I wish I could remember where I heard this saying…
You can’t expect others to pay you top dollar while looking to pay bottom dollar.
You probably know people like this.
They expect their customers to only pay them top dollar for products and services.
But on the other side of the business they negotiate ruthlessly with their product and vendor providers and partners.
On the surface this makes business sense. It would be in the best interest of a business to get as much as possible from customers while also paying as little as possible for goods and services.
But that’s strictly taking a view of profit in the short-term. Profit can result from many things in the long run. It always comes down to dollars, but if you strictly look at the short-term numbers you’ll lose sight of what can be gained from goodwill throughout the lifetime of a business.
The Pure Dollars
From a pure dollars outlook it’s best to maximize profit.
But profit can come in short and long-term forms.
If you look at deals as one-time occurrences then it totally makes sense to push for the highest earnings while pushing to pay the least.
You’ll see this in business all the time.
A business doesn’t budget with a customer on a price. And in the background they push their providers to the limit on price.
Setting A Price With Customers
On one side we have the price you set for your customers or clients.
I’m not a huge fan of discounting or changing prices from customer to customer. I believe in doing your best to set the best price for you and for your customers and leaving it pretty stable while maybe experimenting with various prices while always honing in on the best price.
In this approach I think it’s good to stick with the price and to do your best to stick to it during negotiations.
The other side if where I think businesspeople can lose track of the long-term. They push vendors or suppliers for the lowest price possible.
You might get a low price in the short-term, but in the long-term there are possible issues.
First, let’s say you push for a really low price with a vendor. That might be putting the vendor on a razor thin margin and after the initial terms of the relationship they might take their business elsewhere and not even offer to work with you again in the future.
If that happens you’re left looking for a new vendor. You might find another one-time partner, but doing that over and over requires effort, time and money. You might end up losing money in the long run by switching all the time and you might lose in quality of what you offer by always switching.
Second, vendors, whether they realize it or not, give preferential treatment to customers that benefit them the most. If you’re not giving your vendors a good price either in margin percent or in total dollars then they’re not going to be very excited to work with you. Your company may be last on the priority list for service calls.
You might have worked out a great price, but that lower price will put you down on the totem pole compared to the vendor’s other customers.
Final Takeaway: Winners All Around
The best customers want to buy from those that offer the best price. That’s difficult to define. It doesn’t mean the lowest price. But it doesn’t mean the highest price.
It means customers want to feel like they’re getting good value. They don’t want to feel ripped off.
And vendors and partners want to feel the same way. They don’t want to have to push to make things happen on razor thin margins. They also don’t necessarily want to make a king’s ransom on their customers.
Everybody wants a good deal where there are winners all around.
Happy customers are repeat customers. Happy vendors look to go the extra mile to provide the best quality and service for their best customers.
It’s kind of a golden rule in business. Treat your customers and vendors as you would want to be treated. That means looking at what’s good for everybody involved.