Full Version: Getting Killed On Price
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
From: Jer (DIAMOND) [#35]
19 Apr 2007
To: Boz (CHEDDARHEAD) [#30] 19 Apr 2007
From: RALLYGUY (RALLYGUY1) [#36]
19 Apr 2007
To: Jer (DIAMOND) [#35] 19 Apr 2007
I think you hit the nail on the head. When your talking about a business relationship that has a $10,000 vested interest...you need to find ways to make the marriage work. Perhaps not on that particular item...or adjust that item, and make it up on something else to keep it all working. Sometimes you need to do a balancing act because your customers perception is reality....Do what you need to keep him happy, while balancing it out to keep yourself in a place you need to be for profits.
Unfortunately there are times you have customers that whittle you down across the board....those are the hard decisions on if to let go or not......
This subject is a difficult one....There are so many angles to take into consideration. I feel as if both sides of the issue have many good logical points. The main goal is to be profitable. if you can't be profitable in some way...it's time to be looking for different kinds of business than what your marketing, or changing the efficiency in which you do the work. sometimes these problems require taking less for one job, and shuffling the price on the other end somewhere where it's not perceived as gouging.
Good luck....sounds like you have solid sales, and a decent enough relationship with this customer to find common ground somewhere along the way.
EDITED: 19 Apr 2007 by RALLYGUY1
From: geebeau [#37]
20 Apr 2007
To: ALL
Woman goes into a butcher shop for a chicken. Butcher tells her it's $10.00. Woman tells the butcher that she can get it for $5.75 at another butcher shop. Butcher tells her to buy it there then. Woman says she can't, the other butcher went out of business. Butcher tells her that if he were out of business, he'd sell her the chicken for $5.75 too.
Point being, keep so busy for so little and eventually you're out of business.
Don't be afraid to charge for a quality product.
Have a great weekend, all.
Steve
From: Dave (MT_DAVE) [#38]
20 Apr 2007
To: Jer (DIAMOND) [#35] 22 Apr 2007
Bump the low ball bid up by $.50 and if you get the order, sub it out to the lowballer.
Dave