In this week's Industrial Talk Podcast we're talking to Lydia DiLiello, Founder and CEO at Capital Pricing Consultant about “Get Your Share: Profit During the Business Renaissance”. Get the answers to your “Pricing Strategy” questions along with Lydia's unique insight on the “How” on this Industrial Talk interview!
You can find out more about Lydia and the wonderful team at Capital Pricing Consultants on innovative pricing strategies for success by the links below. Finally, get your exclusive free access to the Industrial Academy and a series on “Why You Need To Podcast” for Greater Success in 2020. All links designed for keeping you current in this rapidly changing Industrial Market. Learn! Grow! Enjoy!
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Company Website: http://capitalpricingconsultants.com/
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Welcome to the industrial talk podcast with Scott MacKenzie. Scott is a passionate industry professional dedicated to transferring cutting edge industry focused innovations and trends while highlighting the men and women who keep the world moving. So put on your hard hat, grab your work boots, and let's All right, welcome to the industrial talk podcast. This location right here right now is dedicated to you hero, you industry hero, because you are bold, you are brave, you dare greatly. You solve problems, you're innovate, you're changing lives, and you're changing the world as we speak this very doggone moment. That's why we celebrate you. Right here on the industrial talk podcast. All right, in the hot seat. Her name is Lydia DiLiello. And she is the CEO and founder of capital pricing consultants, you know, we're gonna be talking about pricing strategies, let's get cracking with the interview. I know that you've had this conversation before. And I guarantee you, it's as if it goes like this. Hey, we got this great service. Yeah, that's great. All right, how do we price it? What do we offer the market? What are people gonna pay for it? All of these questions is their ways of being able to do it in a creative way, what what, what, what, what, where, how, why how they up, you've had that conversation with pricing, Lydia, right there. Capital pricing consultants, they help you out before we get into that interview. Right. Before we get into that, I want to make sure that we plant that seed of industry, industrial talk 2.0. So I've been preaching, as you know, about the necessity to educate, collaborate and innovate. And so we're shifting the industrial talk platform to be able to do that. And we're trying to with help of great people to do it in a way that is frictionless. So you go there, you'll be able to find what you need to find, educate what you need to educate on. And do it efficiently. no friction, no, no, no, no friction, we've got to be able to do that. Without any friction, I can't make it hard for you, you can either they're not going to tolerate something that's hard. So it's a frictionless platform that is dedicated and focused on education. And we're going to feature great people to educate people that have incredible insights. Like all the individuals that have been on the podcast, to, we're going to have the ability to be able to collaborate, you're saying to yourself, Scott, how do I find somebody in the fill in the blank, boom, find that person or persons find that company or companies and be able to reach out to them because you're going to have that contact person right then and there, right now. And you'll be able to sort of listen to what they have to say. And then of course, the innovation. Well, without a doubt, given the fact that we had that COVID win and blah, blah, blah, there everything about the pandemic. The reality is, is that we need to innovate, we need to continuously look at ways of innovating without a doubt. Don't Don't come to me and say, Scott, we don't have to, you have to. So anyway, that's industrial talk. 2.0, a frictionless we got to make it easy for you to find the answers, get the education, to connect with the people that need to end you need to connect with and to innovate, because this is a platform that gets stuff done. Right there. Put it on a bumper sticker. All right. Let's get with Lydia. So anyway, as I mentioned in the beginning of the monologue, I know you have that conversation, are you pricing? I mean, if you're not pricing your services, your products, your what you're leaving money on the table possibly, or you're losing business, there is a balance. There is a strategy behind it. Liddy understands all that. She does. And her team add capital pricing consultants understand it as well. So I it's a great conversation. I enjoyed it. By the way. I love Cleveland. She's from Cleveland. Whatever that song is, he loves it. Whatever. Cleveland right there. She's from Cleveland. great people. Great community. Great town. Alright, let's get on with the interview. Enjoy the conversation with Lydia. Hey, Lydia, welcome to the industrial talk podcast absolute honor that you've found time in your busy schedule to jump on and talk to the listeners of industrial talk. How're you doing?
