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 service?
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.
The Price of Services
It is very important to understand the price of the service. In the case of public services, there is no profit. This means there are no additional dollars above the actual cost of the services.
Since there is no profit, there is no mark-up. The mark-up is the additional profit over the cost of a service. Basically, it is tax dollars in and services out. One might expect, then, that cost and price are the same.
Value of Services
Third, and the essence of the entire discussion, is the value of the service. This one is so important that there should be a course on the subject. Value is based on many factors of which cost is only one. Value will depend on the perception of many groups. A family rescued from a house fire has a different perception of value than someone who has never needed our services. Yet a citizen who knows us and what we do will have a better and more emphatic understanding of our services than one who doesn?t.
The area that the fire and emergency services must concentrate on is the gap between the cost of services, the changing needs of the public and the public perception of the value (again, a constantly changing variable). This is the fulcrum around which marketing public services revolves. ?What am I receiving for what I am paying?? It sounds simple enough ? just show Ms. Smith a menu of our services and hope that the sheer number demonstrates our value.
If you believe in the school of ?one size fits all,? that?s fine, but it does not play too well in today?s environment. The difficulty arises when informed and inquisitive voters begin to pick apart our services based on amount of use versus cost. If we do not proactively engage in painting a correct picture of our real value, we risk somebody else doing it who may have another agenda.
We might compare inquisitive and informed voters to stockholders with a very serious interest in a public company. And, in this instance, they would be right on target. Public services are just that: public.
We saw an interesting display of this interest when thousands of stockholders from the Walt Disney Company descended on Philadelphia to make their voices known to the board of directors. Expect more of this in the future and expect it in the public service domain.
The Quality/Value Equation
How do we approach this issue of price/value with all of these considerations in mind? And how do we demonstrate key factors that have real meaning and value to the public or administrators so that they understand and gladly pay for the services we are providing?
Value is in the eye of the beholder, so for us, the entire market must be taken into consideration. There is one other factor to consider and that is quality, another elusive factor to corner. What is the quality of fire and emergency services as the public perceives them? Now, what is the perception of that quality considering the costs for them out of the public?s hard-earned money? These are questions which do not have easy answers. Perhaps we now begin to see why marketing is becoming so important to public services.
Simply stated, quality is proportional to expectation. It is up to the marketing mechanism ? what we say about what we do ? to set that expectation. Value occurs when the service delivery package (the actual service and the way in which it is delivered) is perceived as being better than expectation: V= SR/E (Value=Service Results/Expectations). Another way of stating this is that the perceived quality of service is greater than the cost of the service: V=Q/C (Value=Quality/Cost).
The key point to remember is that we set the expectation and we deliver the result. In other words, the fire department manages the expectation, the actual service and the citizen?s perception of the result. Our future is in how we manage our business according to the price we are asking for the service.
The final issue to consider about cost is comparison ? to give the citizens a way of measuring their cost against service. How does our fire and emergency service compare to other communities our size? Perhaps it should be measured on a per-person basis or on a property-value basis. This raises the notion of a standard.
Standards of Evaluation
Some years ago, with a goal toward providing a framework for setting a standard measuring the quality of services, fire service leaders created the Commission on Accreditation for Fire International. The mission of CAFI is to highlight the numerous parameters of measurement that are generally accepted as elements of a high quality standard for fire services, somewhat like the Baldrige award for excellence developed for private industry years ago.
Over the past 10 years, CFAI has been quite successful in accrediting many departments from across the country. The accreditation process is not easy and requires a significant investment of time and work to achieve this standard. It is not an easy journey. Those departments that have completed the process successfully observe that it is worth the effort.
CFAI is an important organization for the fire service. The challenge, however, is that very, very few of our citizens or administrators are aware of its existence. CFAI can be a critical factor in assisting any department defines a standard for quality that can demonstrate that great value any fire department is for its community. While many CFAI measurements are technical and beyond the grasp of the administrator or citizen, there needs to be a short, standard ?report card? that the public can understand so our value can be seen for itself. Since we are a public service, our customers should understand the quality-value equation, especially when fire and EMS services relate to how their money is being spent. Furthermore, it is in the best interest of our future that we lead the way in telling them before they ask.
The issue of price raises more questions than it answers. For now, let?s just say that at its best it should provide a balanced scorecard for our citizens to understand in clear terms the costs to deliver our services. It is our challenge to make it just as clear that this cost creates the high value we deliver in quality fire and emergency services to each member and institution in the community every day and night, every year.
Ben May will present ?Marketing the Effectiveness of Your Department Through Measurements the Public Understands,? ?Customer Service That Makes Fire Service Marketing Effective? and ?Bridging the Gap in International Fire Protection? at Firehouse Expo 2004 in Baltimore, July 13-18.
Ben May has over 15 years of experience creating and applying the discipline of marketing management to fire departments and emergency service organizations. He has been a firefighter and fire commissioner, and is a graduate of the Montgomery County, MD, Public Service Training Academy. May has over 25 years of experience in business-to-business marketing and sales in the U.S. and internationally. Currently, his responsibilities include developing new business at Walt Disney World?s Epcot. May was fire commissioner in Woodinville, WA, from 1994 to 1998. He graduated Phi Beta Kappa from the University of Oklahoma with a bachelor of arts degree in public affairs and received his master of arts degree in international communication from the American University. May is a member of the Society of Executive Fire Officers, a trustee of the Education Foundation of the Florida Fire Chiefs Association and a board member of the Tampa Firefighter?s Museum. He welcomes your feedback on the column and he may be contacted at [email protected].
