Full Version: Getting Killed On Price
From: Dee (DEENA-ONLY) [#2]
17 Apr 2007
To: Jer (DIAMOND) [#1] 18 Apr 2007
Let your competition do them. They will be out of business soon and he will come back to you and pay your price.
Dee
From: Harvey only (HARVEY-ONLY) [#3]
17 Apr 2007
To: Jer (DIAMOND) [#1] 18 Apr 2007
The question is answered in the last line.
On a straight cost figuring the material costs about $0.45 plus the mag strip, which is probably more than the flex. Figure direct costs of $1. Wow he is making a 2.5X markup.
That assumes that his time is worthless.
You may soon have a source for used equipment.
From: LaZerDude (C_BURKE) [#4]
17 Apr 2007
To: Jer (DIAMOND) [#1] 18 Apr 2007
Jer,
My cost of materials is WAY high because of the freight I need to pay. A quarter sheet of rowmark plastic costs me about $20.00...so I used THAT as my base.
I charge $1.25 per minute for laser time.
With that in mind, I come up with .89 cost for the plastic. Add to that an arbitrary .50 for the magnetic strip ( just a guess here) and use the industry multiplier of 3 you come up with $4.17.....add to that $3.75 for your laser time, ( figuring three minutes to engrave and cut the piece, unless you are cutting with shears) and it seems to "me" you are right on the money and your competition is missing the boat.
So I think Dee is right. Your customer will be back when your competion goes out of business and in the meanwhile you will have had a price increase due to the rising cost of the plastic which of course is a petroleum product......
Anyway, the short answer is NO you are not out of line. Your competition is.
Just my two cents. Want change?
From: Rodney Gold (RODNEY_GOLD) [#5]
17 Apr 2007
To: ALL
Well you have the option , lose your client to your opposition or better your price. You dont have to go as low as them , but offer some incentive for your client to stay with you. Tell em its reducing your profit a lot , but you don't want to lose em or something like that.
A good rule of thumb is to charge 5-6x material cost.
Problem is your client might NOT come back to you.
If I were them , I prolly wouldn't considering you almost 4x the oppositions price and regardless of whether its fair or not , you will be regarded as gouging them. If the cheapy supplier let me down , I would be looking for another but not at 3-4x the price.
It's not always the greatest strategy to refuse to budge on price.
EDITED: 17 Apr 2007 by RODNEY_GOLD
From: Harvey only (HARVEY-ONLY) [#6]
18 Apr 2007
To: Rodney Gold (RODNEY_GOLD) [#5] 18 Apr 2007
This is one of the rare times I will disagree with you. Going from my market, which can be very different than yours, if you cut price you are competing with yourself.
Sort of , 'Let me give you a fair price, now I can give you a better price, no I want the job I will give you a better price."
You will loose other customers when they find out, because you did not cut them the same deal. My opinion is to lose the customer you know and maybe have them come back because of the professional way you dealt with them, then to lose unknown customers because they felt that you gouged them because you did it for so much less for the other person. It is a judgment and a personal image thing. [NOT meant as an insult.] It is that I look at myself as a consummate professional, my former life built that, and I will not change that. Is it right or wrong? I do not know.
From: Becky (KIAIJANE) [#7]
18 Apr 2007
To: Jer (DIAMOND) [#1] 18 Apr 2007
I'm going to throw my two cents in here even though I haven't been in the business a long time. Pricing is something I really struggle with as well. And while it is good to be aware of what your competition is charging, I don't believe you can chase prices.
My hairdresser has a sign in his shop that I love (and I am going to paraphrase since I can't remember exactly)
"We have no argument with those who charge less for they alone know the value of their work."
Which I think speaks volumes.
I would have to agree with Harvey and Dee, if you start messing around with your formula to chase prices, ultimately you are going to lose more than you would gain in this one customer for a competitor that will soon be out of business.
You want to make sure that you will be there when the customer needs you after the competitor is gone. ;-)
Becky
From: Carl (CSEWELL) [#8]
18 Apr 2007
To: Becky (KIAIJANE) [#7] 18 Apr 2007
Those who charge more than their competitors can be accused of price gouging. Those who charge less are guilty of predatory pricing and unfair competition. Those who charge precisely the same must surely be engaged in price fixing.
Or....
"There is hardly anything that some man cannot make a
little worse and sell a little cheaper and the person
who considers price only is this man's lawful prey."
-- John Ruskin --
Or this one which equates well with 'charging':
It's unwise to pay too much... but it's worse to pay too
little. When you pay too much, you lose a little money...
that is all. When you pay too little, you sometimes lose
everything, because the thing you bought was incapable of
doing the thing that it was bought to do.
The common law of business balance prohibits paying a
little and getting a lot --- it can't be done.
If you deal with the lowest bidder, it is well to add
something for the risk you run. And if you do that, you
will have enough to pay for something better.
-- John Ruskin
From: Rodney Gold (RODNEY_GOLD) [#9]
18 Apr 2007
To: ALL
I could be "nice" and symnpathize with the OP and tell him all the platitudes and the things he wants to hear re his pricing , but I wont be. If hes 3x more expensive , he has a BIG problem right now.
At the end of it all , in the face of competitors that can do the same thing as us , we are merely purveyors of a product or service thats not unique.
