Is it all about price?

Greg Canty Fuzion

Win Win or crush the seller?

I remember when I started my first accountancy industry job in Deasy & Co. one of the early tasks I had was the job of selecting a supplier for all of our stationery requirements.

In those days we went through huge amounts of paper and our bill would have been quite large.

I approached the task diligently as the good accountant that I was – meeting each of the prospective suppliers and impassionately processing their quotes. The best quote won and next time round I did exactly the same thing all over again and put our business out for tender. It didn’t really matter who the supplier was – as long as I achieved the best price and the maximum savings for the company – wasn’t I brilliant?

24 years later and I find ourselves putting quotes together the whole time to hopefully win business and on the other side of the coin we deal with many suppliers.

A few things have I have learnt about pricing since those early days:

  • The clients who hammer us on price because that’s just what they do, I have very little interest in doing business with them again
  • If every piece of work a prospective client has is put out to auction I find myself caring less about this business (unless it is a tender situation where this is what you have to do)
  • I deal with suppliers that I like dealing with as long as their prices are fair – I won’t break them up every time
  • Trust and respect and a genuine interest in each others business is really important
  • The word Loyalty is really important -not blind loyalty
  • You have to leave a Win Win in every single deal that you do (James Caan the successful businessman from Dragons Den talks about learning this valuable lesson from his Dad at an early stage in his career in his excellent book)

For us building a successful business is all about providing excellent services (we don’t always get it right but we will try our best) to our clients in a partnership capacity – they outline their objectives and we do our best to achieve these together.

In the course of our business we use service and product providers that we trust and like doing business with, that ultimately will help us do our job. There is one exception where one of our suppliers just doesn’t care about our business and we are busy looking for a better solution.

The price should be fair and leave a Win Win for everyone.

Do you pay a heavy price when it’s all about price?

Greg Canty is a partner of Fuzion

p.s. apologies to those suppliers years ago – I guess we were probably the loser ?

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15 Responses to “Is it all about price?”

  1. Terence MacSwiney Field Says:

    Greg, it’s interesting how this topic came up, because only this week I was imparting my experience of the printing business in the last millennium to a printer. While price then, and probably even more so today, was a ‘key factor’, what many people tend to overlook is Service and Quality, and all three together are vitally important.

    What’s the point in let’s say, ordering 1,000 letter-heads at the cheapest price, if the quality is poor and the delivery date isn’t met and prices fluctuate? Printers, for some inexplicable reason, are notorious for not meeting delivery dates. I took advantage of that and made a reasonable living from it. I listened to the constant but perfectly justifiable whine from Accountants “Watch your overheads and keep them under control”. One overhead which was so obvious, yet ignored, was the cost of Printing and Stationery. It’s one of those ‘silent’ and sneaky overhead costs which keep increasing throughout the year – or is it? I took the view then, that it was, so I used the old principle of R2A2 – Recognise, Relate, Assimilate and Action.

    Once I was satisfied with the quality, and that I could without fail meet every delivery date, I set about introducing what is now the ‘norm’ in Fixed Price Printing. The principle is easy. Printing is based on volume, the higher the volume the lower the ‘unit’ cost. For example, 12,000 letters is cheaper to buy than 1,000, on a per 1,000 basis.

    Having established the annual requirements of the customer, the quotation submitted was for the year’s supply – with 1/12th delivered each month with an invoice of 1/12th of the quoted annual amount ordered. This meant three things. (1) I had a guaranteed income for 12 months. (2) I kept out the opposition for 12 months (3) I had 12 months in which to convince the customer that I was giving them far better value than any of my competitors. Never again would they run short on supplies, or face a possible increase during the year. Accountants were delighted, at last they had one overhead they could control.

    Today, due to computerisation and the inclusion of in-house printing, I doubt that this system would work in a manner to make it profitable – but the principle still stands in other areas of purchasing.

  2. Ivan Walsh Says:

    Hi Greg,

    There’s a difference between services v product pricing.

    I feel that if one is in the services business, then you need to position yourself very carefully, otherwise clients with do a like for like comparison… which can be a race to the bottom.

    Ivan

  3. Andy O' Sullivan Says:

    Very interesting Greg.

    I’ve been in the construction industry for close to 20 years. Much of this time was spent as a main contractor. It was drilled in to me by an excellent former employer that if you knock the supplier or subbie down on price day one, but then manage them fairly and always try to end with a good final account meeting, then they will respect you for being tough but fair. This system seemed to work well and we generally used the same suppliers and subbies over and over again. While we controlled the money, and probably limited their margins somewhat, they knew that we would always do our best to assist them if problems developed. People will generally remember the end result rather than the journey or the early negotiations.

  4. Paddy Says:

    Hi All

    I am new to this blog so first of all hello! From what i am seeing i think a lot of companies are slashing prices to gain market share. I can see the benefit in this for a number of reasons 1) Revenue, albeit at small profit margins 2) Brand recognition i.e putting what you feel is a good brand in the market with the hope of making users familiar and hoping to raise your price over time and the user to say “well we are used to this so lets stay with it” 3) eliminate competitors . The 3 points I have made all seem like great ideas but in today’s market, can companies sustain selling at very low margins, with price increases in raw materials continuing to rise and every other company attempting the same strategy, a race to the bottom as mentioned above. Surely quality of service/products decreases if we are selling very cheaply? Or alternatively you buy this for 3 months and company A then asks for an increase or maybe disappears and leaves you without a supplier.
    My own opinion is we should consistently maintain fair pricing. If my customer threatens to pull a contract and all of a sudden I offer a 20% discount surely they say well if you can afford to do that now what have you been making off me all these years. Maintaining a fair price and offering a consistently excellent service, as you mentioned Greg, making the customer/buyers job easier needs to be taken into consideration, offering value for money if you like. Is this a Short term gain strategy over long term survival, what do you guys think?

    I hope I have put across my points clearly.

    Paddy

    • Greg Canty Says:

      thanks for the great post.

      I used to work in the drinks industry and in one of the companies we were really selling commodity products but the quality and reliability of the delivery and other service and the relationship were the only differentiators. If we lost an account on price I would freak if our rep was never offered a chance to compete – if you have a good relationship with the customer at least you should be offered a chance to retain your business. If it is a big eduction you are giving your customer you need to be able to rationalise it.

      Sometimes if a competitor is really deep discounting to the extent that they are loss making I feel it is better they are busy with that business and you stick with the stuff you can make money on!

  5. Mark Says:

    My favourite quote on this issue is;
    “The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory.” Aldo Gucci

    If it was all about price, the only supermarkets in business would be Aldi and Lidl. Therefore, it stands to reason is that it is obviously NOT all about price

  6. Paul Lanigan Says:

    I’m paraphrasing from the Boiler Room but ‘in every selling situation someone gets sold. Either you sell the buyer on why he should pay more or he sells you on why you should accept less. Either way, someone gets outsold’

  7. Sold or Outsold? – Brain Sell Says:

    […] is a conversation over on Greg Canty’s blog about price and value. It reminded me of a quote from The Boiler Room that I can now only […]

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