Episode #0099 - What to be aware of with surcharging
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This is the last episode before the Easter school holidays in Australia. So, pricing college is not out for the summer. It's not out. We continue with our podcasts as we know how vitally important it is for you to get your pricing info. In today's episode, we want to cover the press recently, and anybody involved in B2B and B2C will be looking at surcharges, fuel surcharges, and different surcharges. Basically, covering and trying to protect people from the rampant inflation that we're seeing. Particularly petrol, fuel, electricity, all these aspects, with inflation hitting probably 7% to 10% in different countries. But I think in today's episode we want to discuss why it's not always a win-win with the surcharges. It's not always a one-way street. There are certain things you need to be aware of. I've been saying this in terms of what Aidan was talking about. In terms of fuel, fuel fluctuates and businesses have to accommodate a lot of those costs now. To a large extent, for many years, they've just let them absorb those costs. But now it's become untenable with inflation to do that. So what's happening now is that businesses are pushing those costs down the value chain. Whether it's with B2B customers, or if it's B2C customers. In terms of fuel costs, that's quite significant for both. I suppose both of those sectors are But essentially, it's looking at an itemising price. So you've got a unit price, keeping that fairly steady. But then they add a surcharge on top of that price to accommodate that fluctuating cost, whether it's in fuel. Now, I think the bit about surcharging and pricing like that is that it really is an open book, sort of cost. You're really explaining to your customers and itemising your costs at a line item. You think you're sort of being smart by not really moving the price, unit price. But really, what you're doing is exposing yourself and really showing what margin you can make. Potentially, this could lead to a sort of more cherry-picking line item discussion or base back costs. And for me, it's a dangerous road to go down. Because then what you're discussing is your costs as opposed to the value you generate for your customers. I think we completely understand why companies are adding surcharges. Why are they increasing prices? The first time I think I remember seeing this was on airline tickets a number of years ago, with the fuel charges, etc. But I think the point we want to hammer home is that it almost sounds like an easy way to push through price increases. We realise that you have to do it. But it's not really value-based pricing; you're distilling it down to cost-plus pricing. And with that, you're almost exaggerating the negative impacts. The example I'll give with this is when you focus on a cost and your portion of a bucket, and that bucket is one of the temporary fuel costs higher prices. There were a lot of issues, so the examples I’ll give now are in Australia. I think the Ukrainian war kicked off in late February. Oil prices went through the roof. They've almost doubled in a month and a half or whatever it is. And then we got a lot of letters, or you heard about a lot of letters people were receiving saying fuel charges would be implemented. I think some of these letters are placed on Mondays. Then, on Wednesday night, the Prime Minister appeared on TV, saying we're going to cut fuel tax by 20 cents. And already you're seeing petrol prices drop. I think they're down now in Sydney from $2.20 to $1.75. I saw yesterday that it was like 0.40 or 0.50 cents, a very significant decrease. If you're invoicing customers on a monthly basis in arrears, for example, which many B2B businesses do, How can you then justify that fuel surcharge? Are you going to implement it only for the first two weeks of the year or for the month first, and then for the second two months or two weeks, reduce it? And what happens if, fingers crossed, this terrible war in Ukraine gets wrapped up quickly and ends w
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