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Rather than waiting for the customer to ask for a price decrease, explain that with falling costs, you can offer them some degree of a decrease. As you work through higher-priced inventory, you might be able to offer further price concessions. Being on the phone with them is super important, he said. It is an approach that can help instill loyalty.
“Don't let somebody leave you without knowing about it,” he continued. “That's a painful experience when suddenly someone calls you to pick up a trailer. Boy, that doesn't feel good. So what do you do to avoid that? That's not solving a problem, that's preventing a problem.” A key to preventing such problems is having a well-trained sales force.
Make a list of what is working and what is not working
He encouraged attendees to make a list of what is working and what is not working. One mistake Guy has seen is complacency about customer selection when things are going well. “Were you choosing accounts that were good for your company?” he asked. “I'd like you to think about that. I'd like you to think about if you were to do an assessment of your clients, how much do they buy from you? Are they loyal to you? Do they only buy from you? Do they buy from more than one supplier? Do they pay their bills on time? There are five or six criteria you can use to rate customers.”
The role of the owner-manager, he emphasized, is to move the company in the right direction. Cost control and sound financial management are critical. For example, Rose Pallet, his former company, always reevaluates costs, even on things like garbage or the exterminator, looking for opportunities to economize. It doesn't seem like a lot, but $20 a month here and $50 a month there, at the end of the day, it adds up.”
Another area of opportunity for companies can be going after different product markets. As a result of the nail shortage and spiraling prices, one company decided to go into the nail business. A recycling company has made a considerable investment in new pallet equipment. He encouraged companies to explore potentially underserved opportunities such as custom new pallets and wood
headache but ultimately might be more profitable.
Another crucial area is knowing your costs to help inform pricing. “Pricing is actually pretty simple,” Guy said. “It's direct costs, material labor equipment, then you have an overhead component that gets you to your breakeven, and then you have to put something in there for profit. What data should you keep?
“I cannot tell you how many people I talk to,” he continued. “I may walk in their yard. And they have stacks and stacks and stacks of lumber, but they don't have any idea what the value of it is. They don't really even know their current inventory. They just kept on buying lumber because they were worried about not getting it.”
These were just some of the many valuable insights from Part 1 of Guy’s Pivot presentation. We will provide coverage of Part 2 in the April issue. To get full value, consider attending WPA’s online webinars and Master Learning Groups live via Zoom. To learn more, visit www.westernpallet.org/
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