Dear
Friends,
Here is an extract from our
1st book, The Pillars of
Business Success.
This extract is a parable
which is common amongst most
businesses. I hope this
inspires you to change your
habit of discounting.
Tony Gattari
|
Arriving
2 April 2007
The Pillars
OF BUSINESS SUCCESS
Foreword by Peter Irvine
Co-Founder of Gloria Jean's Coffees
The 12 Commandment –
Thou Shall Not Discount
The office furniture industry is extremely
competitive. Some businesses treat the purchase as non-essential to the
business, and always try to get the lowest price possible. A lot of
people see office furniture as no more than a commodity – chairs, desks,
filing cabinets, etc – so the value proposition is greatly reduced in
the mind of the buyer.
There is a legend told in the industry,
how one office furniture supplier went broke trying to win a major
contract at all cost. The contract that was up for tender was one of the
largest office developments in Australia, and all the companies that
were involved in the pitch, knew that it would give their company great
leverage in using it as a reference for future pitches.
Ego prevailed over sensibility for one of
the office suppliers. After each company has submitted their tender, the
purchaser was open to who had the best bid, and at what price that bid
was placed at. Most of the field dropped out knowing that they could not
afford to lose money on the deal. One of the office suppliers took the
bait, and sharpened the offer. The fame was too great for the supplier,
and they reasoned that the contract could be funded by future bids that
they could win.
This office supplier, who gave the lowest
bid, won the contract. The rest of the bidders wondered how on earth
that this supplier was going to afford such a deal. They did not have to
wait long to find out their answer. The company installed the furniture,
and a sea of red started to appear on their books. On the completion of
the installation, they had reduced their workforce by half, and shut
down a couple of sites to reduce costs.
Eventually they went broke.
Why Discount?
Discounting is even more prevalent when
times are tough, such as when interest rate or petrol price spikes
reduce the amount of spending in the marketplace. Why is it that when
times are tough, we lose faith in what our business is, and take on the
poverty mindset and start discounting? The reason is very simple,
business owner panic when sales are down, and feel that to compete in
the marketplace, their prices must be below their competitors. Where do
they get this information? “Our customer’s are always asking for a
discount!” is the common response that I hear.
“The customer always complains that the
price is too high, but then goes off and boasts about the bargain he
got”
Proverbs 20:14
Activation
If
you normally make 40% margin on a unit sale and you discount your price
by 30%, how much do you have to increase your sales by to maintain the
same margin?
A.
125% B. 150% C. 200% D. 300%
The answer is what?
Well if you are struggling with the amount of time that you are working
in the business at the moment, I hope you enjoy working nights as well,
if you keep going at this rate.
Pre-Order
Your Copy Now!
Only $24.95
+p&h
|