Raise the Price Rather Than Fire Your Customer
Thursday, June 23rd, 2011I go back to a time early in my career over 30 years ago. I worked for an aluminum Sporting Goods Company. The owner of this company was also a great mentor to me. His philosophy was to increase the price rather than turn away a customer.
Here is the story
The company produced precision tubing for other businesses on the same equipment that produced their aluminum products. An aerospace company brought in a job for us to do every year. This was tight tolerance stainless steel precision work that was used in military projects.
Many of the employees and managers complained because the jobs were difficult to do and the company lost money every time. They wanted the owner to “fire the customer”. Instead the owner went back to the customer and told them the price would be double on the next order.
The next year, the customer came back and ordered again. We produced the order. The owner then doubled the price again.
The next year the customer came back. Again the price was doubled the price.
Again the customer came back. By this time the job was highly profitable. The customer was happy because the price they paid us was only a small fraction of their overall cost. Quality and precision was more important than price.
With increased revenue we developed new and better methods to produce this product even easier. This new process allowed the company to develop a new line of products that had super high performance.
The lesson I learned was to increase prices if capacity was scarce or a type of job was too difficult. It is better to have a customer not order from you due to price than for you to refuse to do business with someone. Many times you may have set your own prices too low and that is not the fault of your customer.