If you are being undercut in a product or process , the fact is that you are not efficient or have adopted the wrong pricing structure. No one goes into business to make a loss , least of all your competition.
If they can do it at 1/3rd of your price , your price is wrong for the market or that product. Be aware , the price you charge might be right for you , but that doesnt matter a whit.
The choice is yours , stick to your guns and watch your market share dwindle and your machinery idle , or be proactive to your competitors pricing. If you cant even begin to match their pricing , then you need to seriously consider whether you should be competing in that market.
From: UncleSteve [#10]
18 Apr 2007
To: Rodney Gold (RODNEY_GOLD) [#9] 18 Apr 2007
I must disagree to some extent.
If I am working out of my garage or spare room and consider this a side business/hobby, doubling my cost is a "fair" price since it represents a sideline and not my rent money.
If I have a retail space, pay rent, insurance, employees, taxes, carry inventory, etc., being 3 times as expensive on a low end item is also "fair" pricing.
Many of us won't even turn the machine on for less than a $5-10 profit!
On expensive items, I agree such as a cost of $125 and a retail of $500 could be excessive but at the low end of the scale, 4x cost is not unreasonable at all.
From: Rodney Gold (RODNEY_GOLD) [#11]
18 Apr 2007
To: UncleSteve [#10] 18 Apr 2007
I take 5-6x the cost of materials as a good rule of thumb in terms of pricing a fabricated object - its not cast in stone.
if your expenses in running a business mean your selling price is 3x more than your competitors , being blunt , you are innefficient in that market or with that product. Its a wake up call to examine your pricing or production or cost of production.
From: Stunt Engraver (DGL) [#12]
18 Apr 2007
To: Rodney Gold (RODNEY_GOLD) [#9] 18 Apr 2007
Rodney,
If we're doing it right, we do have a unique product or hard-to-match service.
I agree with what you're saying, if the example were novelty items that can be found anywhere, or a product like imaged T-shirts. Competiton is stiff and people will go with whoever is cheapest.
It's the difference between creating an impenetrable niche and duking it out with the masses; and I've never been much of a fighter. :-)
From: Harvey only (HARVEY-ONLY) [#13]
18 Apr 2007
To: Rodney Gold (RODNEY_GOLD) [#11] 18 Apr 2007
If your competition has an overhead of $0 per month, and you have $6000 per month, meeting his prices will bankrupt you fast.
Getting every job out there is NOT a sign of good business, usually just the opposite.
I would much rather lose a job that will result in a loss, than lose established customers that represent a gain.
From: Mark (MAXMACHINE) [#14]
18 Apr 2007
To: ALL
A long time ago, I decided that I was not going to work for free. Price is not what you sell, service is. We have large clients that don't even ask what the price is going to be... their primary concern is "is it going to be on time" and "will they deliver it". The item in question is worth at least $10.... unless you like working for free. Then it's worth about $3.
Possible solutions:
go fishing
reduce your overhead
stop eating
live in a cave
I like #1.
Mark
From: Rodney Gold (RODNEY_GOLD) [#15]
18 Apr 2007
To: ALL
Ok, you got a competitor out there thats a 1/3rd of your price and is already taking your customers - Its yet to be proven that their service is significantly worse than yours.
In my book if you dont react to that your business is in major trouble. You can wait till your competitor takes your market share and perhaps folds , and you maybe get your customers back after he goes belly up oir delivers bad service , thats if you havent gone down the tubes in that time.
Or failing that , you can abandon that particular product or market segment if you cant compete there and find some other area where you can. Either way , you have to react.
From: Dave Jones (DAVERJ) [#16]
18 Apr 2007
To: ALL
From: Laser Image (LASER_IMAGE) [#17]
18 Apr 2007
To: Rodney Gold (RODNEY_GOLD) [#11] 18 Apr 2007
There is a significant difference between your price being 3x the competitors and their price being 1/3rd of yours. You are taking the stance that the OP is wrong in his pricing/production and he needs to take action to correct the problem. I submit that the "problem" is with the other business - he doesn't value his work highly enough and is undercutting his profitability and needs to correct his pricing accordingly.
Just because a competitor is whoring himself out doesn't mean I have to, or that I am wrong!
Not sure why you accused the OP of being the person who is wrong, it could just as easily been the competitor. For that matter, it could be both - the OP was a bit high and the competitor is a bit low.
Gary
From: sprinter [#18]
18 Apr 2007
To: ALL
My question is why would the customer even bother coming back to show an invoice for a cheaper price anyway?? Sounds like something is being left out here.
But I agree that the $8 price is more than fair, if not on the low side.
From: Mike (MIKEN) [#19]
18 Apr 2007
To: ALL
From: gt350ed [#20]
18 Apr 2007
To: sprinter [#18] 18 Apr 2007
From: Goodvol (JIMGOOD) [#21]
18 Apr 2007
To: gt350ed [#20] 18 Apr 2007
I tend to agree that if the "typical" cost of a product is $9 and someone sells it for $3, the masses should not have to jump down in price. If you think they should, what happens if someone does the job for $1 or even for free!?! Do you pay your customer a $1 for the privilege of filling his order? 8-O
Personally, I think you should outsource your plastic plates to this guy so you can free up your time and push him closer to the poor house! You can still charge $9 and make your 3x and keep him busy not making money!!!
Jim