just a big question overall, and it’s not as obvious as it used to be. That’s where that AI, optimized-enabled technology that’s able to go and ingest your data and really come back and show you and say, hey, you’re doing tons of promotions over here, but you’re consistently losing money on those promotions because of X, Y, and Z. This customer doesn’t follow your MSRP guidelines, for example. Those kinds of insights are a key to unpacking the solution to those large, systemic problems.

Danny:

– Yeah, absolutely. Of the things that have changed in the pandemic, you mentioned “new normal,” and as we emerge—well, hopefully we emerge. Who knows? We were talking about it before. Who knows where we are? We’re in; we’re out. But as of three years from now—hopefully that’s a safe assessment— three years from now, what of these changes do you think will remain in place?

Patrick:

– Yeah, we talk about the pricing industry in our business as being a great business to be in because pricing is kind of a one-direction trend. It’s not going to get less important, and it’s not going to slow down. We built software that’s designed to help businesses adapt to that reality that pricing, the way that you price your goods and services and the way that that pricing arrives to your customers is only going to become more and more important over time for you to have mastery of. And the speed at which you will need to be able to make decisions about those issues will become shorter and shorter. I think that’s a macro trend that is not going to reverse itself anytime soon, and in three years that will still be true that the companies that are growing successfully are going to be the ones that are able to rapidly action insights off their data to deliver contextually appropriate pricing into their customers and markets in a way that’s going to both make the markets work but also drive their growth and profitability goals.

I think AI is not a fad. It’s not a buzzword in pricing. I think it’s here for real. I think it’s still a buyer beware marketplace. I think there’s a lot of companies talking about AI for pricing optimization, and it’s important for buyers to really ask questions about what that means. Is it, for example, a black box AI where I’m supposed to give you my data and trust that your software plus smart people are going to just—they’re going to spit out an answer, and I just have to believe that?

Danny:

– That’s it, right?

Patrick:

– There certainly are solutions like that, and one of the things we were able to do in 2020 during the early part of the pandemic was actually acquire a leading AI company. That was one of the changes for us is—that was our first acquisition as a scale-up company. We bought a leading AI company out of France and spent the balance of 2020 integrating that into our core price management and price optimization offering. That AI, I think, is really next-generation in terms of both its power but also its transparency. We have a fully configurable AI solution. The algorithms are not protected. The capability of it is not proprietary to the point where a customer cannot go in and tinker with it and, in partnership with us, can tinker with the AI to meet their needs. That’s a key differentiator, I think, in our AI solution. I think more and more pricing will become a focus, particularly in the senior leadership of enterprise. The C-suite and upper management will begin to pay more and more attention to it because it has a really dramatic effect on the growth of a business when you get it right, and I believe that optimization and AI optimization will loom large in that conversation as well over the next three years.

Danny:

– Yeah, absolutely. You’re starting to see that across multiple industries, multiple solutions, the idea of how AI is the future, AI, machine learning. As they go through this big digital transformation period, whether it’s in your hardware—from a manufacturing standpoint, your actual machining and your actual physical assets—to the intangibles, the softwares, the data aspect and how that is all, where that’s connecting. I think it’s fascinating. You’re able to uncover trends and optimize and see things in a way that you never could before, or you could, but it would just take you forever. Or it would be too expensive, and it would be a massive lift. That’s a lot of spreadsheets you have to go through. If you had a magic wand, like solve one thing in your industry, what would that be?

Patrick:

– I think I’m probably not alone in my answer to this. I think that my colleagues… that our competitors in the business would say the same thing which is I think I would wish that more executive leaders in more billion plus enterprises were thinking and acting critically around their pricing strategy. That’s not necessarily new, but I would say it’s been that way for some time. And I think it’s slowly changing. But knowing what we know about the type of impact that high-grade enterprise pricing automation can bring to a business, I’m constantly surprised that it’s not a top conversation piece among CEOs and CFOs and CROs. The data point is pretty shocking. I think if you can achieve a 1% move in price can yield an outsized, multiple percentage point growth in profitability. If you have the right tooling, it’s actually a fairly easy way to achieve that kind of result in the context of the other ways that you could go about achieving several basis points of revenue growth in a calendar year. Then it comes to a SaaS cloud solution like Pricefx where the investment to buy the full boat from Pricefx can be ROI’d within 12 months just on efficiency or on some combination of efficiency and revenue gain.

Once you understand it that way, it seems like a very obvious, simple choice to make for business leaders to install industrial-grade pricing management and price optimization into their company, and yet it’s not. It still continues to be considered either a back office function, or it’s relegated down the command chain in organizations into, in the best case, pricing leaders or pricing departments. But in many cases, and in some of our customers, there isn’t even staffing that’s addressing pricing. It’s handled out of finance, or it’s handled in sales. I would use my magic wand to create a lightbulb to go off in the brains of CEOs and CFOs and CROs around the world that pricing is actually the most efficient path to profitability that you have. And it’s actually easier than you thought it was.

Danny:

– That’s a great bite, a great answer. It’s funny, though, too. We ask that question quite a bit, and it tends to be a very similar answer. I just wish that people would understand that we’ve got… Totally get it, but there’s a lot of reasons for that. There’s a lot of fires, a lot of other things. And I imagine— I’m not super familiar with price optimization software. How new is it relative to everything else?

