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DEATH BY A THOUSAND CUTS?

July 30th, 2018 - Beth

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Quickslide Chairman Adrian Barraclough asks if it is possible to offer the lowest possible price for a product or service, without making cuts to that product or service

Pressures have never been greater to cut prices. Most of the products that we sell as an industry are purchased by private homeowners – and we are all consumers, whatever we do for a living – and the day to day pressures that we are all facing at present are, I would suggest, the greatest for some years.

Home improvement orders have been harder to come by, so the old default position of the average glazing sales person of ‘discount it to death’ has become even more widespread than ever before. And that is hurting our industry more than most are prepared to accept.

Lack of sales training

The lack of training – including the simple concept of explaining why a customer will be better off choosing a product that has additional features and benefits and that it is worth spending a little more to get them – is easily forgotten (if it was ever learned) when the chips are down. And even if the sales person understands that they should have tried harder to justify the additional price (and reasonable margin!) it is a one off and any way, everybody else does it.

And this is the crux of the matter. What I mean by the title Death by a Thousand Cuts? is does offering the lowest price amongst your competitors improve or damage the market, irrespective of whether it secures the occasional sale for an installer? Will our market benefit from growing sales stimulated by ever-cheaper window, door and conservatory prices, or will homeowners, in due course, find themselves with limited choice and poorer quality overall?

My view, based upon thirty years of manufacturing in the UK, is that cheap, paradoxically, comes at a price. Even in the most efficient factories, there are minimum cost bases that apply to everyone, unless short cuts are being taken. Labour costs will vary from area to area of course but these may be calculated externally. And one factory may be better at buying raw materials than another. But all such costs are finite; competitors’ costs can be calculated almost as closely as ones own.

If a company’s competitive differentiator is merely based upon lowering prices then where does that company go whenever a competitor follows your price movements and undercuts you? Do you keep lowering the price?

I walked into a meeting around a year ago in which our team was discussing how to reduce the cost of our popular VS window, to get it down to become the lowest price in the market. They were discussing what features might be cut and how quality might be imperceptibly reduced in order to reach the desired price point. I point blank refused to accept their discussions. And actually as a result of the ensuing discussions, we actually improved the quality still further, and put the price up.

We won’t want to compete in the swamp, in which price dominates everything and products are compromised for the sake of a few pounds. Such a discussion was good for us because we reconsidered our place in the market, what we are good at and if we wanted to veer away from the values that have served us well now for many years, that is to offer innovative, well produced products, supplied on time and in full and with marketing and service back up that our customers know that they can rely upon.

People like choice

Fortunately, people like choice; for many, the issue is value for their money, assured performance, choice of colour, customising options and of course, reassurance that should they require any support in the future, then it will be there for them.

Fortunately most of our customers understand that whilst lowest price is occasionally an interesting tactic it is not a sustainable longer-term strategy.  Being the cheapest is a desperate act that anyone can do in the short term, usually because they have little else to offer. Before you choose your key suppliers ask yourself what your own long term strategy is, how you want to be seen by your customers and crucially, how you would want them to then recommend your business to others, if they felt inclined to do. Fortunately you still have a choice.

 

ISSUE: JUNE 2018

 


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