"The Four Ps": Part 4 - Price

Question: How should we approach the pricing of our services in the context of marketing? Specifically, what are the necessary and available tools for us to demonstrate the cost for our services to the citizens and municipalities who pay for the...


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Question:

Answer: Most fire and emergency service leaders will agree that a clear picture of the cost of our services is one of the most important factors to understand and to communicate to the public. How these costs are determined and the manner in which they are shown to the public and their administrative servants will determine whether we will continue to receive the kind of funding we need to deliver the service, and at the quality levels we believe our jurisdiction requires.

There are many ways to approach the subject. The main point to remember is that our cost must reflect a significant value to the public. The picture each of us must be prepared to show is the true meaning of that value. More times than not, that equation is not mathematical but perceptive. You simply cannot put a price on emotion.

Over the past few months, we have been exploring ?Marketing 101: The Basics.? We have examined place, product/service and promotion. This month, we analyze what most fire service leaders agree is one of the thorniest, yet one of the most important of the four Ps to understand: Price.

In essence, the aspect of cost for services becomes the basis for marketing the effectiveness of any department to its various customer groups. Marketing effectiveness in this sense means knowing what is necessary to get the job done at the specified quality. This is always a matter of balance. As we have noted many times, public service marketing is not private enterprise marketing. Our job is to provide the exact amount of service necessary for the cost. Too little may put our public at an unacceptable level of risk. Too much leaves us open to ridicule.

What reason would a fire department have for spending more than is necessary to fulfill its mission? Why is the cost issue so important? It is important because if we can proactively demonstrate the value of our service to the public and its administrative professionals, we will be able to continue to perform that service. That last sentence says it all for each of us.

There is a line in the movie, Backdraft: ?The funny thing about firemen, day and night they are always firemen.? Most of us don?t just like what we do, we love what we do and we really don?t want to do much else, except be with our family and friends. For many of us fire protection is as much a hobby as it is a profession. I am not sure why this is. Sometimes, we believe it is part of our DNA. We just wouldn?t think of doing anything else.

What does this observation have to do with a discussion of price in a marketing column? Quite a bit. If each of us cannot show in two to three sentences or in a simple chart the value of our service, we may not be able to continue to do what we love so much. The corporate and public landscape is littered with the rusting hulks of services and businesses that did not know how to demonstrate their value. I would add to this that they also did not keep up with the public?s or their own concept of value. We will discuss the notion of value a bit later.

Here?s an interesting example of what I mean and how fast things change. Video stores are a fairly recent service. They have expanded to include DVDs and interactive games. Within the past three months, however, anyone who has cable TV as been able to access recent movies any time and for less money than at a video store, with no time or travel constraints. The market is a moving target.

The Cost of Services

First, it is necessary to understand the true costs of our services. You cannot explain something well in a ?bulletproof? manner if you do not understand it. So, what are the various elements of cost? Our operating and capital budgets are the main elements of our costs. A budget is nothing more than a detailed plan ? a roadmap ? matching resources to projected expenditures with specific allocations to programs. These costs are always susceptible to encroachments by competitive departments as well as the public?s (or the elected officials?) understanding of the necessity of these costs. Public officials must make tough decisions. It is our fiduciary responsibility to make sure they are well informed about our costs and how and why they are necessary. That is an ongoing marketing issue. You might call it marketing the budget.

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