Look I know getting business is hard. I know that you’re biggest problem is always having enough business and I certainly know that most of our customers pride themselves in buying the cheapest circuit board that money can buy. But still that is no excuse to give away your boards. You have got to make a profit on what you build. It might be a razor thin profit but you have to make something on what you build otherwise you are falling to your customer’s suggestion that what you do has little or no value.
In fact I believe that one of the worst contributors to the near demise of the North American board industry has been price gouging. We have seen it and we have all felt it and we have all been victims of it. A shop will get so hungry that it will start practically giving boards away at prices that are even lower than their estimated costs. I have seen some cases where the price a competitor was offering was lower than the laminate that the boards were build out of.
A few weeks ago we talked about the lack of respect that our customers have for our industry; well on the same token “giving” boards away at a price lower than costs is a pure and evident example of a lack of self-respect.
Now I know that it is not always easy to hold your prices especially when you need the business. This becomes especially difficult when some of your competitors especially the ones who are on the brink of dissolution to the point of desperation will lower their prices just to get business in the door and keep the last of their people employed ugh, not a pretty picture!
Here are a few suggestion to follow instead of getting into the price game with desperate competitors:
- Don’t play that game. You will know if the competitors’ price is too low and don’t meet it. By the way when was the last time a buyer told you you’re priced was too low? When was the last time a buyer showed you the other guy’s prices when they were higher than yours? Just will not happen so be wary of buyers showing you ridiculously low pricing.
- Explain to that buyer, you know the one showing you that ridiculously low price that value of going with your company. Ask him what the true costs are for the low priced guy versus your company. Point out that in his world the lowest price does not always mean the lowest cost.
- Ask him to think about what it cost his company if he doesn’t get a board on time; or if the board is no good; or if worst of all if a defective board is put in his system and fails in the field. These are all things the buyer should be considering if he insists on buying the cheapest boards money can buy.
- Ask the buyer how much trouble she will have replacing a vendor if that vendor goes out of business?
- Show that buyer what the laminate costs are for that board. For the most part everyone is paying about the same for laminate so that is a great comparison factor when comparing prices.
- Be prepared to walk away. Sorry as touch at that sounds you are not in the business of making boards you are the in business of making money and you can’t make any money selling boards that have no profit margin.
- And finally get rid of that ridiculous adage that goes “we’ll make it up in volume” because you won’t. I have never understood that line of reasoning. Look if the unit price of one board is below cost the volume price will also be below cost. Zero profit times one hundred boards is still duh …zero profit or worse. Actually it is worse because you are using up valuable production time not to mention chemicals and laminates and manpower to build boards for nothing. You are better off not having the order than building it a losing prices. That’s not rocket science either.
So look in the end there is just no sense in playing the price game. Now there are some worthy competitors and you should be aware of those guys. They’re the ones who you have been competing with for years. They are the ones who are on a par with you. You know that their capabilities are good and that their Quality is good and that in the end their pricing is usually very similar to yours. They are what I call “worthy opponents. They are to be respected and their pricing is to be respected. Be confident that when you compete against them you are playing on a level playing field, that’s a good and fair game.
But those other guys, those desperadoes, don’t play their game because they are playing a losers game with bankruptcy being the ultimate outcome. It’s only common sense