When successful businesses suddenly change the way they do things, we should all be asking 2 questions:
- Why did they make that change?
- Should I be doing that too?
Seek is an Australian Success Story. It’s grown from just 3 founders 20 years ago into a global recruitment and education business worth $8 billion.
In the last 2 years revenue growth slowed in Australia, leading to its share price falling in the 6 months to April 2019. And then, suddenly, the share price started increasing again. The catalyst was Seek’s shareholder update on the 1st of May 2019. So what did Seek say that caused such a sharp turnaround?
Seek told the market that they would be implementing Dynamic Pricing. The shareholders loved it and the share price soared more than 10% in the next month. That is, the value of their business went up $800 million off the back of this announcement.
Let’s look at what Seek had to say in a bit more detail.
Firstly, they acknowledged that they previously operated a single price for all ads. Regardless of whether you were hiring a clerk or a data scientist for example, Seek was charging the same price for its ads. They realised that they could be charging more for higher value ads where there was more competition.
Then they explained the reason that they hadn’t made these changes to date. They said they charged too little for their services overall, and most importantly, they didn’t have the capability to implement Dynamic Pricing.
Now I applaud Seek for recognising this and doing something about it. Although you would have to ask, if this announcement was worth $800 million to the value of the business, why did it take them so long to build the capability themselves. Would they not have been better off tapping into someone else’s knowledge and experience, and getting the benefits from Dynamic Pricing sooner?
And the question I will pose to you: If Dynamic Pricing can add $800 million to the value of Seek, what could it do for your business?
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