“Price-Led Costing” the Wave of The Future

A few weeks ago in the Creedy Commentary I contrasted the conventional and prevailing DeathCare pricing strategy that is now outdated: Cost-Led Pricing with the more customer-centric Price-Led Costing favored by more and more B2C companies and, more recently, B2B companies.

As our profession relentlessly marches toward commoditization and price becomes the sole determinant of choice in more and more markets the need for a change in our approach becomes glaringly important.  Who will survive?  It is likely to be those that master this aspect of market strategy in spite of its complexity.

There is a long history of companies that became obsessively focused on cost at the expense of providing a product or service of value to the customer. The fact is, you can make a pizza so cheap that no one is willing to eat it.

Here is an article from the Pricing Society that does a better job of explaining Price-Led Costing than I did.

The more usual way is to take the costs and then determine the price; and although that method may be scientific in the narrow sense, it is not scientific in the broad sense, because what earthly use is it to know the cost if it tells you that you cannot manufacture at a price at which the article can be sold?

[price-led costing] explicitly understands that … price determines … costs, and does not let … costs dictate… price. You must do your cost accounting BEFORE providing the service (what Toyota calls Target Costing). Historical costs don’t matter, it’s only future costs that count.  Click here To Read The Full article “Price-Led Costing: The Wave of The Future

What I would do:

Go back and review the articles relative to pricing strategy on the Creedy Commentary.  Begin working with your team to really try and decide which parts of your organization represent “the baby” and which are really only bathwater and start throwing the bathwater out.

Here are links to The Creedy Commentary Articles you should review.

A Broken Business Model

A Competitive Fortress

Licensing Laws: Barrier to Survival

 

The Dirty Little Secret

An oft quoted phrase from “Alice in Wonderland” is: “If you don’t know where you are going any road will get you there.”  

What few people realize is that there is a step before knowing where you are going.

KNOWING WHO YOU ARE. 

I love people who know who they are.  They are comfortable in their own skins.  They are relaxed and they are, typically, very competent.  But right now there is a lot of angst in deathcare as we THINK we have to struggle to find who we have to become.  I suspect that if we believed more in what we do we would find we already have that answer.

Unfortunately, I also suspect that many in our industry don’t really like who we are.  So they dress it up into something else.  But that’s another story for another time

When I’m in a mischievous mood, I will sometimes ask managers and workers in a company, “What does the CEO actually do?” It’s not unusual to get a panicked stare as my answer, followed by some trite response, like “Well, he sets the direction of the company.”

So, I ask, “What is the direction of the company?” We are inundated with direction and vision statements that would all serve as good examples of what my high school civics teacher called ‘glittering generalities.’ They are well-meaning, but often sound just like every other company’s vision statement. For these statements to become more than lovely aspirations something is missing.  To Read More…

What I would do:

The stakes are getting higher every day.  We, as an industry AND as a profession, are at a point and possibly past a point where we, as individuals, need to decide whether we should get in or get out.  The opportunity for our future is extraordinary.  But it will take commitment, it will take passion, it will take painful choices and it will take sacrifice.  The rewards won’t necessarily be priceless but they will be far greater than my generation experienced during its career.  What are those rewards?

  • Purpose
  • Meaningful career
  • Community respect
  • Impacting lives
  • And, oh yes, financial

So, if I were you I would start thinking about whether it was time for you to get in or get out.

VIDEO: How Not To Overserve Your Customers

I have been saying for some time that we are beginning to overserve our customers.  

I am not saying that we should not do some of the things we have been doing lately (like video tributes that add value to our services) but hanging our hats on those activities as if they will save traditional funerals is a mistake.  Right now our industry / profession is in the early stages of radical transformation.

We will soon begin talking about reinventing ourselves.   Some will claim they have already begun reinventing themselves by introducing innovations like webcasting, trinkets, multicolor paper goods, balloon releases and the like.  This is not reinvention.  In the words of famed management guru, Peter Drucker, it is patching.  We are only dressing up what we already sell in an attempt to make it more appealing to a customer who is demonstrating a disconnect.  Then we misinterpret their momentary satisfaction as long term commitment.

Think of it this way: You, your peers and colleagues are all faced with a massive “Sea Change” relative to the markets we serve.  It has become obvious even to the most uninformed that the world has changed. A change of this magnitude causes all of us to grieve.

Our profession is now in various stages of the grief cycle.

The “dressing up of the funeral” that has been taking place these last ten years has actually been long overdue but it is only dressing up (patching as Drucker would say).  Those who have adopted these measures have experienced success in customer satisfaction…but many have also learned that customer satisfaction is no guarantee of repeat business.   In reality patching correlates with the “Bargaining Phase” of grief.  “If I make it better maybe they will see more value.”  And for a while they do, after all it is better than what you were doing…until there is an alternative that speaks to what they are looking for.  And what they are looking for does not currently exist so they can’t tell you what it is.

Patching reminds me of an old Charlie Brown cartoon in which a sad faced Charlie Brown is saying,

“Doing a good job around here is like wetting your pants in a dark suit.  

You get a warm feeling and no one notices.”

In this brief video Harvard Professor and author, Frances Frei talks about the challenges we face.  I find her Pretzel Metaphor particularly helpful.

For further discussion:

This article is linked to the Creedy Commentary article “Licensing Laws: Barrier To Survival”  Click on my photo to return to that article.

 

 

To order Frances Frei’s book from Amazon click on the image below

Pricing As A Strategy To Build Customer Loyalty

Last week in The Creedy Commentary I began a 3 week series on how our old pricing model (cost-led-pricing) is not only outmoded but unsustainable.  In this brief video London Business School Assistant Professor Marco Bertini discusses a concept a brought out this week in my discussion of Price-Led-Costing, the alternative to our old unsustainable method: Fair Pricing.  He explores 5 principles that will help you humanize the way you make money and build customer loyalty… 

and answer the question: “What Does Your Pricing Say About You”

What Would I do:

As I tell you in the last two postings in The Creedy Commentary this is going to be a challenge and somewhat painful. So the first thing is to read the following Posts:

A Broken Business Model: Wringing More Money Out of Your Best Customers Is Not Sustainable

Building A Competitive Fortress Through Your Pricing Strategy

How To Stop Customers From Fixating On Price

Then wait for next Tuesday’s Commentary posting.  Oh, you might also come back here to the roundup monday for a sneak peak at next week’s feature video.  It will help you think about some of what you will be learning next week.

P.S. I know this is frustrating.  But you have to unlearn some things to learn new things.  Reinvention is not easy.