It’s not the price, stupid!

"It may be illegal to be crooked, but it isn't illegal to be stupid" – Lawrence Steinmetz

Don't get caught up in the never-ending "race to the bottom", even though the CE industry appears to be committed to winning it!

It’s amazing how many suppliers seem intent on growth through declining prices. They cut their prices; lower their margins; and make it up in volume.

Sounds silly, doesn't it? Yet companies in our channel do this all the time!

It’s a battle for market share, they tell us. It’s to keep the factory humming, they insist. It’s to bring cool new technologies to the masses, they declare.

Don’t believe them. And certainly don’t follow their lead!

Want to increase sales? Is dropping your price a good way to do it? It all depends – how important are earnings? How about profit margins? How about survival?

Let’s say you yield to client and/or perceived competitive pressure to lower your prices. So now you sell more. You need more staff to deliver. Good for you! Hire & train more people. Your employee costs have increased; and sales are indeed going up.

According to Lawrence L. Steinmetz, PhD, there are three occurrences that cause a business to get into serious trouble and eventually file for bankruptcy (this from his book, “How to sell at margins higher than your competitors”):

1. Gross margins decline over a period of time

2. Wages, as a percentage of sales, begin to increase

3. Sales volume begins to increase

Do your sales people insist your prices are too high? Do they contend that, in order to do their jobs, they need to lower their prices? If that’s true, replace them! Get someone who can sell!

Our channel customers insist on more important things than price, most notably delivery, quality, a satisfactory experience. Do you provide these? Consistently and reliably? As long as you can guarantee them, your price is never going to be a problem.

Customers may tell you price is their determining criteria; but as long as you deliver a quality experience on time and meet or exceed their expectations, your pricing strategy will stick. If it doesn’t, let that customer walk – you’ll never satisfy him anyway.

Let the other guy lower his price. Let him get as much work as possible. Watch his margins dwindle; wages go up; and volume increase…

It’s not about the price, stupid. It’s about everything else…