There was once a lighting supplier who bought a case of 12 PAR lamps from the manufacturer for $200 and sold them for $15 each. Business was brisk. At the end of the month, the owner counted his money and found that he was a little short on cash. So he called a meeting of the entire company and explained the problem. "What are we going to do?" an employee asked. "Isn't it obvious?" the owner answered. "We're going to get a bigger warehouse." Meanwhile, across town, another lighting supplier heard from one of his customers that the guy across town was selling PAR lamps for $15 each, so he matched the price. By the end of the year both lighting suppliers were out of business.
That's a true story, except the part about the two lighting suppliers. But the moral of the story is: Don't let the industry idiot set your price, and never match or outdo idiocy.
A couple of years ago, I was perusing the aisles of a trade show when I came across the Ego Controls booth. I had never seen an Ego lighting console before, and it looked very impressive. It is big and it has lots of faders, encoders, buttons and displays. It's the kind of console that makes you want to wear one of those T-shirts that says, "Yes, I know what all the buttons and knobs are for." When I stopped and asked about it, the person in the booth told me, "This is the most expensive console in the world."
"Really?" I said. "Can I print that in the magazine?"
"Yes, of course. And," he continued, "if any console manufacturer raises their price higher than ours, then we'll raise our price."
That's brazen confidence. It makes a bold statement. It says, "We are completely convinced of the high quality of our product." It's the kind of statement we love to hear. It's the diametric opposite of the lowball pricing approach.
Lowballers also make a statement. The statement is, "I'm selling a commodity, and I have nothing unique to offer you except a low price. Furthermore, I'm not the least bit interested in how I can help you resolve your problem, I'm only interested in dumping my product on you, taking your cash and going on to the next sucker."
Ten years ago I spent a pile of money to go to a seminar called "How to sell at prices higher than your competitors," conducted by Lawrence Steinmetz, Ph.D. (pricingexpert.com). The information is more relevant today than it was then, because the economic conditions have changed. In the course materials, there's a paragraph entitled "Your Prices Are Too High." It says: "When someone tells you your prices are too high, your reaction should be, ‘Well, of course we're higher than anybody else. And I'm very proud of that. Let me tell you why we're higher." Of course, then you have to be prepared to back up your statement with facts.
Selling on price alone is a no-win proposition. It drives profits out of the industry, erodes the ability to provide customer service, depletes resources that should be devoted to research and development, retards technological advances, lowers the pay rate and benefits for all employees and lowers the quality of the labor pool. Customers who buy on price alone are not doing you any favors. According to Dr. Steinmetz:
1. They take all of your time.
2. The do all the complaining.
3. They forget to pay you.
4. They tell your other customers how little they paid.
5. They will only order from you again if your price is too low.
6. They destroy your price credibility.
7. They won't hesitate to lie and steal from you.
Several months after I met the Ego Console people, I was at another trade show when I came across the ACT Lighting booth. Brian Dowd was there showing the new MA Lighting grandMA 2 lighting console. He said that it had just started shipping, and I asked the price. When he told me, the first thing I thought of was that those Ego Controls guys were going to have to raise their price. Good for them.
