Full Version: Getting Killed On Price
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
From: RALLYGUY (RALLYGUY1) [#22]
18 Apr 2007
To: Goodvol (JIMGOOD) [#21] 18 Apr 2007
Sweet idea!
Ask him for wholesale pricing.....Hahahahahahaha!!!!!!
Now that's taking lemons and making lemonade. :)
EDITED: 18 Apr 2007 by RALLYGUY1
From: gt350ed [#23]
18 Apr 2007
To: Goodvol (JIMGOOD) [#21] 18 Apr 2007
From: Rodney Gold (RODNEY_GOLD) [#24]
18 Apr 2007
To: ALL
In terms of pricing , For him $8 is fair , for the competitor $2.50 is fair (I would actually sell an item like this based on reasonable qty at about $5 or a little less - cost of material is round 75c ) Pricing is also about what the market can bear.
However this does not mitigate the fact that the guy has a REAL problem in his market in that he has a competitor agressively pursuing his customers and is pricing stuff at WAY below him.
The days of him pitching his pricing at what he feels is fair and what he feels the market can bear are over now there is another player on the scene thats spoiling the party....thats the reality!
We can all bleat unfair practices or stick to your guns etc , but thats not gonna help him at all. If he cant compete in that market or segment , then he needs to get out of it and if he wants to compete , he will HAVE to drop his prices or respond to his competitors strategy.
He asked if he's outa line - in the circumstances he is in , he IS out of line in terms of pricing.
From: sprinter [#25]
18 Apr 2007
To: ALL
From: Bill (ALBILLBERT2000) [#26]
18 Apr 2007
To: ALL
Ok my two cents.. it was never determined what the qty of plates a month was. Also what other business does this customer bring into your shop. If you just tell them you wont budge.. and that this is your price.. you could be loosing all the other potential business there giving you.. I would call the customer talk to him.. tell him your pricing and that you would love to keep his business.. and what does he think you have to do to keep your business..
Normally you would be surprised. The customer is just like us trying to cut costs, they like you , your prompt professional and great service. For him to show you the other companies price is him telling you to see if you can come to a compromise.. you might be surprised as to the price the customer thinks would be fair..
think of all the business.. not just the one job... but again.. your not saying how many is a nice amount of plates per month... is it 15 is it 40 or 100 or more..
EDITED: 18 Apr 2007 by ALBILLBERT2000
From: Jer (DIAMOND) [#27]
18 Apr 2007
To: sprinter [#18] 18 Apr 2007
From: Stunt Engraver (DGL) [#28]
18 Apr 2007
To: Jer (DIAMOND) [#27] 19 Apr 2007
Jer,
This is a true story. Pretty much the same line was given to a engraver friend of mine.
My friend said, "That's a great price. Why are you talking to me?"
The would-be customer replied, "Because that guy went out of business."
Here's a separate "low bidder" story, from just this afternoon:
A previous customer calls. He wants me to remove some existing engraving from his radios (walkie-talkies) and re-engrave them.
Note: For customers who don't want to replace the plastic housing, I occasionally route-out the existing engraving, which leaves an indented rectangle, then engrave new information in another area.
I said, "Oh, you bought some radios from another company and want to put your information on them?"
He said, "No, my company's name is already on them. The place I bought the radios from engraved them for free and I don't like the way they turned out. From now on, all my engraving goes to you."
This won't be the first time I've fixed another engraver's handiwork.
EDITED: 18 Apr 2007 by DGL
From: Ozzy Fox (CLIVEGARAWAY) [#29]
18 Apr 2007
To: ALL
I’m with Rodney on this, my view is that this guy is giving you a chance to deal, question is do you want to?
Most people would just take the $2.50 deal walk away and you’d be wondering why you didn’t have a customer.
Case in point I did some work (white plastic labels) for an electrician who came back said I was more expensive than “in the city” but
I was more convenient and would I consider my prices, I gave him a good deal next time (not $2.50 though) and now he is a regular,
last 3 months spent $2500 (to a small one man band that’s a good customer!.) He wanted a bit better deal not a cheap deal!. Fact is I probably overcharged first time.
IMHO if you’re doing 3 or 4 labels a week the price is fair if you’re doing 100 a week it’s not.
regards Clive.
From: Boz (CHEDDARHEAD) [#30]
19 Apr 2007
To: Jer (DIAMOND) [#27] 19 Apr 2007
Jer, I think it is pretty interesting that you said, when I delivered the parts and the invoice, the customer said that he had paid only $1.50 last year. Then he checked his invoice, and found that he really paid $2.50. Fair enough.
But why was he doing business with you, when his "previous" supplier was so cheap? Maybe his "previous" supplier was no longer in that business.
