1341 – How Price Affects Everything Simon Kucher’s with Hermann Simon

In this episode of the Thoughtful Entrepreneur, your host Josh Elledge speaks with the CEO and Honorary Chairman of Simon-Kucher & Partners, Hermann Simon.

While Hermann was growing up, his father did not have an influence on the pricing of his goods. This is why he got into working with pricing and allowed him to create Simon-Kucher & Partners which now employs over 1,800 people globally as well as maintaining a revenue of 522 million dollars in the year 2021. Simon-Kucher & Partners is focused on pricing, gross, and profit consulting for their clients. A major point about pricing that Hermann explains to clients is the pricing value to the customer. Value and pricing are separate ideas that need to be balanced for the best outcome for the company as a whole. Another point Hermann makes is for businesses to avoid Marxist pricing. When businesses give a guarantee for their product or service it makes consumers more apt to pay higher prices as the guarantee increases the value the consumer places on it.

Hermann explains that profit is the cost of survival and it is a moral responsibility for the entrepreneur to make a profit otherwise the business may suffer as well as do damage to everyone involved. There are multiple costs that go into a business such as paying employees, satisfying vendors, interest, and taxes to name a few. Hermann explains that earning before interest or taxes is not true profit, he considers true profit to be net profit. There have been many fundamental ideas that Simon-Kucher & Partners has believed in but have not been able to implement until recently due to technological incapabilities. Globalization has been a fundamental idea that has grown for Simon-Kucher & Partners due to the increase in international trade. Simon-Kucher & Partners works within all industries, especially in Silicon Valley, as well as banks and telecommunication companies. Dynamic pricing refers to the value of pricing mixed with the basis of supply and demand. Hermann explains that dynamic pricing is influenced by technology and adjusts supply and demand better than a rigid system. Hermann advises, based on his book Hidden Champions in the Chinese Century: Ascent and Transformation, there are three pillars to the success of a business owner. The first pillar is the ambition to be the best in their market, the second pillar is utilizing focus, and the third pillar is to broadening their market through globalization.

Key Points from the Episode:

• The impact Hermann has in the world
• Key points clients are likely to hear
• Why guarantees allow for the basis of pricing to change
• Importance of true profit
• The changes to Simon-Kucher & Partners over the last four decades
• Typical clients of Simon-Kucher & Partners
• Dynamic Pricing
• Hermann’s insights from his book Hidden Champions in the Chinese Century: Ascent and Transformation

About Hermann Simon:

Hermann Simon, PhD., is a world-renowned management thinker, consultant, pricing expert, entrepreneur, and leading authority on the “hidden champions” business model. He is the founder and honorary chairman of Simon-Kucher & Partners, the world’s leading price consultancy with over 1,700 employees and 42 offices worldwide. Simon is the author of 40 books in 30 different languages, including the worldwide bestseller Hidden Champions, first published by Harvard Business School in 1996.

Simon-Kucher & Partners is the global thought and market leader in price consulting, and Hermann is recognized as the worldwide pricing guru. His books Confessions of the Pricing Man: How Price Affects Everything and Price Management: Strategy, Analysis, Decision, Implementation are standard works in the price management industry. In a time of rising inflation, Simon is an invaluable resource for companies, especially in the United States where pricing is a generally neglected topic.

Simon continues to bring value to the marketing world through his writing, recently publishing True Profit!: No Company Ever Went Broke Turning a Profit (Springer, July 2021). In True Profit! Simon brings clarity to the jungle of profits and balance sheets, shedding light on the performance of numerous companies and industries in an international comparison. He discusses the dilemma of why more than 80% of companies in the U.S. that have gone public have never turned a profit, and questions allegations of corporate greed – arguing that profit-making is ethical if achieved decently.

Simon’s upcoming book, Hidden Champions in the Chinese Century: Ascent and Transformation (Springer, April 2022), is an in-depth exploration of the ever-changing operating conditions, as well as the more significant uncertainty and volatility, that will define global business over the next 10 years—with a particular focus on China’s impact. Whether a company is a “Hidden Champion” or aspires to be one, this newest release from Simon provides essential food for thought as executives and managers chart their course into the future.

In 1995, Simon made the life-changing decision to leave his professorship behind. He put his Hidden Champions blueprint into practice as an entrepreneur, founding his consulting firm, Simon-Kucher & Partners, with Dr. Eckhard Kucher, his first doctoral student. Simon-Kucher & Partners is now the global market leader in price consulting, growing considerably faster than the rest of the consulting market, with  $522 million in revenue in 2021, 18% average annual growth, and a clear focus on top-line growth.

Tweetable Moments:

7:58 "It is a moral responsibility for the entrepreneur to make a profit."

13:52 "Dynamic pricing is driven by technology and adjusts supply and demand much better than in a rigid system where you do not have price differences over time."

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Links Mentioned in this Episode:

Want to learn more? Check out the Simon-Kucher & Partners website at https://www.simon-kucher.com/en

Check out Simon-Kucher & Partners on LinkedIn at https://www.linkedin.com/company/simon-kucher-&-partners/

Check out Hermann Simon’s website at https://hermannsimon.com/

Check out Hermann Simon on LinkedIn at https://www.linkedin.com/in/simonhermann/

Check out Hermann Simon on Twitter at https://twitter.com/hermannsimon

Check out Hermann Simon’s book Confessions of the Pricing Man: How Price Affects Everything at https://www.amazon.com/Confessions-Pricing-Man-Affects-Everything/dp/B08TZPRKVY/ref=sr_1_2?qid=1663777845&refinements=p_27%3AHermann+Simon&s=books&sr=1-2

Check out Hermann Simon’s book True Profit!: No Company Ever Went Broke Turning a Profit at https://www.amazon.com/True-Profit-Company-Broke-Turning/dp/3030767019

Check out Hermann Simon’s book Hidden Champions in the Chinese Century: Ascent and Transformation at https://www.amazon.com/Hidden-Champions-Chinese-Century-Transformation/dp/303092596X

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