Pricing Strategy. Who do you identify with?
…General Motors (GM) or GM’s suppliers? It’s fine to say “none of the above” — you are, after all, your own person. It’s easy to say “I’m smarter than that” when you’re not in the situation, but we all have blind spots. I’m not here to critique, but to help prevent others from fates similar to CCM’s. In Stephanie Gleason’s WSJ article, July 12 “Supplier Feud Threatens GM Plants”, and in Clare Goldsberry’s article, Plastics Today article, July 13, “Another automotive supplier victimized by General Motors’ purchasing strategies”, we see the fallout of discounting and low pricing. In summary, Clark-Cutler-McDermott Co. (CCM), at 115 years old, unable to continue supplying parts ‘below cost’ to General Motors (GM), went bankrupt.
Here’s hoping this is a wake-up call for you, if you’re afraid to charge what your products and services are worth because “no one will buy” or “it’s better to make some money than none”. In “Pricing. What’s Your Strategy?”, I touched on what goes into pricing. This is simply an example of what happens when you haven’t thought this through. This is the same trap that:
- CCM fell into when they failed to walk away from GM.
- GM fell into when they didn’t tell their Labour union in 2009, “we cut salaries or we go out of business”.
- Keeps so many ‘entrepreneurs’ working ‘part-time’ — giving their less productive hours to building their businesses.
Each of the situations above can be “in the meantime” situations, but only if you’re committed to keeping them “short-term”. Once you get comfortable in any of the above, your business isn’t really sustainable. What’s sad is these are avoidable outcomes!
The Industry Argument
It’s okay to explore your “you don’t understand my industry” and “no one in our field would pay that” arguments, but if your industry goes down, are you willing to go with it? Isn’t it worth it to either disrupt your industry OR get out while you’re still financially equipped to build elsewhere? Think back to our most recent global recession:
- Financial Industry-driven: Was it poor regulation and ‘complexity’ of sub-prime mortgage calculations that lead to the 2009 recession? or Did no one really think it through?
- Automotive Industry-driven: GM was bailed out by taxpayers so it wouldn’t fail. Did this save a company with a sound business model? or Did it perpetuate a deeper problem within GM?
The “no one is really responsible” argument won’t put food on your table at the end of the day. Whatever your reason for going into business, you want it to last (or at least you want someone to buy it).
We also tend to argue that we should do anything to hold on to our biggest clients, but if they’re taking you under, I say invest that time and energy into a better client.
What’s the solution?
Prevention is better than cure. That is all. We can go back and forth on the mountains we need to move to change things, but Henry Ford foisted the 8-hour work week on us (not a fan), Louise Hay made affirmations a main stream word and Warren Buffet inspired many to empty their calendars (huge fan). None of these ‘changes’ happened overnight, so you can see that they simply didn’t quit. Where do you stand? Read more…
[Excerpt taken from my Successiory blog post, “Pricing. Are You GM, GM Suppliers or Smarter?”]
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Crystal-Marie Sealy, MBA, is a speaker and business strategy consultant focused on pricing, social media and more, for established small businesses, entrepreneurs and executives. President, founder of Successiory and her signature E.A.S.Y. Strategy process, Crystal-Marie works with professionals who want to build sustainable (livable) business models around their lifestyles and create sustainable client community on social media. She also speaks and delivers workshops at business and motivational conferences on business entrepreneurial strategy for pricing, your schedule and client social media community. Connect with her and subscribe at www.successiory.ca