From: Stunt Engraver (DGL) [#31]
19 Apr 2007
To: Ozzy Fox (CLIVEGARAWAY) [#29] 19 Apr 2007
I think many of us would agree that a regular customer, with a consistent volume of work, deserves special consideration.
When it's suggested that we come in at a lower price than a competitor, no matter what that price may be, is when we part ways.
Here's another true story:
In 1974, a friend of mine became the new owner of an established trophy shop. He was approached by a bowling league, looking for a new vendor, claiming they were being overcharged by another store.
Of course, my friend, being the new owner of a business, saw this as an opportunity.
He determined the award the customer wanted, sharpened his pencil and came up with a price that would surely lock him in as the league's new source of trophies.
He confidently slides the quote over the counter.
The customer says, "You've got to be kidding! We can't pay that much!"
Not wanting to let this customer slip away, my friend says, "I'll take another look and see if I can do better."
He slides the uncomfortably-lower quote over the counter. Still no good!
Finally, thinking he was being worked my friend decides to try something.
He took his exact costs (zero profit) for the materials, added minimal labor and slid that quote over the counter.
The customer said, "No, I'm sorry. That just won't work."
It was that day, when my friend decided his shop would be known for high quality work and he would charge accordingly.
Seemed to be a good business move. I worked for the shop from 1976 to 1989, before founding DGL Engraving.
During that time, we stayed very busy, producing awards of distinction, engraving high profile awards such as the Emmy and earned a reputation for engraving virtually anything that would fit in our equipment.
We did have a solution for people looking for screamin' deals on bowling trophies.
A stack of business cards, of shops that would work for less.
We prided ourselves in one-stop shopping. :-)
EDITED: 19 Apr 2007 by DGL
From: Cody (BOBTNAILER) [#32]
19 Apr 2007
To: Stunt Engraver (DGL) [#31] 19 Apr 2007
From: Cindy (CINDYM) [#33]
19 Apr 2007
To: Jer (DIAMOND) [#1] 19 Apr 2007
I've known many shop owners, most of them no longer in business, who had no price formula at all. They pulled numbers out of their hat as the job came before them. Some didn't count their overhead as part of their costs - they told salespeople who stopped by that they had to be there anyway so they didn't think the electric bill needed to count! Or Mommy & Daddy paid all the bills to keep the guy out of their hair and so he didn't care what he charged. Why would or should a legitimate business person compete with that situation?
If you have a formula that you set up that shows you all your costs, and add in the profit you want to make, you won't go wrong. If you just guessimate, sometimes you'll be high, sometimes you'll be low. Most of the time I see our industry quoting very low for what we are providing. Most price like hobbiests. I'd ask you to ask yourself - which are you? Highly trained and talented craftsperson or hobbiest?
You are probably leaving money on the table if you don't know exactly what it costs for you to produce a job and stay in business. If another shop gives a quote lower than yours, but you've done your homework, you don't have to adjust your price unless you want to reduce your profit on the job for some reason. If someone wants to do the job for less (in some cases much, much less), let them. Move on to something more profitable for your talents.
One thing I discovered a long time ago. Someone, somewhere, will always be lower priced than I am. Doesn't matter what the product is - someone is willing to charge less. I'm not going to drive myself crazy trying to figure out their pricing. I put together a formula that shows me what I have to charge to stay in business. Ultimately, that's the only thing I really have to care about. I decide who I'm going to cut prices for (that is called a contribution or donation) and I make out the invoice showing the "real" price, and the lowered price so my client can see the difference.
So someone else charges less, even much less. If you know what you need to make a living, don't feel bad about charging that amount. If your friend is showing you an invoice showing that $2.50 price I too would ask him why are you shopping with me and not the other guy. There could be a lot of reasons - even friendship could be one of them. Maybe they weren't happy with the quality, service or whatever. But bottom line, it is his decision where to shop and what to pay. It is your decision what you want to charge and earn.
I NEVER match quotes. It is counter productive to myself and to my client and I don't mean to sound uppity about that statement. Why would I match a price where oranges are bananas for the final product? Does the other shop have the exact same equipment and did they buy it for the exact same price? Is their overhead exactly the same? Do they attend the same trade shows and classes and have exactly the same knowledge? Have they (this is a big one!)done their homework and is their price 'correct'? In other words, have they broken it down? Most of the time when they bring in a sample of the other persons work I don't want to match it, much less the price. Shoddy merchandise should not cost the same as a quality product done right, and you don't know if that is what you are suppose to be matching.
Stand firm on your pricing if you have broken it down and know that is what you need to stay in business. Running jobs on your equipment for free just to say your machines stay busy is just crazy. If you are not making money on a job, pass on it.
Time to get off my soapbox now, but hopefully some of this will give you something to think about before you lower your prices....
Cindy Murdoch, CRS
From: UncleSteve [#34]
19 Apr 2007
To: Cindy (CINDYM) [#33] 20 Apr 2007
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