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The Innovation Table | Randy Mangum on The Art & Science of Pricing Pt. 2

By May 4, 2023February 8th, 2024No Comments
The Innovation Table | Randy Mangum on The Art & Science of Pricing Pt. 2
The Innovation Table | Randy Mangum on The Art & Science of Pricing Pt. 2

Continued from Part One
Randy Mangum is an accomplished retail leader with more than 20 years of proven success across the retail merchandising and pricing industry. Randy’s deep analytical understanding, broad segment expertise, and passion for data transformation have helped him train and lead cross-functional teams that provide consistent and measurable business results across multiple industries, including high-end jewelry, grocery & supermarkets, department store, and mass merchandise. 

A proven innovator and process evangelist, Randy helps organizations identify and adopt emergent pricing technology, improve their data analysis and strategy, and implement effective change management processes that deliver multi-million dollar benefits to the company’s bottom line. Randy earned an MBA from Kent State University and a BS from Brigham Young University.  When he’s not working, you’ll find Randy at the tennis court, pursuing community and church service opportunities, or supporting one of his four kids. 

Edris Bemanian: What have been the biggest changes in the field over the last 20 years?

Randy Mangum: Well, it’s a lot of the buzzwords you’d expect to hear. Big data, technology, transparency. Retailers and vendors have all these new toys at our fingertips, and it’s forced everyone to change how they do things.

It’s sort of funny. Pricing used to be all about gut feel. And then when data science and analytics first caught on, people swung from gutter to gutter and started to over-rely on the numbers. Now we’re learning that the reality is somewhere in the middle. Even though we’ve got significant technology and great analytics, we can’t replace people. Customers’ needs are continually changing and you need a human being to totally understand and build around that experience. 

Transparency is so prevalent now as well. Customers understand that they can pull anything up on their phones at any time. So on big purchases and even sometimes when they walk into a grocery store, they’ve shopped in advance. Before they come to you, they’ve already made their decision. That definitely has caused a lot of people to rethink their approach. 

Edris Bemanian: I guess I shouldn’t be surprised, but the way you’re answering these questions is very similar to how one of our cofounders Ken Ouimet might. 

RM: I’ll take that as a compliment!

As you should! I think so few people respond and think about things this way. We’ve talked about how the general landscape has changed. Great minds think alike, I guess. How important is competitive intelligence? And how have you seen CI evolve specifically? 

RM: Yeah, competitive intelligence is a critical component of what we do. You need those data inputs to help you make the right decisions. Customers have access to so much information. You absolutely can’t survive in a silo.

Now, it’s a double-edged sword because not all retailers do things the same way. Everyone has different strategies – certain products and KPIs that are more important to them than others. So sometimes you’re overwhelmed by incoming data and you’re not sure what direction to follow. Again, it comes back to having a well-defined strategy. It’s only when you have a clear strategy for a particular product that you can start navigating the minefield of competitive prices and figure out what you’re going to do.

Here’s an example. When I first started with one of my previous companies, every store was doing its own price checks. Store managers were, understandably, price-checking everyone in the local area from little mom-and-pops down the street to Walmart and all the big guys. And sometimes these very specific localized prices would get pushed out across every store in the chain. It was obviously a bad decision, and it happened because there wasn’t a strategy other than “don’t get beat.” Price checks would come in with no context and we’d just lower all of our prices everywhere and lose money.

EB: So price data in a vacuum, or without strategic oversight, can be dangerous. Especially in terms of what your team decides to do with that data. 

RM: Yeah, exactly. If you’re not careful you might have a mom-and-pop store in Fargo, North Dakota dictating prices for your entire company nationwide. You can’t do your job today without competitive intelligence, but you have to be really mindful and put a strategy around it. Otherwise, you’re just chasing someone else’s strategy which may or may not support what you’re trying to do. 

And as companies are becoming more sophisticated and evolving into more localized prices, sure, you’ve got to have the right intelligence, but unless you have a way to execute that appropriately, who cares?

You have to move according to your capabilities. Even if you know you’re going in a certain direction, you’ve got to make sure that you’ve got the right strategies and processes in place so that you can actually take advantage of the data, so you can actually move the needle. And until you’re ready, you’ve got to be patient. Set the strategy, follow it, and when you’re ready, evolve the strategy again.

