Mutual Respect for Profits
08/01/09 10:08 AM
I know it is very hard to understand this but we are BOTH in business to make a profit. Yep, that is right, both you and me work hard to deliver a service, not out of the goodness of our hearts, but to make money doing it. But, what I have been trying to figure out for a long time now, is why is your profit more important than mine? And I do not mean you specifically, but metaphorically.
In business we all have a position in the chain. In our relationship, I am the supplier, and you are the customer. But think about what I am saying, and I am certain you can look further down the chain and see the same things happen to you when you are the supplier and you are dealing with a customer. Everyone wants to pass the burden of cost up the chain, while maintaining their profits.
Let me give you some examples -
The other day a customer called in and had an issue - we had sent him a spoiler for a Ford Fusion, when he clearly had ordered one for a Focus. He was irate about the problem and needed a new spoiler shipped to him Next Day Air!! He had a very upset customer, and he was going to lose the dealership if we didn’t fix his problem ASAP. The freight alone would have COST us over $100.
We proceeded to look into the issue. We pulled the recording of the original call, and listened to it. In this case, we did NOT make the mistake. The customer mistakenly said Fusion when he meant Focus. Still, he maintained that we had made a mistake and we had to eat the Next Day Air freight. We sent him an email of the call recording, which he listened to and then called back a few minutes later. However, this time the call was different.
Now, he accepted the fact that he made the mistake, and suddenly, the spoiler could wait to be installed in 2 days, not tomorrow, like was demanded of us. It is amazing to me that when the burden of cost is transferred the urgency declines.
In a different case; we had a customer who demanded we drop our price on some custom name decals we made for him. We had charged him 75¢ each, and he felt this was way too expensive. “The vinyl only costs a few cents” he explained. He told us to take them back or he would take his business elsewhere. I then proceeded to ask him a simple question: How much do you charge to put these decals on the car? His response; $5 for the pair. So I explained to him, that the most profit I could make on these decals, if the materials were free, the labor were free, and the equipment to make them were free, is $1.50. He was making $3.50 in gross profit, with none of those expenses.
I then asked him what was a fair price to pay for these decals. I told him I would sell them to him at that price, but he had to split the profit on his sale with me. He quickly dropped the issue.
I understand the self-preserving philosophy behind these examples, but I really begin to wonder why we do this. Is it because we can? Because the customer always has the power to take their business elsewhere, and reminds you of that many times when an issue arises? Is it because the “big” company can afford to eat this expense much more easily than the “small” company can? Or is there some other intrinsic human quality (fault??) that makes us do this?
This issue is evident everywhere you go. Pay attention to people, the things they do for a “Freebie.” I witnessed a lady return a 10 year old ceiling fan to Home Depot “because it quit working.” Or the couple who got the “Never Ending Pasta Bowl™” at Olive Garden. Then asked for more breadsticks, and another bowl of salad. They had the audacity to ask for a to-go box for the “Left-Overs.”
These are trying economic times, and we all are working to find ways to save a penny, or cut our costs. But we all need to be viable businesses. You can’t expect your supplier, or favorite restaurant, to be there for you in the future if you don’t treat their profits with as much respect as you treat your own.
Doug Jacobs
In business we all have a position in the chain. In our relationship, I am the supplier, and you are the customer. But think about what I am saying, and I am certain you can look further down the chain and see the same things happen to you when you are the supplier and you are dealing with a customer. Everyone wants to pass the burden of cost up the chain, while maintaining their profits.
Let me give you some examples -
The other day a customer called in and had an issue - we had sent him a spoiler for a Ford Fusion, when he clearly had ordered one for a Focus. He was irate about the problem and needed a new spoiler shipped to him Next Day Air!! He had a very upset customer, and he was going to lose the dealership if we didn’t fix his problem ASAP. The freight alone would have COST us over $100.
We proceeded to look into the issue. We pulled the recording of the original call, and listened to it. In this case, we did NOT make the mistake. The customer mistakenly said Fusion when he meant Focus. Still, he maintained that we had made a mistake and we had to eat the Next Day Air freight. We sent him an email of the call recording, which he listened to and then called back a few minutes later. However, this time the call was different.
Now, he accepted the fact that he made the mistake, and suddenly, the spoiler could wait to be installed in 2 days, not tomorrow, like was demanded of us. It is amazing to me that when the burden of cost is transferred the urgency declines.
In a different case; we had a customer who demanded we drop our price on some custom name decals we made for him. We had charged him 75¢ each, and he felt this was way too expensive. “The vinyl only costs a few cents” he explained. He told us to take them back or he would take his business elsewhere. I then proceeded to ask him a simple question: How much do you charge to put these decals on the car? His response; $5 for the pair. So I explained to him, that the most profit I could make on these decals, if the materials were free, the labor were free, and the equipment to make them were free, is $1.50. He was making $3.50 in gross profit, with none of those expenses.
I then asked him what was a fair price to pay for these decals. I told him I would sell them to him at that price, but he had to split the profit on his sale with me. He quickly dropped the issue.
I understand the self-preserving philosophy behind these examples, but I really begin to wonder why we do this. Is it because we can? Because the customer always has the power to take their business elsewhere, and reminds you of that many times when an issue arises? Is it because the “big” company can afford to eat this expense much more easily than the “small” company can? Or is there some other intrinsic human quality (fault??) that makes us do this?
This issue is evident everywhere you go. Pay attention to people, the things they do for a “Freebie.” I witnessed a lady return a 10 year old ceiling fan to Home Depot “because it quit working.” Or the couple who got the “Never Ending Pasta Bowl™” at Olive Garden. Then asked for more breadsticks, and another bowl of salad. They had the audacity to ask for a to-go box for the “Left-Overs.”
These are trying economic times, and we all are working to find ways to save a penny, or cut our costs. But we all need to be viable businesses. You can’t expect your supplier, or favorite restaurant, to be there for you in the future if you don’t treat their profits with as much respect as you treat your own.
Doug Jacobs