Capital Pricing Consultants: Lydia Di Liello

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Lydia Di Liello, CEO & Founder of Capital Pricing Consultants, shares how and why she started a company to help manufacturers properly price their products.

 

 

Danny:

Hey, so, let’s jump in today’s episode. I have Lydia Di Liello, who is the CEO and founder of Capital Pricing Consultants. Lydia, thank you so much for joining me today on IndustrialSage.

Lydia:

Thanks for having me Danny. I’m looking forward to the conversation.

Danny:

I’m looking forward to it as well. So, for those who aren’t familiar with you and Capital Pricing Consultants, can you just give us a little bit of a high level overview of who you are and what you do?

Lydia:

All right. So, as you said, Lydia Di Liello, I have owned Capital Pricing Consultants for the last five years. I have been in the revenue management and pricing sector for the last 25 years. So, I spent my time as an executive for most of that time, working in the space and then decided to go out on my own to really help other companies relative to the size of pricing and making money on sustaining profit.

Danny:

So, it’s interesting. So, the science of pricing is– Well, there’s obviously a whole psychology and, as you mentioned, science. It’s very interesting. So, I’m excited to kind of dive into that in a little bit, but before we get into that, I’d like to know a little bit more about you, about your story, your journey. So, you said you started the business, but take me back. How did you get into this space? What did that first job look like? Tell me those details. I want to hear some stories.

Lydia:

So, my story’s a little odd, Danny, in that I had graduated with my MBA, just coming out of school. So, I’m from the North East, Cleveland area, and General Motors, 25 years ago, was a huge employer. They actually had a lottery. In our town, if you worked for General Motors, you got a lottery ticket, and if you were chosen, you could appoint anyone you wanted who could pass the drug screening and the interview to come and work for General Motors. My brother-in-law hit the lottery, as they say.

So, I went in, but the caveat was you had to work on the line second shift. I’m not much of a second shift kind of girl, but I survived it. Worked nine months actually on the line making harnesses for General Motors, and it was a wonderful learning experience. But, after nine months, I was able to post for any jobs that were in the office. So, I posted for absolutely everything in sight because I wanted off second shifts. Going to work at three and finishing at one in the morning, just not really my style. So, by chance, I started working in competitive intelligence in the GM offices. At that point, we were part of Packard Electric, one of their divisions. We really from that point, my career grew within General Motors up through the Head of Pricing for that division for Packard Electric, and then after 11 years and we actually wrote software as part of the role. I was with them for 10 years.

I often joke that if I had only trademarked that software then, I’d be on a little island somewhere now, because a lot of the concepts that another pricing person and myself wrote are being used today, relative to conceptually what was important and how to manage prices. So, that was successful. From there, I spent one year on the dark side relative to– I went into supply chain management. So, I always joke with pricing people, I went to the dark side, and with the supply chain people, I tell them, I spent 10 years on the other dark side, but it’s a lot of fun because you see both sides of the table, right? You learn what each group needs and wants.

Danny:

Absolutely.

Lydia:

From there then, I was quartered away to create a pricing department ground up for a custom plastics company. Spent nine years there at the executive level and then transitioned out and decided to go out on my own. So, kind of an unusual start to what’s been a wonderful career and a really interesting career opportunity.

Danny:

That’s super interesting about the very beginning with the lottery piece and coming in and doing that. So, throughout your career, is there somebody that stands out as far as who really helped you out in that journey or a key milestone moment or moments? What jumps out to you?

Lydia:

So, the person that probably helped me the most was one of my first bosses. She was excellent about always telling me, when you look at data, don’t just believe the data, does this make logical sense to you? She would always talk about gut checking. So, I would say she was very foundational, because today, so much of what we do is data driven. But, I think in some sections we have forgotten Danny how to gut check, how to look at– is this logical based on everything else we know about this data? How does this make sense in reference to our business? So, that’s a skill that she taught me early on that I’m grateful for. Her name is Kim. We still are friends today. To this day, if I run into something data related that just doesn’t make sense to me, I’ll call her and say, this isn’t lining up, the data says X, I believe Y, where’s my disconnect? I try to share that with my clients and really help them through those challenges because our world revolves on data now.

Danny:

Yeah. Sorry, yeah, keep going. This is great.

