With 10+ years in strategic data-marketing, digital, AI and management consulting across sectors like automotive, travel, pharma, and BPO, Fabien Cros has been recognized for his knack to develop and deploy impactful, data-driven solutions. His expertise spans data consulting, AI solutions, UX, marketing analytics, and more.
In this episode, Fabien shares successful case studies, such as Patagonia and Decathlon, demonstrating how companies can transition to more sustainable business models and achieve higher profitability. Also, learn practical advice and strategies that can be directly applied to a company’s business operations, helping make informed decisions and drive impact.
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Why you have to check out today’s podcast:
- Discover how to incorporate sustainability into your business models and pricing strategies, gaining valuable insights along the way
- Gain in-depth knowledge and practical advice on leveraging sustainability as a competitive advantage, backed by real-world examples and data
- Learn why there is a significant untapped market for sustainability-focused products and services, making it relevant for businesses aiming to capture new customer segments and drive profitability
“Go in depth, over-segment your market because you need to understand this new trend emerging around sustainability. Because it’s a major untapped market for a lot of brands and companies.”
– Fabien Cros
Topics Covered:
01:52 – How he got into pricing
03:43 – Introducing the concept of integrating pricing strategies with sustainability goals
10:25 – Discussing the challenges and benefits of integrating sustainability into pricing strategies
14:23 – Delving deeper into the concept of sustainability in pricing — that sustainability is more than just a feature; it’s a fundamental shift in business practices
18:30 – Acknowledging challenges integrating sustainability in pricing but also highlighting growing consumer awareness and regulatory pressures around sustainability
22:46 – The potential for sustainability as a competitive advantage in pricing strategies
27:21 – Examples of large companies successfully integrating sustainable practices
30:23 – Fabien’s best pricing advice
Key Takeaways:
“What we say with Pricing for the Planet is, move to what we call 21st century concept which is value-based pricing. That way you can create additional revenue and additional profits. That way you can invest into sustainability.” – Fabien Cros
“The data is showing us that you have a subset of the population. They’re so passionate and they’re so convinced that it’s crucial that you cannot forget this market and this market segment could actually fuel a lot of the money and a lot of the financial need that is required to move to a more sustainable business model.” – Fabien Cros
“We are trying to convey this message that sustainability could be viewed as a feature for the end users, but it’s a new way of doing business.” – Fabien Cros
People/Resources Mentioned:
- Accenture: https://www.accenture.com/
- Stephan Liozu: https://impactpricing.com/podcast/582-segmentation-strategies-uncovered-driving-revenue-through-focus-and-value-with-stephan-liozu/
- Schneider Electric: https://www.se.com/ww/en/
- Patagonia: https://www.patagonia.com/home/
- Doc Martens: https://us.rewair.drmartens.com/
- BCG: https://www.bcg.com
- Michelin: https://www.michelinman.com
- Decathlon: https://www.decathlon.com
Connect with Fabien Cros:
- LinkedIn: https://www.linkedin.com/in/fabien-cros-3b66a332/
- Website: https://www.pricingfortheplanet.com/
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Fabien Cros
Go in depth, over-segment your market because you need to understand this new trend emerging around sustainability. Because it’s a major untapped market for a lot of brands and companies.
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Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the sustainable relationship between them. I’m Mark Stiving, and our guest today is Fabien Cros. Now, from now on, I’m going to say Fabien. Fabien, because he gave me permission, but I had to do it right once. Here are three things you want to know about Fabien before we start. He is a data lead at Google, which tells me he’s amazingly smart and has access to way more technology than any of the rest of us do. He’s a founder at Pricing for the Planet, and he is a French guy who lived in Detroit for seven years, and he learned to root for that team up North. Welcome Fabien.
Fabien Cros
Thanks for having me, Mark.
Mark Stiving
Let’s ask the easy one. How’d you get into pricing?
