High-end manufacturers know the frustration of watching customers base buying decisions on price. Pursuing low price has sent companies searching the globe for suppliers, and some have been disappointed in the result. Basing the decision on price alone is illogical, because if quality or performance don’t matter, then why buy anything at all? One can always obtain zero quality and zero performance simply by spending zero.
Basing the decision on cost, on the other hand, is utterly logical. This is the way purchasing decisions should be made. Price is one component of cost, but not the whole picture. The other components relate to the expenses and compromises of putting that product to use.
Machine tool supplier Makino recently hosted a seminar in Auburn Hills, Michigan, for mold and die shops. The seminar informed attendees about not just machining technology, but also trends and ideas in the industry. One of the speakers, Jeffrey Fox, co-author of “The Dollarization Discipline,” argued that North American die/mold manufacturers need to do more than just leave their customers to weigh performance versus price. Instead, they need to shift the terms of the debate from price to cost by identifying and quantifying the cost benefits they deliver.
Those benefits may be considerable. More than just a mold, the high-end supplier also offers customers the chance to avoid many expenditures. They include: lost time waiting for the mold to arrive; maintenance and repair of a faulty mold; lost time during mold repair; scrap cost; lost value from slow change-over; lost value from short mold life; finance cost waiting for the mold; and so on. Then there are the costs resulting from a low-quality molded product. When costs such as these are added to the initial low price, which supplier truly has the low-cost product?
Mr. Fox says customers don’t really want to buy anything. In industrial purchases, they buy to solve a problem. Price is used instead of cost because price is often the only hard number the customer has. Can you change that?
That is, with a bit of analysis, can you offer prospects credible numbers showing how much they can save by choosing your product instead of a cheap alternative?
Doing so would make the evaluation more honest. In the end, you are not selling a mold or any other engineered product. You are selling money—and you want to be the one who helps your customer hang onto the most money in the end.