Lydia:

And then, I would say that the other pivotal moment for me was certainly moving into procurement. Being in professional procurement for a year was absolutely pivotal for my career and for my learning experiences, understanding what that other side looked like and how procurement thought and what they needed and why they acted the way that they did. It was a turning point in my career because then, I began to be able to teach negotiation to those in my organization. I took our executives at that time at the plastics company through training as well, and was the lead negotiator with all of our key customers. So, I found myself having multiple jobs as a result of that, but I really enjoy it.

Danny:

That’s awesome. Well, now that I think, there’s definitely something in the whole gut checking piece with the data and I think that’s awesome. That’s a great story. You said that was one of your earlier bosses on there. I think it’s so true, especially now. You mentioned, we are so data driven, you talk about it or we hear about it all the time. We’re talking about all this digital transformation, big data, cloud. The fact that manufacturing in the industrial space is the largest data prolific industry. Because there’s so many things and you can measure everything, but it’s interesting. It’s like a pendulum, I guess. You’re like, “Okay, maybe things weren’t measured and we weren’t looking at stuff before.” Now, everything can be measured and you can just go like way over here. So, I think to your point, anchoring that– logically, does this make sense? I mean, yeah, sure, the numbers may tell us something else and it may be the truth. Okay, let’s go discover that. Let’s go probe into it a little bit deeper. But, I think it’s fascinating.

Lydia:

I think it also speaks, Danny, to the… So many companies are afraid that they’re not measuring enough, so they measure everything. But, the everything is then completely useless because they’re paralyzed by trying to analyze everything that’s going on, instead of saying, what helps me run my business? What information would allow me to make better decisions more quickly? Be more market sensitive, more market effective? Instead of just broad brushing, let me have 10 pieces of paper full of reports, none of which do I look at or understand. I find that consistently with all of my clients, whether they’re Fortune 500 or mom and pop, they’re not getting the information they need, but they’re getting reams of data.

Danny:

No lack of data. That makes a lot of sense. I’m guilty as charged as well for that. It’s exciting and it’s fun, but yeah, you can get easily overwhelmed and inundated, and then you’re like, “What is all of this?” We’re collecting the data, but, okay, what are you doing with it and what is it telling me? We need key information. So, I really like that. And the whole procurement piece obviously, being able to see on the other side the whole… So, you’re the key negotiator there, I think that’s pretty cool. So, as far as now. So, let’s say you had maybe the traditional, maybe not traditional career course, I’ll still call it traditional, but you made a decision at a certain point to go out and say, “Hey, listen, I want to start this organization, I want to start Capital Pricing Consultants.” Tell me, what were those moments when you maybe had that first thought in your head to, “I’m actually doing it?”

Lydia:

So, I had a boss when I worked at the plastics company. The owner, Bernie, was very influential in my decision. He had founded Automated Packaging Systems and as an owner, he would often come to me and talk about the profitability and where we needed to be and how we looked according to goals, etc. So, we would have these very deep conversations relative to what makes a business work and why. I remember him saying to me one day, “Yeah, you’re going to own your own business.” I said, “Na, I don’t think I want all this, Bernie. I see you walking the halls all the time and you’re, on a daily basis, ‘Where are we at with the numbers? Where are we at with the numbers?’ I thought, I don’t know that I really want to be there.”

And then, the more I was exposed to how a business evolves and the kinds of decisions that we were making, that was allowing the company to grow so quickly and profitably, and then seeing other companies that were just getting it all wrong, I really started to have a desire to go out and say, there’s a way to do this, and there’s a way to focus on pricing, which so many people do as an afterthought. They design the products, they worry about the market, they take care of absolutely everything, Danny, and then they go out into the market, and they say, “Oh wait, yeah, we’ve got to put a price on this thing.”

Danny:

Yeah.

Lydia:

Well, to me, that’s completely backwards. We need to be starting with pricing from day one, to say, what’s the market willing to pay for this? I don’t know if you remember the rocks? The pet rocks from 30 years ago, right? People were paying three bucks for a rock with a smile on it, right? So, those people clearly understood pricing very, very well. So, that was really pivotal when Bernie said to me, “You’re going to own your own business.” I thought, I don’t know about this and it wasn’t six months later that I was really seriously thinking about how could I do this and what would my next steps be?

Danny:

That’s awesome. So you decide now, “Okay, I’m doing this,” and you make that jump. What was that first day? What was that first day like?