Fabien Cros
Well funny enough, it’s a connection with Detroit. I moved from, actually, I was living in China at the time, I was finishing my business school, and I got a job offer at Accenture in the Automotive Center of Excellence in Detroit. So as a 24, 25 years old young man, I moved to Detroit and I spent seven years there. I loved it. I’m a big fan of the city with my wife. We created an art gallery there. So we have just an amazing memory from Detroit. And the reason, so going to Accenture and working in automotive, a huge piece of the business was around spare parts pricing. So I did a lot of pricing, and then we moved out to spare parts to service pricing and being smart about how you can price services going into not just automotive, but heavy equipment as well. and that’s how I moved to data and analytics and AI. And then I moved away, went back to Europe and joined an AI startup and then Google right after that.
Mark Stiving
Yeah, it’s a fascinating world. And just for kicks, I have to tell you that my very first pricing project was for spare parts. It was pretty, and there’s so much money to be made in spare parts. Oh my gosh.
Fabien Cros
Absolutely.
Mark Stiving
So what we’re going to talk about today, and this could be an interesting conversation, we’re going to talk about pricing and sustainability and I got to say, in all honesty, I don’t know that I’m bought in, I’m convinced. No, I love sustainability, right? I love nature. I love the idea that we’re not destroying the planet. I have no idea what pricing has to do with any of this, so I’m just going to open it up to you. Tell me what I’m missing.
Fabien Cros
Yeah. Two paths on this topic. The first one there is a very pragmatic path, which is what we’ve discovered through pricing for the planet, is that most of the companies are still using what we call 19th century concepts such as markup, such as a single-bottom line approach. And a lot of companies can benefit from actually a better and a more sophisticated pricing approach. I think we have a number, and it’s coming from Stefan Liozu with whom I co-funded Pricing for the Planet, but I think it’s almost like a quarter of industrial companies using value-based pricing. So it means that three fourths of the industrial companies are still using a cost-plus approach. So what we say with pricing for the planet is step one is move to more like what we call 21st century concept, which is to go more near value-based pricing. That way you can create additional revenue and additional profits. That way you can invest into sustainability. Because most of the problems that we see when we have discussions with CEOs are like, we don’t have money to invest into sustainability.
Mark Stiving
I’m going to say what I just heard you say, I too teach value-based pricing. Of course, every pricing person teaches value-based pricing, right? How do you move away from cost-plus there’s a whole lot more revenue, there’s a whole lot more profit. And so then what I heard you say was, but we want the CEO to take the incremental profit and invest it in this specific area, right? Where most of us pricing people would just say, make more money. That’s your job. Make more money and then invest it however you want. Okay, back to you.
Fabien Cros
Yeah, no, absolutely. And it’s a good point, Mark, because we did a funny study. What we did, we took financial statements from the top 50, 500 companies, and we looked at those financial statements about their mission, where they want to be. And most of the key words were really like 20, 30 goals, sustainability, frugality. And then we said, okay, fair enough. Those are good objectives. Now let’s look at what the users are looking for today. So we use Google Trends and we said, okay let’s look at all those new trends, and we compare the financial statement and what the people are looking for. People are looking for very different thing than what we can see on the financial statement. They’re looking for second hand recycle, repair, recyclability, all those things that are very pragmatic and we see a big disconnect.
And when we zoom into the pricing world, we see the same thing. We see a big objective: we want to be carbon neutral. We want it in 2050. We want to be CO2 negative and all those big statements. But there is a disconnect with what the current user is looking for today. And this gap, we need to bridge this gap because for two reasons, one, if we want to reach those, 20, 30, 20 50 engagements, we need to be pragmatic and start concrete stuff, which is far from what we’re doing today. And the second one is, there is a huge market bubbling around sustainability. I would say, especially in Europe and especially on the west and east coast, we can see the market being not very uniform and very homogeneous around those topics.
But those markets are emerging and we see a lot of brands not tapping into those markets for a lot of different reasons. But that’s kind of the mission we have at Pricing for the Planet, is to say, hey, there is a market. We need to move away from the traditional, we have one price for everybody. And we have one approach for all across our entire company, because the world is more complex, segments are way more difficult and way more diverse than ever. And we cannot continue to do pricing like we were doing during the industrial revolution. And maybe because I know you want me to be very concrete, Mark. To give you one concrete example, it’s, we love to use the example of markup. So for the past 50 years, most of the companies use markup to say, okay, I take my cost and I do my markup, et cetera, and that’s my list price.