Wonderful, Scott. Thanks so much. Glad to be here.
All the way from Cleveland. Right?
I love that town. Just due to
minus the snow.
Is it cold there now?
It's still cold. We're running in the 30s but pretty typical this time of the year.
Alright listeners, I went up to Cleveland for the first time. I bought liou was last year sometime and had a blast. Unfortunately, with COVID, a lot of the great restaurants were closed, which bummed me out, but just an absolute wonderful town. So there, put that on your bucket list, you got to get on up there. All right, for the listeners, okay. Here's the deal. I want to give you a little background, we're gonna be talking a little bit about pricing pricing strategies, and talking to Lydia about this. So Lydia, give us a little background on, you know, who you are, and why you're such an incredible professional.
Thanks, Scott, happily. So I fell into pricing totally by accident. I came out of graduate school with an MBA, and my brother in law hit the lottery with General Motors back then they actually did a lottery with employees. If your name was chosen, you could have anybody you want to apply for a job with General Motors. Back then it was guaranteed lifetime employment. So those were hotly sought after position. Um, so I by chance, my brother in law had it and offered me his his option. And I took it. The caveat was, I had to work afternoon shift, building harnesses for at least nine months before I could get into the offices. It was a great experience, I wouldn't trade it learned a tremendous amount about how a business actually works. And still use that with my clients. today. When I work with clients. I don't go in on day turn, I go in on afternoon turn around midnight to see what's really going on because they turn always gets enough oversight.
No, II have good, it's true. It's true. A lot of eyeballs in the daytime,
it's more interesting to see what happens in afternoon evenings. So I really did learn an awful lot. And quite honestly, at that point, I applied for any job that was in the office, Scott, after that nine months was up, and it turned out to be competitive intelligence. And I was fortunate enough to move into that role and then be promoted up through pricing, I found I had a real passion for it's a little geeky, it's art. And it's science. And yes, it's a complex space. So I spent 11 years with General Motors, moved on to a privately held plastics company, and and set up their pricing. It was a global company. And then from there such You know, there are so many companies of all sizes, that don't understand pricing that are not very efficient with their profit, and as a result aren't growing like they could. And so I really, I have a passion for helping companies and I love the space. I think it's exciting. And it's convoluted, which is part of the fun. I'll tell you, the picture of harnesses, right? I've
seen them. It's like spaghetti, but you're trying to control the spaghetti, you're trying to create some logic, spaghetti, kudos to that job. Kudos to people who build harnesses, because I specially today with these cars being so, so sophisticated, and so. So cool. That's it. That's a cool story. I like it. Alright, listeners, we're going to talk a little bit about pricing. Now, I have intimate knowledge on on how I've screwed up pricing, because I had no idea of how to do it. But I want to start off with this topic of business Renaissance. Lydia, I see that on your forum. I want to talk a little bit about that. What do you mean by that?
So Scott, I see that there is tremendous pent up demand in the community at large business community as well as, as in our client communities. After COVID people are ready to get back out and buy and take advantage of services and, and live that quote unquote, normal life again. So I see that there's going to be tremendous growth and pent up demand that we have not seen even prior to COVID. And I think I think our listeners need to be ready for that they need to be prepared to service that.
Yeah, that's that's a hopeful statement. I love it. I love that. Because it's still still from a market perspective, Lydia, it's pretty squishy out there. I don't know when something's gonna happen or not. You know, you, you get so many. And I'm and being a business owner myself, you get so many pieces of information that contradict each other. But I think you're right. I think just eventually people are just going to say, to heck with it. I've got to get going, I got to get rolling. I got to make this thing. I got to survive, rebuild and prosper or whatever this looks like. And I'm blazing my own trail right now. And I got to do it. And I guarantee you, there's probably other people out there that are saying, Yeah, I'll work with you. Just because I got to do that same thing. So I love that message. of hope. Now. This brings about a great little segue into our topic. And and, and listeners, I, I can I can I feel the pain but never really had a conversation to this effect of of is there some real I don't know a science behind strategies with pricing. So give us a little just sort of a background into pricing and why it's important and then maybe some strategies to to up our pricing game.
