David Klečka: We’re at the beginning of something really big
Dozens of employees, customers recruiting from the world’s largest chains, and now also a huge investment. Czech start-upYieldigo, helping entrepreneurs with pricing strategies using artificial intelligence, has grown significantly over a few years. Its CEO, David Klečka ,explains why he still thinks that this is just the beginning.
How does a pricing strategy with Yieldigo work from the perspective of an entrepreneur, or else, where exactly is the opportunity to increase or optimize the prices?
The decision to increase or decrease prices is in the hands of retailers. For big retailers, it is complicated to watch and determine the prices of let’s say 5,000 or even 50,000 items in 500 stores. In our experience, retailers know that the right pricing management should take into account lower dozens of internal and external factors influencing them,not just the purchase prices or the prices of competition. If you think about it, this is an enormous complexity of a great number of prices and their combination in a relatively dynamic market environment, where you need to get the right information and respond on a daily basis. It is logical that each decision of a retailer regarding prices has been made with a certain purposeand goal. Due to an incomplete description of the said complexity, this goal is generally missed. In reversed rhetoric, this means that inaccurate prices were selected/calculated for the given goal. This can lead to confused consumers, unfulfilled business goals, and huge price confusion and inconsistencies throughout the assortment and stores. Now, imagine a price specialist on the side of the retailer being able to see and analyse in one click what pricing strategies lead best to meet his intentions or business goals, and given the selected pricing strategy, he could see in turn what prices lead to achieving it. Well, that’s what the Yieldigo software is about.
How can artificial intelligence predict customer behaviour and thinking?
The ability to automatically process nearly any data at the retailer’s disposal is fundamental. Thanks to machine learning and advanced data analytics, it can learn to predict the customer’s probable decision under given circumstances from the purchasing data. This was well visible in connection with the Covid situation when the behaviour of people changed significantly.
The market was suddenly more dynamic; entrepreneurs learned to react faster. Most retailers build on the experience of their employees, but none of them had this kind of experience. On the other hand,software can learn from the last hours and days, presenting conclusions based on data, not based on emotions or long-term experience, which may be mis leadingin the given situation.
It sounds like a service every entrepreneur should want. Why is this not the case so far?
These really advanced technologies were not available to retail for quite a long time. And secondly, there is the question of priorities. If a retailer struggles with good supply for his stores, pricingstrategy only comes second in line. Many entrepreneurs are still in a situationwhere they need to improve logistics and they are not ready to discuss pricing strategies yet.
You were awarded the prestigious title Cool Vendor by Gartner; how much do retail firms perceive this?
Gartner outputs are, among other things, meant for the heads of innovation and information systems. Retailers implement this position more and more often in the form of some liberio for innovation. Credibility is important for every start-up, and this award can really help us - being a Cool Vendormeans something, and only a few companies from the Czech Republic achieved this;you could probably count them on one hand.
How much are the cards dealt on this market? Are there any large, global suppliers, or is it like the Wild West?
It’s clear that especially the United States are way ahead. The market started to develop earlier there, and services that we offer were available as early as in 2014. In Europe, this need appeared later, and there are literally only a few providers; it still is a lot about education here.
When exactly did you realize that there was room for something like this in Europe, too?
For several years, we’ve been dealing with general mathematical research in the area of pricing strategies, it was on the borderline between academic and business spheres. We learned a lot and we fellin love with this area. Going into deeper research, price has become a kind of a communication channel and communication of value to us, rather than just a number on a piece of paper. In the beginning, we naturally believed that retail resolved a thing like this a long time ago, but it turned out to be just the opposite; and a number of retail firms liked what we showed them. That was an impulse to the first financial investment, and to develop the so-called MPVbefore the end of 2016, which was something of a minimum solution. In 2017, our aim was to launch the service as quickly as possible, to offer it to retailers who were waiting for it, and to see its real utilization in practice, even if the product was far from being perfect.
So, is the current investment meant to accelerate growth before the competitors from the West set their eyes on Europe?
If we stopped now and only grew organically, someone might out run us. We must be fast and dynamic. We spent the last year travelling around Europe, from Spain to Russia, having long discussions with retailers, and we know the market perfectly from West to East. So, we know precisely what we need the money for, we know the customers. But besides business growth, the investment will also cover technologies. From the beginning, we’ve been building on mathematics, and we’ve been moving on the edge of human knowledge in this sector; we’re about to continue with that.
Why did you decide to choose J&T Ventures?
A number of people cooperating with J&TVentures are rather close to retail. Whether directly or through their investments. We saw understanding for this area from lots of sides at JTV, and it was important for us.
What markets are in your viewfinder now?
The CEE region is naturally interesting, because it is culturally close to us Czechs, we know it rather well and we would like to grow in it. However, it is just a spring board and it is important to look West. We have a superior team; Yieldigo is growing successfully even inthe time of Covid, and we know exactly what to do with the money. We all perceive this as the start of something really big, and there’s enormous excitement in the team. I’ve always admired Czech firms that decided to go and set the world on fire. Now, we’re humbly trying to do the same.