Lydia:

I was a little stunned. Because, you get out and you think, “Okay, I’m out, now what? How do I reach out to potential clients? How do I talk to my target markets? How do I get my message across in a meaningful way?” So, that first day was a little nerve-racking and there were a lot of days after that of you do a lot of prep work. I’m sure it’s the same for you Danny, all of the behind the scenes that has to be done, for them, the same in front of the camera, it’s the same thing with consulting, the same thing starting a business. You spend hours and hours and hours that nobody sees for the 30 minutes that you spend finally when you get a chance to get in front of a client.

Danny:

Exactly, yeah.

Lydia:

So, there was a lot of nervous energy I’ll say around it starting.

Danny:

That’s all part of it. It’s all part of the journey and I think it’s exciting and what you explain is something that I hear constantly and can obviously identify myself with. But, also, there’s that little bit of trepidation, little bit of fear, little bit of anxiety, but there’s also a lot of excitement and there’s a lot of passion and there’s a lot of exploration and discovery which is really exciting.

Lydia:

That’s a perfect way to put it. Absolutely.

Danny:

So, all right, well, let’s move on a little bit now. So, you talked about, one of the reasons why you decided to start the company. So, you saw a lot of challenges and you started building this desire to be able to help these companies and say, listen, I think some of the things we’re doing here are a little bit wrong. Relative to some of the challenges that you’re seeing in the industry right now, I imagine that some of those may be the same, I know there’s new challenges on the horizon. What are you seeing? What are some of those top challenges right now?

Lydia:

So, the first is, I would say that for long established companies, in the industrial and manufacturing sectors, we have a little bit of a historical challenge, relative to– It’s that everything old is new again. So, all of these old, and we’re back to data again, data systems, these old ERP systems, nobody wants to touch them, because they cost– they’re a huge investment to address. Once you start to undo them, you don’t know what’s going to fall apart and I think that that’s a legitimate concern of every business owner. It’s sort of like, “We’ve got duct tape and super glue on it, leave it alone please, let me get another year out of it!” Right?

So, I see that the data systems that are being utilized are archaic, they desperately need changed out. I am not a proponent of saying, just put software, that’ll fix everything. That is not my motto. However, if you fix the strategy, and I would say that’s the second thing. So, the first problem is, is archaic systems to manage your data. Well, I’ve heard it 100 times. “We can’t run that report.” “Well, why not?” “Well, because this data sits in this system, and this data sits in that system,” and nobody wants to spend the million plus to pull it all together. Which is legitimate. But, there have to be better ways to get your data to run your business.

The second thing I see is, businesses have forgotten about hierarchical strategy about doing an overall strategy that says, what’s my business goals for this year? What are my business goals five years out? And then, how do we work those down into our functional departments? So, the first thing I do with pricing is to look and just say, what’s your corporate strategy? Whether you’re a mom and pop or you’re a Fortune 50. And then, how does that corporate strategy trickle down to each department? When you interview each cross functional department, Danny, what you find out is, they all interpret that strategy differently. So, you’ve got this going on from the very beginning and I would say that continues to be a challenge for companies regardless of size. Those are the two most critical challenges that I see.

Danny:

Yeah, that makes a lot of sense. I totally understand the whole data piece. Yeah, these are systems that have been built on top of being built, on top of being built, on top of being built, so yeah, the whole duct tape and super glue, perfect analogy and it’s great. Yeah, you don’t know. You just start pulling one piece and what’s going to happen is, does the bottom fall out or what? Totally get that. And then, the whole strategy piece, I love the… Well, you were talking about, you had talked to different leaders or different departmental managers and yeah, you start getting the, “Well, this is, we’re doing this,” or, “No, we’re actually doing that.” So, that’s a huge issue as far as where’s the ship going.

Lydia:

Exactly.

Danny:

As far as the industry as a whole, what other areas relative to… I guess, let’s get into the pricing piece a little bit. You mentioned earlier on is that, do you think that pricing should be, at the beginning versus the end? When you go to a lot of product development, one of the obviously big pitfalls is that… It’s the thing we talked about with data, is that, just because you can do it, doesn’t necessarily mean you should. There’s a huge tendency to be like, “This is super cool, we can make this product or this widget and it’s amazing,” but is there a market for it? You’re suggesting we start with price. Walk me through that.