Absolutely, Scott. So, you know, as let's talk about small business owners first, you know, if you set a strategy that your goal is to achieve 5% more than you did last year, which would be pretty modest considering last year for everybody, at least for a lot of folks was not their best year by any means. But But what I would say is, you know, look back at what you did in 2019, and set a goal based off of that and say, you know, my goal is I'm going to do at least as well as 2019. Let's put it out there. First of all, set a strategy that stretches you and makes you want to work for something you would be happy to achieve. Don't set something that's lackluster and halfway and and if I could just get through, I'm not about that at all. I'm about earning prosperity, right, so so let's set that strategy. That's the first step. Because if you don't know where you're going, then how do you measure what you did? How do you know if you're actually making progress against it? So the strategy is, we're going to hit at least 2019 numbers, then you move into so tactically? How are we going to do this? Are we going to promote a specific kind of product? Are we going to bundle products that are similar together to try to get people to buy more quantity? Are we going to run specials on the core service that we have? Um, are we going to use some of the kind of kitschy marketing of, hey, let's call the pandemic, on its way out? And you know, try to add some fun around that. But so it starts with this strategy, then you add the the specific tactical requirements, what are you going to go do to help this along? And the third piece is, of course, what's your pricing look like? that supports that because of the price things all wrong, you could have great tactical approaches. And if you don't get it right, with the pricing, it's not going to happen. So you know, everybody knows the McDonald's Happy Meal. I think that's, that's the most quintessential bundle that ever existed. If they had priced that $1 more, they would not have gotten near the volume, they wouldn't have have achieved that goal of hitting specific volumes as a result. Yeah, yeah. So just to keep it real simple strategy, tactical approach? And what are the prices you're using to support that?
I like that. I like it. It there's an interesting when you start talking about pricing, and volume or quantity, because there is an inverse proportional to the pricing and say, if I, if I raise my price, 50 cents, I get a reduction in x. But I have is there a Is there a way? How do you do that.
So that's where it gets really complicated. Scott, you bring up, you've identified the core issue, he does not always work. In fact, generally it does not work. If you raise prices, you do not lose business, if you have a good business and you know your market. And if you've communicated to your market openly, and honestly, everybody can smell a rat. And so where I feel businesses make a big mistake is they tried to play off a situation to raise prices and take advantage. customers see that and then and they've lost their credibility. But if you message to your customers, hey, because of my supply chain, my costs have gone up 30%. So I'm going to raise your prices by 10% this month and another 10% next month, because I'm trying to work with you. Keep it honest, keep it open, people will respond to that. So as you are raising those prices, you do not necessarily drop off in volume. However, some companies will make an intentional play to say I want to drop volume by 10%. Let's say we're at capacity. Let's use hand sanitizers, paper towels, toilet paper, those are all perfect examples. In the pandemic, it would have been considered predatory pricing for those goods to have been priced significantly higher to control demand. However, in a in a standard state, let's say your hottest selling part. Let's say your auto parts manufacturer, you can't keep it off on the shelf. You could right Price Is 25 or 30%, to try to slow that demand, you might double prices to try to slow that demand. And maybe, let's say the lower 15% of your customer base drops off and they say, Look, I'm out, I'm not paying 200 bucks for that part. I know what I can get it for 100 somewhere else. So that's somewhere where you could intentionally use pricing to manage your demand. Make sense?