If we do the same thing with sustainable products or services, the list price will be crazy and will be far from what the consumer or what the businesses are willing to pay. So we see a big gap. So that’s what we call the 19th century concept. And what we call the 21st century concept is to pass along to say, look for sustainable products or green products or services, you will use the grand product or service structure, market structure, and you will pass along the additional costs directly to the end user. So you continue to make the same amount of money as before, but you don’t apply the market on this additional green kind of additional cost to produce. That way it’s affordable for the end user, and you are not killing your profitability. I mean, we have plenty of other examples, but this one is very concrete. It’s like we need to move away from the 19th century concept and we need to move to adopt the 21st century, which means we need to change the way we do business and we need to change the way we do pricing. So, Mark, did I convince you?
Mark Stiving
Have you convinced me? No, but I want to make sense of all this. So before the concrete example you gave, I thought you were talking about something different. and so I want to bring that up in a minute. But the concrete example I actually liked a lot in the following sense. Instead of using the word markup, I’ll just use the word margin. And that is, we’re giving up margin percent, but we’re keeping the same margin dollars, right?
Fabien Cros
Correct.
Mark Stiving
And so if you’re increasing my cost for sustainable initiatives, I just pass that cost on. I just don’t take a margin on that, right? Absolutely. So as long as I’m raising it exactly the same, I have the same margin dollars. Now, CFOs are not a huge fan of margin. They like margin dollars, don’t get me wrong, but they seem to love margin percents for some reason and it’s like, that’s what the street, that’s what the investors pay them for. And so somehow you’ve got to get investors to say, hey, this is acceptable as well.
Fabien Cros
And I think what you are saying is very important because the same way we’re trying to change the way we do business, we need to change the way we do investment. And I think we see a lot of changes coming from investors, especially in the ESG space. So we see the, actually, if we look at cost of capital, now, it’s kind of very beneficial for companies to be much more advanced in ESG. And it’s not just a question of like margin percentage or margin dollars. It’s really like investors will influence companies to be much more advanced around ESG. But you’re right, the same way we change business, we need to change the financial industry as well. A hundred percent.
Mark Stiving
Yep. Okay. By the way, I love the concrete example because it’s the first time I’ve ever heard anybody say something that I thought had to do with pricing and sustainability.
Fabien Cros
Yeah.
Mark Stiving
So that was very good.
Fabien Cros
There is another one that I love. It’s more about business models because we put, and we like to be provocative. So when we say pricing for the planet, it’s, I would say it’s way broader than kind of just pricing. I don’t like to say just pricing because pricing could mean a lot of different things. So we like to say a very broad definition of pricing, including monetization and what we see, we see a lot of new business models that are kind of like green compliant or like, great for the planet and great for the bottom line. And then we have a long list. So we talked about, like remanufacturing for example, and we published a paper about the shoe industry, like it’s a like $80 billion industry that is mostly linear.
And the opportunity to move to a circular model for them is huge. And it’s a huge way actually to create growth, to continue to have growth and to have additional margin coming from this new business. And also, concrete example, you have Doc Martens that just released their rewear platform where they are buying directly from the consumer, repurposing remanufacturing their shoe and offering those shoes as a second hand product, which is cheaper, but actually the margin percentage is way higher. And you can go on their website, I think it’s drmartens.rewair.com, and you can usually see the buy back, it’s close to $20, I think for a pair of boots. And then I don’t have the exact number, but I think it’s another 20, $30 to kind of repair and repurpose the boots, and then they will sell it back for a hundred, for like a 150 lease price for a new pair of goods. So you can see from a pure profitability perspective, it actually makes a lot of sense to go in this kind of much more circular model than the traditional linear model.