Lydia:

So, the first approach I take with clients is to say, have you done any market studies? Have you done any voice of the customer? When you’ve gone to the customer and you said, “Here’s what we’re thinking about doing,” what kind of responses are you getting back? Have you included conversations relative to, “So what would you pay for this? So, I’ve got this great widget, I’ve got this idea, we think it will help you in the following ways.” And then when you get to the discussion about the price, if the customer tells you, “Yeah, I don’t want to pay any more than I’m paying today,” and you know that your cost, your approximate cost to develop it is two times what they’re paying today, then you’re done really before you start. Now, I fully expect that there aren’t any customers in the world who can’t wait to tell you, Danny, that they want to pay more. I’m one of them. If you ask me what the price is, I’m notorious for telling you it’s too high.

Danny:

Well, you’re a negotiator, so that’s part and parcel.

Lydia:

Exactly. So, I always take that 20% to 25% what I call fake or fudge factor in there. But again, when you’re looking at development costs that are two or three times, you know going in that that’s not going to be a viable business model. So, really, I make it sound very, very simplistic, but honestly, getting down to those three pieces of information, what does your customer want? What value are you bringing with this device to them? Because it may be a value they don’t yet know they need or want, but you have to define the value. If you can’t define it, then we can’t expect the market to accept it. I see products fail constantly because they met the needs and the passion of the developers. There’s some great minds out there that can make all kinds of things. The challenge is the marketplace may not care, and certainly may not be willing to pay for it.

Danny:

Right. Absolutely. No, that makes all the sense in the world. You’ve got my wheels turning. It’s very good. Let’s talk about a little bit with that, kind of moving forward with industry challenges in that space. We were talking a little bit before we started rolling, a little bit about the impact of the tariffs. Obviously, that’s making big headlines, obviously major impacts to the business. Actually, we were talking about, “Hey, we’ve got to be careful how we approach this because maybe this episode that we’re going to release later, we want to make sure it’s timely,” and you said, “No, that’s a very big misconception.” Let’s talk about that. You identified a big challenge that you said a lot of manufacturers… maybe they’re misunderstanding.

Lydia:

So, the biggest pitfall that I see, Danny, is last year, so many of my clients, when the tariffs first came out, they said, “Well, we don’t think this is going to last. This is all political and it’s going to be some back and forth and we’re just going to wait it out.” That is the biggest misconception and the biggest mistake anyone can possibly make. While we’re waiting around, our companies are bleeding cash. Everyone of my clients that waited and said, we’ll take price later, lost all that profitability that they could’ve had in Q1 and Q2, all through last year and it makes it harder to catch up the longer you wait.

If you go back to the market immediately and you say- and you communicate clearly with the tariffs- “You’ve seen the headlines, this is how it impacts us as a business, here’s the percentage we are going to transparently pass onto you…” because I am not a proponent of trying to capitalize on the tariffs and make additional profit. I don’t think that’s realistic in this climate and given the amount of the tariffs. So, my council has been to my clients, pass it through transparently, let your customer base see what that impact has been to your business. So, if you’re paying 30% increase, let your customers know and pass it straight through.

Now, supposedly, we’re supposed to see 75 billion dollars in goods from China being repealed. But, the supposed is that China spends 200 billion with the US in the next two years as well as a caveat about how much they spend in agricultural products. So, I think this is going to be an ongoing story with bits and pieces along this roadmap, but I don’t see it Danny, as coming to a close, and in the meantime, while all of this conversation is going on, people are still losing money, because they haven’t gone back and said, “I need to adjust for this.” Many of the companies that I’ve seen have lost seven margin points. Not percent, but margin points.

Danny:

Wow.

Lydia:

You can’t do that very long before you close the doors. So, I am really passionate about getting out in front of these tariffs and educating clients and the marketplace as well.

Danny:

Yeah, absolutely. I mean, that makes a lot of sense. Obviously there’s a huge level of uncertainty still out there. I mean, you’ve got a lot of– you throw politics in there. I mean, there’s a big cloud of unknown out there, which certainly, more than certainly are playing into it. To your point, yeah, the game is not over. You’ve got to make those adjustments. You’ve got to make those adjustments. Man, you’re talking about a seven point impact on margin. That’s huge. So, as far as your organization, how are you helping your clients? I know you’re kind of sharing this now with some of your council, but as far as staying ahead of the curve and helping your clients stay ahead of the curve and really make these adjustments, how are you guys doing that?