Yeah. And that last analogy there that thought came to mind, and that is quality. That is a risk. If somebody if I say, Hey, I can't manage that price. 200 is too high, I'm going to go to this place over here, because it's 150. But I me hast, I have to recognize that I'm comfortable with this quality, they do a great job, I get customer service, I do all of the other intangibles that are associated with that, I'm going over here. And there might be a lot of headaches over there and might be cheaper. But then. So that's, there's a lot of science, a lot of variables that could definitely take place. But the thing that I got out of that last conversation, and I and I lived through this is just an honest conversation. I think that that is is is brilliant to be able for me to come to you and say, Hey, I'm trying to survive. This is what's taking place. Here. Here's the paper. Here's the information. See, I'm and I want to continue to service you. But I have to add that that that that is your way of being able to say I'm gonna be honest. And then I want you to reflect that in your pricing, whatever you do, is there is there a way of being able to help them with their pricing?
So absolutely, and I think the approach Scott that, that you just referenced relative to wanting to actually show your clients, kind of your costs, if you will, one caveat, I would I would suggest around that is be careful if you set that precedent, because they will then expect to see that cost forevermore. So it's kind of like you know what, once you show it, you're never going to get away from it. So so do take that part with some caution. And the way I like to, to provide that information is just kind of a brief customer letter that goes in the window of the shop. That is is a handout with any customer that comes into the store that says hey, costs have gone up by this much. We want to work with you. If it's somebody you've done business with for 10 years and has an account with you. Maybe you agree to some special terms for them, maybe the general public is getting a 10% increase this month, maybe for them, you index that at five, and then the next month five. So for them, if it's a long term customer, you give them three months to get up to that full 20% increase we talked about rather than the two months, that standard for your other customers so that you are rewarding those customers that have always given you the largest portion of their business, we would call it percentage of wallet in the in the techno speak.
But I'm still I you know, if you came to me, and you're saying, Hey, I'm raising the price, and we're still trying to recover from this thing, that's not a good conversation to have. And it does sort of make me a little mad. Do you fall?
You know, you may be a little po but quite honestly, you're living this everywhere. So you're seeing this happen all over. You've seen this happen in the grocery store, you've seen this happen at the pumps, you've seen this happen in any services that you are using right now. So I think this is not a shock. You may not like it, but but you are seeing it especially when you're dealing with smaller businesses, private businesses that you know, don't have the deep corporate pockets to withstand. And I think that's where there's a difference, Scott, if, if it's a fortune 500 you have to to address that a little differently with a price increase than you do with a very small firm or a midsize firm. Yeah,
I think I'm more apt to consume this information. If there is a collaborative spirit, that we have a mutual desire to all of us succeed and come up with solutions that are mutually beneficial. Because especially today and in the COVID world that we live in. I find that there's a pre virus. We didn't have these type of conversations to a certain extent it was but but during the the pandemic, we've become more vulnerable, having a little bit more conversations that demonstrate the heart. And I think that that's a benefit. And because we're talking about pricing, we're talking about volume, we're talking about a lot of things that are wrapping around your business, that desire to collaborate, that desire to reveal your needs and help. And I would imagine, I would imagine, Lydia that if I came to you, and I said, have got to have a price increase, because of these reasons, all reasonable. And if if that individual says, Hey, I can't, because of these reasons, you can come up with a mutually beneficial solution for everybody. And I think that that's the, that's the beauty of what you're talking about.
That's absolutely, it's got an end half the battle, quite honestly, is asking for that increase. And I will tell you that that pre COVID, that part of the conversation was no different. Nobody likes to go to a customer and ask for a price increase. But there's a wonderful quote by Warren Buffett that I love, which is, he's basically said that any business that cannot raise their prices by 10%, and not lose customers is a terrible business. And that speaks directly Scott to what you just talked about a minute ago relative to quality, and services and, and the efficacy of the product that you're buying. And that's all, quote, value definition. And that value, and how you monetize it, how you turn that value into your end price, is critically important. And it's the single biggest mistake I see everyone making, whether it's a fortune 500, or it is a small mom and pop, people don't realize the value they bring to their customers. You know, if Scott, you you agreed up to to help me out, and I can only speak at 11 o'clock, and you agree to fit me into that time spot. That's a huge value to me. If, if you agree to deliver product or service to me on a Tuesday and a Thursday between the hours a two and four, huge value. So I would encourage the listeners to make a list of all the things that they do for their clients everything. And make sure you capture that value and your end price.
