I am sure you have heard this before: “What is done in the dark will be brought to the light.” In other words, if you try to hide something, sooner or later it will come to the light where all can see.
It’s happening all around us. Most of us were aware that employees of the major automotive manufacturers were given discounts if they purchased a car from the company. I have no problem with that; as a matter of fact, I think it’s a great perk. I didn’t know what the discount was, but I was happy for the employees.
However, when the auto market went south, the major manufacturing companies began offering “employee pricing” to the general public. The price of brand new cars and trucks was being discounted thousands of dollars, which were supposedly the same discounts employees had always gotten.
In my mind, two things happened. First, I didn’t have to guess anymore what the employee discount was because now I knew what it was. The discounted pricing “came to the light.” Second, I thought if they can discount this much and still make money, the general public, including myself, has been ripped off for a very long time!
I realize most of you don’t sell cars, so this may not be a big deal to you. But, how about this …
Nearly every week, my wife comes home from the grocery store upset. She notices the packaging on some of her favorite products changes. Upon closer scrutiny, she notices two things. First, the quantity purchased had been reduced. Second, the price either stayed the same or, in most cases, increased.
Over the past few weeks, I have noticed something in our small town of Owensboro, KY. At least once a day I drive down Frederica Street, which the main street in town, and I pass a Pizza Hut restaurant. A few weeks ago, the owners placed a banner outside along the street that said: “Any Size Pizza, Any Topping - $10.”
My initial thought was that it was a great deal, if it were true. The pizza I usually order runs about $15 unless I have a coupon. So, I decided to test the advertisement and have a pizza. Sure enough, any size pizza, any topping, was only $10. I instantly forgot about the other places we buy pizza because Pizza Hut was the place to be. It was quality pizza, and the price was right.
Guess what happened over the next few weeks. Every pizza place in town started offering “Any Size, Any Toppings - $10.” All of a sudden Pizza Hut didn’t look so great any more. Now that everyone was doing it, I was starting to feel about pizza i like I did about cars – I had been paying $15 for large pizzas for years, and now they’re selling the same thing for $10! If they can make money at $10, then they must have been making huge profits at $15! What started as a great idea from Pizza Hut suddenly ruined the industry!
Sound familiar?
The economy has been down for the past 12-24 months. What have most contractors done? They have lowered their prices. What are we now telling customer, without saying it? “We have been ripping you off at the higher prices we used to charge.” And guess what? When one contractor lowered his price, so did the guy down the street. Does this sound familiar?
Pizza Hut ruined the market, and we are doing the same thing.
The reality is that most contractors have lowered their pricing without making corresponding reductions in their overhead costs. The net result is predictable: we are now under priced. Now what? The more we sell, the quicker we go out of business. Ouch!
If you are selling based on price, you might as well close your doors today. The low-price guy always – yes, always -- loses. The low-price guy will go out of business; it is simply a matter of how long it will take to happen. In today’s economy, the answer is NOT cutting pricing. The answer is differentiating your company from others. If you didn’t read last month’s article entitled “Ducks Quack, Eagles Soar!” be sure to read it. The answer to becoming profitable in today’s economy is there.
If you are serious about profitable growth, consider attending one of our three-day “Basic Business Boot Camps. Check the schedule of dates and locations on our website at www.GrandyAssociates.com.
Tom Grandy
Grandy & Associates