Lydia:

So, the first one really is kind of going back to what we talked about earlier on which is looking at overall strategy. What is their strategic plan relative to dealing with the tariffs? So that it is proactive rather than reactive. We know this is going to be a business condition going forward. To what degree it impacts us, we don’t know. One thing’s for sure, Danny, nobody ever complained about making too much profit. So, if we plan that this is going to last through all of 2020, and if there’s a company we plan the impacts to our organization is going to be, let’s say 15.8%, if it turns out that part of that gets repealed half way through the year, and as a result, we make another 3% or 4% in margin, all the better, right? We’re on the right side of the equation.

So, I really start with a strategy, because it’s a very different way of looking at it. Most clients and most business people, it’s knee jerk, it’s reactive. “What am I going to do about this? How do I fix this?” Well, it’s not one action, it’s a plan and it’s time-consuming, which I think is a big challenge for all of our manufacturing and industrial businesses. Whether you’re independent or whether you’re publicly traded, the commitment of time that this takes is significant. So, it’s really strategy, a commitment to time and an understanding that that’s part of this. Right? You can’t just make a decision, all right I’m done, make this go away, it’s a pain in the neck. We’d all like to, but that’s not reality. That’s not going to preserve or increase profitability.

Danny:

That makes a lot of sense. I think it’s precisely why it is a problem, as you mentioned, is the time piece. The strategy takes time, especially in today’s climate where it’s, we’ve got to get things– the climate has not changed I don’t think in decades and decades, but better faster, cheaper, right? We’ve got to go, we’ve got to get things out there and efficiency. So, this whole strategy thing, uh, we’ve got to focus on getting these widgets out better so it’s really focusing on that short term piece, looking down like this, versus saying, we need to stop and look up and look out and say, “Oh, there’s an army approaching us, we should probably do something.” Or we’re driving the boat: “There’s the rocks, we need to move this way.”

Lydia:

It’s very tactical. That’s a great analogy. Everybody’s so busy looking down at the next tactical step to take. They’re missing the thing that’s going to cause them tremendous impact negatively, that’s two months out kind of thing.

Danny:

Yep, exactly. Well, Lydia, I’ve really enjoyed our conversation. It’s been really interesting. I really, really enjoyed hearing your story, how you started. I have several different takeaways from this. But, for those who would like to learn more about you, have some questions, what’s the best way of reaching you?

Lydia:

So, they can reach me either through my email, which is [email protected]alpricingconsultants.com. They can also reach me through my mobile, which is 330-283-5273.

Danny:

All right, Lydia, thank you so much. I appreciate it.

Lydia:

Thank you Danny.

Danny:

All right. All right. Another great episode here at IndustrialSage. I really enjoyed it. I think just some really great stories from Lydia. I always love hearing how entrepreneurs, the stories on how they get started and I think there’s several takeaways. One of them that I had was, there’s so much data, there’s so much going on, there’s so much that we can measure and just because we can’t measure, doesn’t necessarily mean that we should and then you can get super inundated or generate a report and you look at the numbers and you say, “Wow, I had no idea this was right.” But, in your gut, you kind of feel like, “Yeah.” You need to do that gut check. I think that is awesome. I love that and I’ve definitely personally experienced that. That’s a great takeaway.

Another piece is, Lydia was talking about some really big challenges in terms of having your data accessible, making sure that you are looking to put in those proper investments, which maybe if you backup and write that into part of your strategy, which is a big challenge, of not spending that time and sitting down and coming up with a strategy and forward thinking, because the reality of it is, the way that businesses is changing, you need to have these systems in place so you can run those reports and you can see what’s going on and you have to have a strategy to be able to look at things, so you can address things like the tariffs and other challenges that are coming up down the road. So, anyways, I really, really loved the story. Hopefully there’s a couple of things that you took away from it. Certainly, if you have questions, check out Capital Pricing Consultants. We’ll have their contact information in the show notes below.

Thank you so much for watching or listening. We’d love a review. If you’re checking this out on Facebook, or LinkedIn or if you’re listening on any of the podcasting stations, if you’re not on our email list, we can send you all this content on a weekly basis and then some. Go to IndustrialSage.com and we can send you these emails with all this great information on a weekly basis. That’s all I’ve got for you today. Thank you so much for watching. I’ll be back next week with another episode of IndustrialSage.

 

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