I I'll give you a real life example. So I just purchased it. And whatever the reason is, just don't get me wrong, whatever the reasons. I purchase something online, which we all do, right. And then I'm waiting for it to be delivered. We have an ice storm, we have challenges, the supply chain got hammered. And the biggest problem that I had with that it wasn't the delivery of the product because it was held up. I understand that it was the fact that the company didn't communicate. I had to try to run down information. I was in the dark, I tried to feel my way through where does it stand? What do I do, I can't get ahold of everybody. All, I think that that is a great example of the price was great. I can't speak for the volume, but the price was great. Now all of a sudden the services, and I'll pay an extra, whatever for the price to get the product and information that I want to receive. Maybe it's it's a factor of Amazon delivering so well. And you just got this high level of expectation, be that as it may, that's the standard.
Absolutely. And I'll
pay a premium, I'll pay a premium for that client service that, that that experience. And it's just me
know your, your exam. Exactly right. And, Scott, I want to circle back just for a quick second about volume, because I want to make sure that the listeners are really clear about Be very careful. When we talk about volumes. There's so many sales jokes about, you know, oh, you can't fire my very best customer. And that very best customer that does the single largest volume is losing money with every single transaction. I worked with a client where I recommended that we release the client. And that was not something they had ever done in their history, privately held company, long history. We release that client who was bringing in a million dollars of revenue, and the margin of the whole company went up 10% 10 percentage points 10 margin points. Huge. So I just want to share with our listeners Be really careful that you don't just assume just because it's it's high volume, it's good business. really analyze where you're margins coming from don't just say, Hey, you know, these top five are paying my bills? Well, maybe but but are they robbing you? At the end of the cycle? When you look into profit?
Did in that scenario? Did you have a conversation with that company and saying, Hey, we want to be we have to do the things to help us, whatever. Did you have that conversation?
We actually had several, we had two main conversations. And then we went back yet a third time, and issued a legal letter that said, we've had these conversations, you're not interested in participating? And since that's the case, we will see shipment as of this date. Wow.
Yeah, but but you went out there You did it. You talked about it, you said, and yet they, you know, I guess they they felt comfortable with with the relationship, which was not beneficial to the the individual or the company itself. So that's, that's a I can I can feel for that company, letting go that big company? Because I don't know. It just, it's it's a tough decision. But you've got to do that. Right. Okay. So let's, let's say your what you've spoken about, right? is very important, which is great. And how do I how do I start? How do I incrementally approach I've got a gazillion products, how do I how do I just take the first step? What do we do?