Mark Stiving
Yes. And so now what you just described to me is what I expected us to be talking about when we talked about pricing for the planet or sustainability. And that is, I often think of sustainability as a feature right? Now, there’s lots of different features that you could think about in that realm, but think of it as a feature or a benefit that companies or people want to buy. And so now when you say pricing for sustainability, the question becomes, am I advertising the fact that I’m sustainable? Am I getting extra revenue because I’m sustainable and I do my product development or my business model development? Am I thinking about the fact that there’s an entire group of people who care a lot about sustainability, a market segment that cares a lot about this, and so we could and should be investing in that? And so, I take nothing away from anything that I just said except for the fact that it just feels like a feature to me. It doesn’t feel special.
Fabien Cros
Yeah. And I think that’s where we need to do a lot of work, because I think, for me, it’s not a feature because it’s a different way of thinking. Because again, I would say color or like material could be a feature. At least we are trying to convey this message that sustainability could be viewed as a feature for the end users, but it’s a new way of doing business. And to take a very concrete example, again, we talk a lot about shared value, which is like, we’re trying to align actually the economic value created from a business with the social needs. And for us it’s this complementary and this new angle. We talk a lot about the triple bottom line when we say pricing for the planet, we want to create a price tag that is not just one piece of the triple bottom line, which is a first P, profit, but we want to have a price that is in three dimensions, the traditional price.
So for profit, we want to have a KPI about the planet, and we need to define each company’s KPI, and we need a KPI about the society and the impact on people. And for us, we cannot talk about pricing for the planet without having this trick, because for us, it’s too easy. When we really think about the impact of companies, it’s too easy to have one price hiding all the bad thing that we do on the planet and on the people, and I don’t want to finger point, but for example, when we think about Walmarts, when we think that at some point a lot of their employees were using food stamp from the government, what it means is that the pricing that they were using at Walmart for their products indirectly, it was kind of like they were relying on the government to pay for the employees.
I’m not a US citizen, but as a global citizen I think it’s not fair that society is paying this kind of indirect costs, those externalities that some companies are, for a lot of different reasons, but are leveraging today. That’s something that we need to stop because we are obsessed with only one P. We need to move away from that. And I think the only way is to give the end user the choice, or at the visibility of online. Yes, it’s maybe very cheap, but it’s very bad for the environment and it’s very bad for your community. And on the other flipping the coin, it’s like, yes, it might be more expensive, but actually it’s a very good impact on your community and a very good impact on the planet. And after, it’s up to the end user to make the decision, but the decision needs to be bright and fair.
Mark Stiving
Okay. I honor the intent. I think it is very, very hard to do well, and I’m not sure it’s going to work. And I’ll say that in the following way, first off, in the eighties, we had this big push people would put made in the USA on their clothes or on their products. And I got to tell you, nowadays you don’t see that. Do you know why? Because people didn’t care, right? We’d rather buy cheap Chinese goods than expensive goods that are made in the USA. So I’m not sure that it’s going to make a difference to the way people make decisions. And I think a bigger thing in my mind is the fact that in order for me to have a price around ESG or a price around good for the planet, it actually requires somebody to go out and say, yes, this is the price you have, right? This is your rating in that respect. And people play games with these ratings all the time. People get paid for these ratings. And so I’m not sure I believe it, and I’m not sure that I would buy differently. I’m not sure most people would buy differently than price, regardless of what you said there.
Fabien Cros
Absolutely. And two points on this one, first one coming back to, I invite all the audience to look again at the data, and we see more and more people very conscious about the impact on community and the impact on the planets. I’m not saying everybody’s buying based on those decision, but we see more and more people and especially people with a traditional higher willingness to pay. So there is definitely a change in the mindset of the consumers. And then what we see emerging is regulation. And we see that a lot in Europe. We see that a little bit in California. We see that in China as well. So we see governments are actually, they will try to influence and they have no choice because of the Paris agreements, they have the same thing.
They want to be leaders in the circular economy. I think Washington did a post on this one, Beijing did a post on this one. So this consciousness about sustainability will be required by the government. So for us, it’s really like, we want to say you have these very nice windows of being a leader. It’s right now, like in five to seven years, it’ll be regulated. You will have no choice. So you will have to pay taxes on things like carbon emission. So by design, your price will reflect your pollution and your impact on the communities will influence your impact on most of the different layers of your value chain. So that’s where I think you have this nice five to seven years where you can influence the regulation. Because right now, and I’m honest with you, Mark, we are far from having all the solutions for everything.