EB: Great call out. It’s so easy to get excited by the technology but you’ve got to display enough patience so that you can really bring that tech to bear for your specific strategy. 

RM: Yeah, it’s about strategy and also preparation. I can’t just blindly take the data and action it. I’ve still got to do some work on my end to make sure I understand what’s going on so I can drive value.

Say you’re looking at a product link with the right product matched, but if that product is on clearance or promotion, and you’re comparing it to your regular price, you’re going to end up with false positives. I’ve watched so many retailers stumble through this. They make some poor decisions because they don’t understand how the data pertain to the questions they’re asking. 

You’ve got to understand what the data means, and then you’ve got to massage and sanitize it it’s going through the process. If you don’t, you end up with bad decisions and people start to think “This new pricing process doesn’t work.”

EB: That’s something we haven’t really touched on yet. A lot of success in pricing has to do with internal perception and getting people to buy in. What advice would you give to someone building out a pricing team or starting a pricing program?

RM: I think the first thing is just to be patient. A lot of people want to come in like a bull in a china shop and start making changes for their own sake. And I get it, when you come into a new organization you want to make a good impression and demonstrate your value as quickly as possible. 

But my philosophy is to slow down and make sure I understand the nuances of what’s happened in the past and where you are now. Believe me, it’s hard to be patient. But you can’t add value in the long term unless you understand the history and the starting point. You have to understand where you are today before you can start planning for where you want to be in three years or five years.

I’ve gone into places where the leadership had a really clear version of where they wanted to get and they hired me to get them there…and then I’d come in and start pumping the brakes. It’s scary to be the guy that comes in and says, “We’re not ready, and this is why we’re not ready.” But you’ve got to push back and say, “Look, here’s the work we need to do before we can make effective use of all this competitive intelligence and pricing data.”

EB: So you’ve gotta be somewhere in between the tortoise and the hare. In terms of priority, where do you start? 

RM: Data is critical. The first thing I try to understand is what data we have; what elements are currently available.  I’ve done this for so long that I can see what data elements I need to get to the utopia of using price optimization, but sometimes it takes some research. So I start having those conversations and learning what we have and what we need to invest in.

The next thing would be building my team, and it’s the same approach. Who do I have, and who do I need? What are they going to work on? What are they going to drive? How are they going to help us get to our strategic goals?

The other thing that’s critical is senior leadership has to be bought into the process. You can come in as a pricing manager or even a director or vice president, but if you haven’t got the leadership on board beyond them just hiring you, it’s not going to be successful. 

You need to communicate clearly and be completely transparent. That’s hard for a lot of people to do because they don’t want to look like they don’t have the answers. “I don’t know yet” is a great answer. Your leadership needs to understand completely what you’re doing and why you’re doing it. Be transparent in your successes and your failures and the corrective actions that you’re taking along the way. They need to be comfortable with the process and the roadmap, so when things go wrong, or the category or merchant teams start to push back, they have your back.

EB: It’s interesting because you highlighted the importance of alignment to the pricing process, not just alignment to the pricing strategy. Along the way, you know you’re going to get pushback from your point merchants or buyers, or customers are going to complain about something. And if you have a reactionary senior leadership team who’s just going to throw you overboard at the first sign of trouble, right then you’re never going to get anywhere.

RM: Right. You’ve got to get people aligned or you’re never going to make headway with change management, which is maybe the most important part of what you do as a pricing leader. You can have the best technology and the best analytics, but you have to find a way to communicate and drive change. Your category managers and your leadership and your store people all need to understand the why.

EB: Communication is definitely a big part of the job. How many PowerPoint presentations do you think you’ve given over the years?

RM: [laughs] Countless! But you’ve got to build that excitement and understanding. If you come out of the blue with a new system and ask everyone to follow the recommendations, you’re going to fail. Even if the recommendations are good.

If you’re trying to get people engaged, stop sending emails! Walk over to somebody’s desk and have a conversation. Or if somebody’s working from home, pick up the phone and call them. Take the time to explain what you’re doing and why it matters. It’s not about coercion, it’s about understanding. People are smart, and once they see the power of the analytics and what you’re trying to do, they’re going to naturally come along.