Patrick:

– That’s another interesting answer. So the answer is, it’s not new. Price management software has been around since the 80s, pre-internet. That’s where, when I mentioned those hybrid solutions or providers that want to install machinery and custom software at the customer, that’s them. Those technologies were invented in the 80s, and some of them were invented on mainframes.

Danny:

– On-premise.

Patrick:

– Yeah, on premise. So the idea of it and the solutions for it have been around for some time. We came on the scene six or seven years ago, really commercially started selling about five years ago, and we were different because we didn’t have any hardware. We were 100% cloud-delivered and 100% SaaS subscription, commercial terms. That was a big, new change. Now I think if you look around the pricing software industry, everybody that we run up against has some kind of a cloud solution. It’s another, similar to the AI question. It’s like, be asking questions about what that really means. Is it cloud-hosted, meaning it’s the same software that you used to run on premise, except now it’s on AWS. Or is it cloud-native? It’s built for cloud delivery and cloud configuration. We are in the latter category. The genre has been around for a while. I think awareness has been growing, and our business would reflect that. I think we’re in the early innings of cloud and SaaS pricing becoming a dominant staple of the way that middle-office management is conducted in large enterprises.

Optimization is the new, shiny object in that conversation, and I think there’s a lot of learning that needs to happen in the business to grow into what to do with that. Yeah, and I think the thing that’s new—and it’s related back to our previous conversation—is this sort of heightened importance of that capability, that the pandemic black swan event and the knock-on effects that we’re experiencing today I think are drawing a very sharp focus on the idea that you need to have some level of responsive mastery over how you’re pricing your products to your customers and that you can’t do that in outdated technology, and you can’t do it in isolation of all this data about the supply chain or about the relationship with the customer or regionality or seasonality or all these other factors.

Danny:

– Yeah, makes a lot of sense. Interesting stuff. Big challenge, but also exciting. Obviously you’re doing something right if you guys have the growth rates that you are and the needs are there that companies are realizing that. My last question is a little bit more personal on you. What are you doing to stay at top of your game? What is that?

Patrick:

– I have been really investigating over the last year how to transform this company into a content marketing and inbound sales organization. That, I think, is the general trend among SaaS software providers is to move in that direction. Much like AI, I think people talk about that a lot, but implementing it or actually putting some teeth into it in terms of what does that mean is difficult. For us, I think we are investing, I am investing a lot of time in studying what it really means for the pricing industry to become a content marketer not from the point of view of what content do we make, but how do we create marketing that serves customers in the form of answering their real questions, but also serves our sales organization in terms of helping them not spend all their time on the phone educating but rather letting our marketing efforts educate our buyers so that by the time they meet our sales people, they can have a really precise conversation about how we’re going to work for them. That’s been interesting, so I’ve been making a lot of investments in our content marketing capability.

As I look out into 2022, I’m eager to put some of that thinking to work. We’re going to really ramp up video as a company as both a tool for sellers but also as a primary channel for our marketing efforts. We’re attempting to develop a YouTube channel that will be the first pricing channel on YouTube, which I’m excited about. I’m keeping really close touch with the folks that are in that headspace in the business of marketing and software marketing about what does it mean to evolve from content marketing as having thought leadership to content marketing as marketing as a service to the buyer, educating buyers through marketing. I’ve really been enjoying this book recently by a gentleman named Marcus Sheridan who wrote a book called They Ask You Answer. I think there’s so much that’s right about that book, and I’m stealing shamelessly many ideas from the book as we look at how we’re going to build our content marketing organization at Pricefx.

Danny:

– That’s perfect. That’s it right there. Just answer your customers’ pressing challenges, their needs. That’s it. It’s easy, right? Boom, one and done.

Patrick:

– It’s easy to say.

Danny:

– Exactly. Well listen, Patrick, I’ve enjoyed our conversation. I’m sure we could probably go on for hours and hours. I think it’s a really fascinating space. I think the technology that you’re bringing in, certainly with what’s going on in the world, even before that, honestly. There was a reason why you guys were on a growth track before that. Now companies realize—it sounds like they’re realizing more, gosh, what levers do I have to pull? Oh, I never really paid attention to this one over here. Maybe we need to look at that now.

Patrick:

– Thank you for having me on, Danny.

Danny:

– Good stuff. But yeah, thanks for spending some time with us today sharing so we could learn a little more about you and Pricefx.

Patrick:

– Appreciate it, thank you so much.

Danny:

– Alright, well that wraps today’s episode, our Executive Series with Patrick Moorhead who is the chief marketing officer at Pricefx. You can learn more about them at pricefx.com. That’s price, foxtrot, x-ray, dot com. It’s the letters. We’ll have the link in the notes so you can go check them out.

So that’s all I’ve got for you today. Thank you so much for watching or listening. If you are not on our email list, I highly recommend: get on that. Get on it today because you’re missing out some valuable insights. You’re going to learn about what other companies, your peers, learn about new technology like Pricefx that’s coming in. Learn about different solutions and what some of your peers are doing to really adjust and pivot with the pandemic and all the great things that life has thrown at us over the last two years. Thank you so much, and I’ll be back next week with another episode on IndustrialSage.

 

Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go!

Sponsored by Optimum Productions