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More than good
memories
When Primo Industrial
Supply faced price pressures from a good customer, sales manager Kevin
Fitzpatrick needed more than words and memories to demonstrate his value.
by Paul Markgraff
 Imagine for a moment you
receive that phone call that sends chills down your spine. A long-time
customer, loyal for years, just called to say you might be fired. In the
ultra-competitive manufacturing world, price pressures have become too
much to bear and your best customer can’t take it anymore.
Your product is being
replaced by your competitor’s product for one reason: price.
This scenario is not
unusual. Fictitious distributor Primo Industrial Supply is facing it right
now. Primo’s sales manager Kevin Fitzpatrick just got off the phone with
a good customer’s purchasing manager, who informed Kevin that a
competitive distributor offered a price discount on the product Primo
provides. Understandably, Fitzpatrick was taken aback.
In the last issue of
V-mail, we posed this question to our subscribers and asked them how they
would respond. Should Fitzpatrick bow to pricing pressure or present some
sort of value proposition? Would you bring value-added documentation to
bear, or should price win out?
We received numerous
responses. Here are a few.
Darrell Tetreault,
western regional manager for Kinecor, a Quebec-based distributor of
bearings, power transmission products, hydraulic and process equipment,
said he would first need to establish the credibility of the threat. He
would find out more about the competitor’s product and associated
services. Then, Primo should show them their value.
“If Primo is the
current provider of the product and service, then it is reasonable to say
that they would understand the cost of doing business with the
customer,” says Tetreault. “If Primo has documented their value and
investment in the customer’s business, they would have a foundation to
work from to support their price. The customer will need to fully
understand why he should pay more.”
Like Tetreault, Carl G.
Norris, president of Rogers Industrial Supply in Fort Smith, Ark., says
the customer often needs to be reminded of the value they have received in
the past and that Primo needs to remind them in a professional manner of
the savings and improvements Primo has brought them.
“It will work for some
customers, but for others, price will win out,” says Norris. “If the
customer still demands price concessions after Primo presents its case to
a proper decision maker, Primo will have to decide if it can play the
price game with that customer or walk away. Sometimes the customer needs
to be fired when their philosophy is not line with the distributor’s.”
For these two
distributors, it is obvious that presenting a well-thought-out value
proposition is the preferred course of action. Gary Drypen, vice president
of operations for Farmington, Mich.-based Exotic Automation & Supply,
shares their view. He says sellers need to continually education their
customers as to the economic benefits of value-buying over price-buying.
“In
the scenario described in the article, the seller should not bow to price
pressure,” says Drypen. The problem arises when the seller has nothing
but words and memories to support the value-added proposition. Had the
values the customer received from Primo been documented, the objective
evidence gathered would bolster the seller’s claims. Price should not be
allowed to be the sole basis for buying decisions, and it is the
responsibility of the seller to educate the customer in this regard.”This
article was prepared exclusively for ValueAddedPartners.org. Copyright
2006.
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