Have you Shown Your Value to Customers?

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“Your price is too high compared to the competition.” Have you ever heard this feedback from your customers or potential customers? Over the last 40-plus years, I have heard this said to me many times. I find it very frustrating, because what it really means is that my shop has not shown the value of our company to the customer. Don’t get me wrong, there has been the odd occasion that we have been totally out to lunch on a quote — it happens, but very rarely.

What I mean by showing your value is that you should not try to continuously compete on price. Competing on price is just a race to zero that you cannot win, since there is always someone out there that will be cheaper. Start showing customers your value instead of just focusing on price, which is the last thing a customer needs to consider. Below, I have come up with a hierarchy on what a machine shop needs to consider important in their relationship with a customer and to show value:

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Quality is the number one thing that every shop should be striving for. The continuous improvement of quality every day is so important. I have heard many stories about people remembering the quality and not price when the competition fails to provide the right part to specification. I think that quality is the first to suffer when you compete on price. To make money at low prices, something needs to be cut and, in my opinion, quality is usually the first. The number one complaint that people have with low-priced parts is that the quality is not there. Remember to make quality your first defining value to the customer!

Delivery is the second most important thing that a customer takes into consideration. If your shop has a great price but cannot get the parts to your customers when they need them, then the price becomes irrelevant. Delivering parts when the customer expects to receive them is so important. Many customers return to their vendors because of delivery. In a world where consumers are used to overnight deliveries because of companies like Amazon, they begin to demand that from everyone, including their machine shop suppliers. There is never a day that goes by that a shop is not moving in a scheduled delivery due to the demand of their customers. To add value, you need to find ways to improve deliveries to your customers. This could be anything like carrying inventory to refining your processes so that production goes much smoother. If you cannot deliver, then the customer will find someone who can, and price is not as important.

Customer service is the third most important component, and it is a term that has been so forgotten over the years as companies compete on price. I am sure you’ve heard the phrase, “I got a great price, but the customer service was terrible.” Many customer complaints about their vendors are tied to not being able to get ahold of anyone when there’s an issue. If they can get ahold of someone, then many times that person is rude or does not have enough knowledge to help. As a consumer, we see this all the time. This also happens in machine shops. Your customers are calling and the person who answers does not have a clue how to help the customer in a courteous manner or cannot help at all. This is a real problem in our industry, and I hear customers complaining about competitors on this often. The other part of customer service is the ability of the machine shop to help the customer with manufacturing problems. Today’s customers are having problems finding experienced engineering and manufacturing people. By aiding these customers, the machine shop shows more value.

Price is the last thing that should determine value. If you are not showing value by providing quality parts, on-time delivery and excellent customer service, then you will need to compete on price. Remember this piece of advice: “The winner is the one that has made the biggest mistake on the quote.” Many companies can relate to this statement. Needing to be only competitive on price is when customers consider your machine shop a commodity, because you do not show value in the first three items. Compete on price last!

I hope that you consider these very carefully, so that if your customers say your price is too high, you realize that you need to show them the other ways your machine shop is valuable. The best way to be competitive is through giving your customers the best quality, delivery and customer service, rather than just providing the best price. Show your value!