Pricing

Normalizing Metrics for a Vacation

By Daniel Bormolini
July 8, 2011

I was booking a vacation the other day and trying to compare the price and benefits of each. The choices were completely different: Do I go spend a long weekend in Napa Valley relaxing and enjoying wine, or do I fly to Berlin for the Berlin Marathon—two completely different vacations during the same weekend.

PinMap_ThumbnailI was trying to make the decision in the middle of working on my webinar content for normalizing price, so I thought ‘Why don’t I try to normalize the cost and benefits of each of the vacations.’ The question then became ‘What was the right normalizing metric?’ Should it be price per hour? While neither would be cheap, Napa held an edge here. Cheaper flights, cheaper hotels and cheaper food (albeit only marginally), and no Euro conversion all weighed in its favor. Or should it be weight change per day? Berlin would be the clear winner there in spite of a few Hefeweizen and Currywurst. Then I thought about enjoyment percent. For me, that would have resulted in a tie.

When normalizing anything, the key is choosing the metric or metrics you’re trying to maximize. For some businesses it might be asset contribution per hour, for others it might be profit by deal size, net present value, or percent of high value resources fully realized.

Whatever the challenge, by deciding what the right metrics are, the challenge in normalizing becomes much easier. In the end, the metric I chose was grief per minute. With a screaming baby in tow, requisite strollers, car seats, diapers, food, bottles, and clothes, the grief per minute of either vacation was astronomical. Looks like we’re staying home…

– Dan Bormolini

  • Asset Contribution , Net Present Value , Normalizing Metrics , Normalizing Price

    Daniel Bormolini

    Dan has over 9 years of practical experience in pricing in both process industries and discreet manufacturing, including global pricing challenges while managing export pricing at Smurfit Mexico (now SmurfitKappa). In addition to pricing, Dan has lead lean manufacturing initiatives focusing on inventory rationalization and mill asset cash contribution per hour (CCH) improvements. Dan has an additional 7 years of enterprise software experience where he has worked with discrete manufacturers and their distributor networks, streamlining complex channel environments and most recently in enterprise price and margin management. Specific areas of pricing experience include best practices in rebate and discount management in complex channel environments, price optimization in configured products, transactional price optimization, and reducing channel pricing conflicts.