So the first thing I would say you do, Scott is take a look at what you are selling, which sounds so obvious, and find out where the money is? You'd be amazed how many companies can't answer that question very easily or clearly. So in other words, let's say you you sell 1000 products, where's the money coming in on those products? and get that on a list, get it down to your top 100 or your top 50? If you sell 10 products, get it down to your top two or three, but see what's selling, at least from a revenue level to start? Once you've got the revenue level, then move on to what margin Are you really making? On what you're selling? And if it's service, it's the same thing? Are you selling a specific one service that makes your list pretty short? But you look at how much revenue are you bringing in on that service? against what your costs are? So how much is your profit? Yeah. And then you start to what I would call work backwards, because so often, we look only at the top of the list and not at the bottom. But the bottom can also be where there's a lot of problems. So but start at the top so that you know where your cash flows coming from. Yep. Then look at the bottom and say, wait a minute, why are all of these these parts in the negative? Why is all of this that I'm selling, not generating profit or generating very poor profit? Maybe I'll stop carrying it. Or maybe I need to make a dramatic increase to price to adjust that. And that's where we get right back into that whole fear of increasing prices. Yeah. And I'm not saying that a company should go out and just, somebody starts on a Monday morning and says, raise this and raise that and raise No, no, that goes right back to the strategy where we started our conversation. Yeah, you've got to have an intention. So look at the top with the bottom of that list. That's the first place. really understand what you are bringing to your customers, what are you helping them with? What is the value that you're delivering? What made me what matters to you? Doesn't matter to your customers? Maybe the fact that that you deliver to me on Tuesday and Thursday, I appreciate it. But really, I don't care if you want to deliver it Monday morning. But if we're not having that conversation, how do I know? So the way you know, as you say, Lydia, if I'm going to keep delivering for you on Tuesday and Thursday, between two and four. I gotta add 10% to your price. That's peak. Peak rush hour traffic's coming back again, I can't have my truck sitting out there, you know, happy to serve you. But this is the new cost new price.
Alright, listeners, what we have there is Look at, look at what you're selling. Now. There's also products and services. Look at the margins that each one of those, you might have to pare it down. You know, it's funny how companies will hold on certain products, just because it got us started whatever that legacy thinking is, I don't know what it is. But then when you start to pull the data out, and you start to analyze it, then you realize like you You guys might want to consider the markets moved on and you're still trying to sell whatever that is. Look at that margin. work backwards, right? work backwards. And then I think the real gem in this particular conversation because of where we at, because we can have this vulnerable conversation, what problems are you solving for your customer? Is it really doing it, and then if it is solving a problem, then you can have a better conversation saying, I'd love to be able to deliver on this time. But here's the challenge, we're gonna have to do XYZ, is that important to you. And it might not be important, it might have just, it might have fallen into that. And now you can start to really pursue and hone that pricing strategy in a way that really makes sense. But what you guys do is that you're able to pull in that data and you're looking at that you're not just sort of sitting there, thumb up foam, you know, taking swags out if you're looking at it from a very, you know, reasonable one.
it's got a limit, and we got to wrap it up, because we've already talked way too long there, Livio, you're that engaging you out there on LinkedIn. I am. Alright, listeners, you're gonna have that link. So don't come to me and say I can't get ahold of Lydia because that's a lie. Industrial talk.com is where it's going to be located, as well as her website, as well as any other contact information that I can possibly jam on her. Her landing page for the podcast, it'll all be out there. So no excuse you need to get your pricing together, guys. out there, listeners. Get it together. There's ways of doing it. Lydia has the answers. Reach out to her. Lydia, thank you very much for joining the industrial talk podcast.
Thanks so much, Scott. It was a pleasure.
Pretty cool. I geek out on this stuff. Alright, listeners, we're gonna wrap it up on the other side, do not go away. You're gonna get all the information that you need about Lydia. Alright. So stay tuned. You're listening to the industrial talk Podcast Network.
All right. I want you to reach out to Lydia go out to her stack card, LinkedIn. It's it's a great struck card. And she is of course the CEO and founder of capital pricing consultants. As you can tell, she knows her stuff. And he she spells her last name. Well, you could spell Lydia, that's fine. DiLiello. That's di l i e. l l o o reach out to that you will not have to be disappointed again. I'm going to plant that seed for industrial talk 2.0. The reason we're going to do that is because I think that if I'm preaching the necessity to educate, collaborate and innovate, and try to find people who want to do that, then I know that you want to do that. And that's what it's going to take for us to survive, rebuild and prosper is one of those people. All right. Let's be bold. Let's be brave. Let's hear Cory. Let's reach out to people who are bold, brave and daring greatly, like Lydia. Make it happen. All right, thank you very much. Be safe, and we're going to come back with a great interview shortly.