But we are trying to say, hey, it’s now the time to really think about it and to champion those topics. It doesn’t mean that everything will be successful, but by trying and by trial and error, you can show the path, and then regulation will pick up and we’ll say, hey, actually we like what this company A is doing. It’s not, maybe not the best thing, but we will try to use that as an example, as a benchmark, and then we will align the entire industry based on what the company did a couple of years ago, et cetera, et cetera. So it’s really emerging. It’s like, I mean I’m working at Google, so I have the responsibility for AI as well. And it’s like the big difference between sustainability and AI.
AI went so fast that nobody could really leverage AI as a key differentiator. Sustainability is completely different because we know we have five, seven years. So we have time to really champion sustainability and make it purely part of the DNA of the company. And we know by actually explaining that it’s working, we can use Patagonia. We have a bunch of example like that. We use a lot of data on sporting goods in Europe. They picked up this fight and now they’re way above the market. Schneider Electric, if you look at the market cap of Schneider Electric, it’s the, I don’t have the exact number, but it’s way higher than the competitors because actually they use sustainability as part of the new DNA. And now they are actually quite advanced on this topic. And now they are, we are using Schneider Electric as a benchmark. So they are really influencing regulation, et cetera, et cetera. So again, we know that it actually could be a winning factor for the companies interested to kind of leverage sustainability as a competitive advantage.
Mark Stiving
I have no qualms about trying to get companies to use this as a competitive advantage. I have a feeling that it isn’t going to take off the way you think it is. I mean, by the way, Patagonia is headquartered here in Reno, Nevada, and I love Patagonia, but I never would’ve said, oh, these guys are high on sustainability. I certainly know they’re high on social good, but I don’t buy Patagonia clothes because of that. I buy Patagonia clothes because I love them. And so I think that’s the big issue.
Fabien Cros
But that’s a very good point actually. And I think that’s something that we, I’m not sure you’ve seen, but we did our annual submits in April. And I think we had an interesting… so BCG was a partner of, and we talked about something called the green premium quandary and I think what you’re explaining, it’s exactly going into this direction, which is the traditional way of like, kind of like the 19th century concept. It’s like, yes, we have, one segment, which is kind of like planet friendly or sustainability friendly, and then we have a big part of the segment. They don’t care. And some actually they don’t like, they don’t like sustainability. Well, actually what BCG did, they did a lot of like, really, really fine pricing market studies and content analysis.
And what they’ve discovered, they’ve discovered that they found five segments. And actually the first segment, which is really passionate about sustainability, for some categories, the willingness to pay was like 60, 70, 100% more than the traditional price. But the traditional way of thinking was like, oh, no, no, we cannot go above 20% premium because again, because we believe that it’s not fair. No, actually you have one segment that is ready to double the price. And then we have a second segment that is actually up to like 30, 50% premium. And then we have a big long tail of people, they don’t care. But I think people, and most of the companies today, don’t do the homework well, they use what they think and they apply how they shop, the way they are doing traditional pricing and traditional business.
And again, they are missing the point that you have a big part of the market that is actually super concerned about sustainability and they have money and they’re ready to pay a lot. So I think your example of Patagonia is perfect. Like, yes, you have a lot of people, they buy because of the quality of the clothes, but actually you have a huge market. And I’m buying Patagonia, not because I like the clothes, actually, I don’t like the clothes because, for me, it’s kind of like normal clothes, but I buy them just because actually I like the message about sustainability. And for me it’s very important and it’s well above and I’m ready to pay like a hundred percent more for a jacket because I know I can keep it for another 10 years.
I can bring it back anytime because they’re the circular model. They will repair my jacket. So again, you and me, we are in different segments. I’m not saying you’re wrong and I’m right. That’s, I’m far from saying that, but I’m just trying to illustrate that we are in a world where we see huge discrepancy between one segment from another. And that’s something that we didn’t see in the past, especially because we were in a more kind of like the norms were kind of closer all together. Like the market was not that differentiated. But now with sustainability, and again, it’s kind of, the data is showing us that you have a subset of the population. They’re so passionate and they’re so convinced that it’s crucial that you cannot forget this market and this market segment could actually fuel a lot of the money and a lot of the financial need that is required to move to a more sustainable business model, for example.
