For several years in my current business I had the impression with large customers that it’s ok to take some transactions at a loss.
The rational was that large dollar good profit orders are offsetting the low dollar low profit or loss orders and you keep the customer happy by not requesting any price increases.
But through the years I have learned that it is a very unsustainable business model.
First off in times of a bad economy or just in the ordinary business cycle eventually the large profitable sales will start to dwindle. Most of the new generation of managers are near sighted when it comes to cost and have forgotten or never learn the Fourteen Points for Managements by Dr. Deming. To these young guns the hard cost is all that they see and perhaps this is driven by the corporate culture. They place no value on the added value you are giving them with your product or service.
So they shop your nice large orders to squeeze every penny they can, and don’t care about sacrifices in quality or service. That’s because those issues are usually someone else’s problem not within their silo.
Next thing you know in order to keep these large profitable orders that help offset the small and unprofitable orders you have to sacrifice your profits. Or you start losing the large orders because you just can’t sell on such thin margins and continue to provide the quality and service the customer expects and that you expect to give them.
Now you decide to ask for price increases on the non profitable orders and now the customer threatens to take their business elsewhere.
I say let them.
Why do you want an unprofitable customer?
Do you really think that if you keep taking these bad orders and just hang in there that someday it will turn around. Do you think that some day they will start sending you the big money making orders again?
It will never happen.
Either train your customer right from the start or change your business model to make those small ordes profitable.
The problem with the second suggestion is it means you either have to down grade the quality or institute a significant price increase (minimum order amounts).
Train your customer from the start and if what they are looking for is a cheap price and cheap quality let them go elsewhere. Yes there are plenty business out there that thrive on that but if you pride yourself on being the best you can they you don’t want to be in that business.
I would rather do nothing for zero dollars then bust my butt and lose money all in the hopes of someday making money. It won’t happen.
Be who and what you are.
Sell who and what you are.
Don’t sell yourself short in the hopes that someday you’ll get paid what your worth.
If you’re not going to do these three things then why bother.
© Otis P Smith and About the Groove, 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Otis P Smith and About the Groove with appropriate and specific direction to the original content.