Thoughtful Thursdays – When operational costs skyrocket…
…prices must go up, and the professional sales person knows it.
About a month ago the Thoughtful Thursdays sales topic was about having the price increase conversation with your customer, and today we dive a bit deeper into that challenge.
The subject of skyrocketing operational cost recently came up with a customer. In the past year they have experienced raw material increases in the order of 300% or more. When an industry goes through this kind of situation, tough questions must be asked and difficult decisions made.
When industry capacity approaches the maximum, it may not be possible to keep all demand satisfied. Product allocation becomes the norm and some customers may be cut off.
So what can you do?
Keeping all your customers going with supply being tight is the objective. It may require micromanagement and the understanding from your customers where there may have been an inventory buffer in place, it may disappear. You can help your customer help you by not building in wiggle room. If supply is that tight, everyone in the supply chain must commit to time lines and measure progress on a more frequent basis.
Remember that the competition is in the same situation.
If you do have to make the difficult decision of not supporting a customer, what will be your criteria?
- Length of relationship?
- Depth of that relationship?
- Profit margins?
- Time to pay?
We haven’t even talked about price increases. While your customers may not like it, having secure supply will trump your increasing prices.
Be mindful of taking on new customers at the expense of existing ones.
While the situation is difficult, a growing industry will increase capacity a quickly as realistically possible to meet demand.
Good selling,
Richard
Have a question about sales? Contact Sakanashi and Associates Inc. and I will respond.
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