EB: You know, this reminds me of one of the first conversations you and I had in person back when you were leading pricing in a grocery context. We were dealing with this same issue. I remember you telling me, “It doesn’t matter how good the data I’m giving my merchants is because they don’t trust it.” The complaint was, “My avocados are better than my competitors, so why are we being indexed without weighting it somehow?”

And so that led to us like saying, okay, well, let’s take photos of avocado. So we took photos of some of the avocados and said, here’s the quality, right?

RM: Yeah, I remember that. Avocados were just the tip of the iceberg, this came up everywhere!

EB: Right, I remember! That also inspired us to do is build out a proprietary data asset that would allow us to measure the quality of the fresh items we were checking for our customers as well. 

RM: Very relevant! 

EB: When you look at the next two or three years, what competitive intelligence trends do you think will emerge or should emerge?

RM: Yeah, I think we are going to get to more and more differences across the omnichannel. So the in-store price and the online price can and will be increasingly different. Today we still have customers that don’t accept there to be a variance or even we have retailers that just don’t accept that there should be a variance. I think that’s going to evolve. 

That evolution, in conjunction with retailer strategy, is going to be critical. I envision a time when every store could potentially have a different price because their local competitors are different. 

I think the more and more and more retailers are going to go after that dynamic pricing. The technology is still pretty darn expensive for retailers to do that, but they’re all looking into it and they’re all going to start to adopt that in some way, shape, or form. And that’s going to change the whole dynamics of competitive prices because you’re no longer limited by the labor-in-the-store issue. 

Now, is a can of beans going to change multiple times a day? Probably not. But technology will make it possible And on the critical items, you’re going to be able to affect that. So how does that change the way you gather and action competitive intelligence?

I’ve now got to evolve from doing this once a day or once a week to much more frequently. And as web prices start to vary from store prices, what do I do? Because I can’t rely on just scraping their website and then pushing that across all my stores.

How do I confidently understand what the pricing is store by store? My approach has been, look, we need to really understand what are our KVIs and figure out a way to continually compare online and in-store prices to account for those variances. The can of beans is probably always going to be the same, but you know, milk will start to vary. So we’re going to need to figure out how to get the in-store price different from my online price scrape so that I price effectively. 

EB: There’s this age-old debate in eCommerce. Do you look at your eCommerce as market share and defending your customers or acquiring customers, or do you try to be profitable as a standalone? Where do you sit on that?

RM: I think every retailer is a little different. In grocery where it’s commodity-based and commodity-driven, I think it’s a different approach. There are some people that are going to buy online and like to just click and pick it up and not have to shop. And for them, it’s about convenience instead of price.

As you move toward more specialized or higher-ticket items, then that changes, right? It changes the approach and how customers feel about the price.

Retailers always have to be mindful of what the eCommerce site is going to do. Is it simply saying “Hey, this is who we are and this is the assortment we have?” Is it a knowledge base to get people to come to your store? The answer changes your approach. If it drives sales and transactions, then do you treat it like a separate business? I think a lot of retailers are still figuring it out. Even if they have robust sites they’re still in this conflict. 

EB: Even organizationally they’re they report to different org sectors still. Right. So it’s like how could they be aligned and how can you have a cohesive strategy? It’s fascinating.
It seems that for large retailers, there’s been a convergence between online and in-store due to customer expectations. But with smaller retailers, I’ve seen a willingness to break that and like going in and having different pricing levels.

I think Instacart played a big part in helping establish that expectation. It highlights that you have to have an omnichannel capability if you’re across a lot of markets and a big competitive set.

RM: Absolutely. It has to be localized, and there are a couple of prominent nationwide retailers you can point to as examples. You need a localized eCommerce strategy because the prices across the country are going to be very, very different. And sometimes retailers with a smaller footprint or smaller geographic area can get away with having a less complex approach. 

EB: What do you see happening with Price Image or price perception in the next few years? Do you think companies have learned to incorporate that? 

RM: I would hope so, but I think most companies haven’t yet. Optimization tends to push you towards analytics and looking at what the numbers are telling you. And it leaves retailers in a position of having to figure out how to incorporate gut feel and art and to balance with the science. And I think that’s where people still struggling.

