Are Your Costs Going Up? Who Cares?

Source: VeraSage Institute

The following has been excerpted, with permission, from the VeraSage Institute blog.

Ed Kless - 04/20/2009

Kodak in a recent open letter to their customers announced changes to their terms of service for their Kodak Gallery on-line service. It has been hailed in the Twitterverse as an example of how to communicate change to customers.

While I admire Kodak for their openness, I have sharp criticism for the core message. Essentially, they are saying that they must raise their prices to offset costs. Who cares? Certainly not their customers, nor should they. It is not the responsibility of customers to cover a seller’s costs. Should consumers pay more for General Motors cars just because they have a higher cost structure than Toyota?

Kodak should instead focus on the value they are creating through the service and create a pricing model that attempts to capture this value. I believe the moment a company pays more attention to cost structure and maintaining profitability rather than focusing on value creation is the moment that it begins to die.

The billable hour is about cost recovery not about creating value for customers. Please take heed professional firms. You are dying, you just don’t know it.

To read the complete posting, click here.

From VeraSage Institute, http://www.verasage.com/index.php/community/.