4 Reasons why you should not press on Price (too hard)

When I had to do shopping for my grandmother I had to understand a very important fact: When you are send to the butcher, cheap always has a drawback. Either old meat or lower quality or even a different animal: “Schnitzel” is much cheaper from pig than from veal. So what I learned was: You get what you pay for, not what you want! Last week I found out not all people had a grandmother like me.

 

Callback of Million Japanese and German Cars

Some months ago, Japanese, U.S. and German car makers were recalling 2.9 million (!) cars equipped with potentially faulty air bags supplied by Takata. But how could that happen? Imagine, you press on price and in the end there is only one supplier to offer at that price. And you are not suspicious even if you already had quality issues with exactly this supplier (Takata). And then you find out: You pay for crap and guess what: they actually deliver crap.

The worst thing is that it always works the same way independent of the market segment or product.

So watch out: here are my 4 reasons why you should not press on price (too hard):

1.    You earn too few money
2.    You lose money
3.    You get crap and have to replace (damage to your image)
4.    You push your supplier for lower cast (even more degradation)

At that point you will look for faults on all sides, only not at the root cause: You. And in the end you might even stay with this supplier because it’s the cheapest on. Obviously you call it loyalty…

 

Different Market, same Story

 

Right now, I’m facing a somehow similar challenge: A customer want’s to build a system for power quality control. Like the car manufacturers, he is pushing hard on price on component level and wants to have all components even cheaper than possible. So you start negotiating if housing is 5 USD or 10 USD. But they do not consider that for the 5 USD housing – you need to add a DIN-rail mounting kit for 6 USD. So each separate component is the cheapest but holistic view is missed. Each subcomponent supplier offers only a bare minimum and move costs to someone else or hope that it ends at the customer in system integration. What I want to say is:

In the end adding all this cheap components and make it work, is significantly more expensive than doing a good and professional solution right from the beginning!

What I would love to see are customers which consider the entire system and service cost. Have you found them already?

Thank you!

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