Until recently, value-oriented pricing perspectives and strategies didn’t always interface well with math and analytics. I may have an optimization strategy that’s really helping me with my read price. It also has to incorporate what’s going on with promotions and what’s going on with clearance and what’s the relationship across the category; all those kinds of things change the pricing perception.

Retailers can’t just jump to EDLP from a HILO strategy because of the perception. The perception is I was being gouged before, if they’re not careful. Yeah, JCPenney saw that like crazy, and it doesn’t mean that they were wrong trying to make their change. But customers didn’t like that messaging. And so customer perception is more than just price.

It is about how you communicate with customers, how you message the value, how you communicate the relationships between products, and how you store and display products. If your assortment changes, that has a direct impact on perception. You know, if you have products that let’s just say you are very much op private label type of products and you decided I’m going to start introducing all these key national brands, your prices are going to go up even though you probably have better quality and better brands and name recognition and all those kinds of things.

But from where you left to where you’re at, your price perception is going to take a hit. And so it can’t just happen just because you lowered prices or just because. So you’ve got to figure out that messaging and that can go through eCommerce, omnichannel types of things that can go through your ads, that can go through, you know, in-store promotions, you know, how you’re comparing your prices in, you know, tags and signs, You know, all those kinds of things fall into price perception.

And a lot of people don’t understand that. They think it’s just “Do I have the lowest price, yes or no?” Almost every company I’ve worked for has done market surveys, and they rarely show that the retailer is getting credit for their good prices. We had great prices and we always felt elite, but unless you effectively influence perception, you’re not getting anything out of it. You’re just lowering your prices and giving away profit and not getting the transactional turn that you need to support it.

EB: You’re making many excellent points. We know that at the end of the day, everyone is trying to better understand how to help their customers feel good about the value they’re getting. That’s why we created Price Image as an objective way to quantify that measurement versus relying only on qualitative points of reference. But it’s also important to communicate about where you’re making your price investments. The other point you made that really resonates with me is about how important it is to step into any big strategy changes you make in a thoughtful way. Like you said, but going the opposite direction, going from HILO to EDLP overnight won’t necessarily get you the credit you deserve but could crush your margins. Thoughtful change management is just as important as the strategy you select. Thanks for sharing that wisdom with our audience!  

So another fun question: if you were the CEO of a retailer or a brand, what would you be most focused on? 

RM: I’m going to go back to having a strategy. Starting there. And I mean a complete strategy. Not just “I’m going to be EDLP” or “I’m going to be HILO.” You need to identify and support all the components and the people and teams that are going to make you successful. That’s a critical piece that I think many CEOs pawn off to someone below them. You don’t necessarily need to be involved with everyday decisions on ads and promotions, but you need to be involved in the discussions and understand what’s happening at each level.

So, say your supply chain team is looking at analytics and saying, “Look, you’re only selling one of these items every year” and they start supporting purchases based on that trend, and that starts to affect the merchandising team’s ability to advertise and turn those products around. And there are knock-on effects on inventory management, so there will be opposition there, and they might not be aligned with merchandising and what promotions are being planned.

If you’re a retailer with a very broad assortment, half the assortment is going to be deemed unproductive in the traditional sense because they are not going to sell as fast as the most important items, but they’re critical to the assortment. 
You have to make sure that everything is aligned with your strategy, from supply chain to assortment building, to store messaging and merchandising. You’ve got to keep everyone moving in the same direction. Your promotions, your assortment changes all of the small and planet-grabbing decisions need to be linked. 

And so I would say if I was the CEO or on the executive committee, you have got to facilitate those conversations at the senior level and make sure the strategy and the communication goes all the way through the organization.

EB: So you get organizational alignment through a top-down strategy ethos. Understand what’s happening, define a strategy, and get everyone on board. Once you have that strategic framework in place, what role does technology play? 

RM: I’m a big believer in technology, but technology is not a strategy. Now, sometimes technology can accelerate a change because you’re going to get better insights and better understanding, but technology is agnostic to strategy.

Everyone wants to reach utopia, right? But there are so many retailers who want to do all these cool things they read about and hear about, but they’re not ready for it.

Success in pricing has nothing to do with the size of the company, how many millions of dollars in sales you do, or the number of products you have. It’s about building an effective culture, building a really clear strategy that your entire organization buys into. Start small, do it well, and then evolve over time. That’s how you do it.