Never, never be the lowest bidder!

By : Jim Pinto,
San Diego, CA.
USA

When business is tough, some people feel that price-cutting may be the best way to generate business. But that is a loserís game - especially in the industrial automation business, which has a high level of applications knowledge and specialization.

The original version of this article was published by
EECO Electrical Equipment Co. Oct. 2001

When business is tough, some people feel that price-cutting may be the best way to generate business. But that is a loserís game - especially in the industrial automation business, which has a high level of applications knowledge and specialization.

When identical products are available from several sources - like soybeans and pork and scrap-iron - they are "commodities." For such things, as well as for commonly used items in industrial controls, it sometimes seems like discounting is a way of life. And the lowest bidder wins.

Or loses?

Products and equipment are differentiated by the FABS (features, advantages, and benefits) that competitors cannot offer. When a product becomes a commodity (no special FABS), the differentiation that remains is quality, delivery, and price. Losers, or lazy salespeople, fall back all too quickly on price as the determining factor that wins a purchase order.

Do you buy the cheapest food?

Quality is a tough-sell - everyone says they have it. The savvy customer will review whether or not prospective suppliers operate an ISO 9000 program, or have a good track record from past shipment. A demonstrable reputation for good quality is indeed a differentiator . . . and that value should be reflected in pricing.

Delivery implies availability within a specified time to satisfy the customerís need. Commodities tend to be offered "from stock;" but suppliers should recognize that there is a carrying cost involved, which must be factored into the price.

It finally comes down to price. There is an ice-cream store near my home that has a sign: "Somewhere else, you can find cheaper ice-cream; if you need cheap ice-cream, go there." And, even though many people might think ice cream is a "commodity", that is not evident from the success of Ben & Jerryís, or Haagen Dazs.

Industrial automation is a broad-based business, with a tremendous range of applications, equipment, environments, and special requirements. Product and equipment applications knowledge has significant value and should not be discounted. Above all, sales people should strive never to be the lowest bidder. Often, that raises doubts, rather than success.

One would think that pride would involve offering the highest value at a reasonable cost. It is curious that some people boast about their products being the lowest cost. When hiring people, do they hire the lowest paid? When buying food, do they buy the cheapest?

If they do, then good customers might choose not do business with them.

Does knowledge have value?

Youíve probably heard the oft-told story of the retired plant engineer called back in to repair a machine that had stopped the factory. No one could figure out what was wrong, or how to fix it. The retiree comes in, looks at the machine for a split second, tightens a single screw . . .and, within minutes, the factory is back into production.

When his $10,000 bill comes in, he is asked to itemize the charges - after all, he spent only a minute inside of the plant. He sends back a second bill: "Cost to tighten screw = $1. Cost of knowing which screw to tighten = $9,999."

Always remember: you are selling value. Your knowledge, your experience in the business, your understanding of the problems that are involved, your ability to solve the problems that will inevitably come up, your availability to help the customer when needed - all these add up.

As an instrumentation professional, strive to provide the most value - the best specifications, the best performance, the best quality and reliability, the best delivery, the best applications assistance, the best after-sales support, the best-looking literature, the most helpful documentation.

And, of course, do that at a price that is the best value for the Customer - and for yourself!

So, the next time someone asks you "What is the Discount?". . . donít discount yourself! Ask yourself whether you should really be doing business with that person, or that company. Never, never be the lowest bidder!

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