Surviving in today's economy: What do you do when the customer asks for a price reduction?
Quality doesn't come cheap and a steadfast customer base doesn't come easy, as any custom coater will tell you. The question then becomes, how do you deliver a good product reasonably and consistently without giving away the store? This article offers suggestions on customer relationships and how to go about making the most of what you have and what your client wants. The article walks you through a situation between a powder coater and one of its patrons, offering advice along the way, from the pricing transaction to product delivery.
You're the owner and manager of a medium-sized custom powder coating company. The volume of work from your existing customers has been slowing down over the past 3 years. You're finding it more difficult than usual to attract new customers. These recent years have presented significant business challenges. Several key costs have been rising. However, you've made some adjustments in staffing and operating schedules; the company is still marginally profitable.
Thankfully, Anchor Customer - our hypothetical customer for the sake of this article - continues to be a dependable source of income. Anchor Customer has considered you to be its coating source for more than 5 years. Your production team is very good at powder coating Anchor's products and has made some productivity improvements, ones that have enabled you to keep the pricing constant. Yet, the profit margins for Anchor Customer's jobs have slipped and are now below target levels. Despite this, Anchor Customer's job pays a lot of your overhead and keeps your main coating line running regularly. You appreciate this reliability because many of the jobs from other customers are becoming more sporadic and less frequent this year.