Mark Stiving
Okay, so that’s the second thing you said today that I liked a lot. I’m going to restate what I just heard you say though, and that is, there is a market segment. I have no idea how big it is, you didn’t say, but there’s a market segment that’s willing to pay a lot for sustainability. And companies who go after that market segment will end up with much higher margins, probably lower volume, but much higher margins, which is great for the bottom line, great for profitability. And there’s nothing at all wrong with that strategy. I think the challenge there is that big companies today who have huge volume can’t take their entire company and say, we’re going to move it to sustainability because they’ve already built a reputation, they’ve already built a brand. I think this is something that new companies could do or big companies could spin off a new company or a new brand and say, look, we’re just going to build for this marketplace and structure around that. And I could see that A, being successful for the consumers that want it, and B, being successful for the businesses that want to do that.
Fabien Cros
Yeah. And you’re right it’s a step-by-step approach. But I have two, at least one, I mean, no, two good examples on this one, on big companies actually moving from traditional brand reputation to sustainability. You have Michelin, the tire company. They explored especially on the B2B, a much more circular business model because again the concept of like tire as a service. So again, huge, huge move and very successful move. And at the same time they are transitioning to a very like, sustainable type of tires. So I think they are very successful moving from traditional brand image to sustainability oriented business image. And again, I’m coming back to Decathlon. If you didn’t hear the story instead of selling sport goods, now they’re renting it, which make a big difference because instead of having an incentive to sell yoga mats, bicycles, snowboards, all that stuff, they have incentives to actually make it really efficient so they can get it back and rent it again.
So you can see how the entire shift is going on. It’s like, before my only KPI is to sell more, huge impact on the planet, huge impact in terms of CO2 emission. Because my incentives are not aligned with a planet friendly approach. You shift the model, now your model is to rent it. So it’s to make sure that your assets are, they have a long life cycle that the usage of your assets is maximized. So now your financial incentive is aligned to your planet or our planet and our society incentives. And I love those numbers because for the end user, it’s coming from the Decathlon, from the end users. It’s six times cheaper to rent. And of course, because we are all buying snowboards and then for nine or 10 months it’s in our garage doing nothing.
But for the company they were, and it’s still a proof of concept. So I’m cautious, but they’re saying it’s between three and 10 times more profitable for Decathlon. And for me here, it’s like, it’s a no brainer. It’s like, wow, actually that very good reason to move to this more sustainable approach is because it’s good for the bottom line, it’s good for the planet, it’s good for the user, but it requires a lot of time to rethink, to realign the incentives, to change the business model. Because as you mentioned, it’s a huge change for any big brand. It’s like, okay, we will stop selling stuff and it’ll still rent stuff. Yeah, it’s a tremendous change for sure.
Mark Stiving
Fabien, we are running out of time. I would love to comment on that, but I’m not going to, otherwise we would just keep going. But this really has been fascinating. I hugely appreciate you sharing with us, and I’m going to ask the final question anyway. What is one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?
Fabien Cros
I think I will come back to what I said about doing your homework, doing your conjoint analysis, going in depth, not doing kind of like a high level 10,000 feet conjoint analysis, go in depth, over-segment your market because you need to understand this new trend emerging around sustainability. Because for me, it’s a major untapped market for a lot of brands and companies.
Mark Stiving
Nice. Thank you so much for your time today, Fabien. If anybody wants to contact you, how can they do that?
Fabien Cros
Super easy. They can go on www.pricingfortheplanet.com and contact us through the website or they can contact me directly on LinkedIn. It’s Fabien with E CROS.
Mark Stiving
Perfect. And to our listeners, thank you for your time. If you enjoyed this, would you please leave us a rating and a review? And if you have any questions about pricing or this podcast, feel free to email me, [email protected]. Now, go make an impact!
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