Why You Do Not Want To Be The Cheapest Supplier In The Marketplace

My wife,  was looking recently for a new gate for our house and had decided on the exact style that she wanted. Jo had seen a set of gates that she liked on a house and had taken some photos so that we could get quotes.

Jo went about scouring the local suppliers and the Internet and came across three blacksmiths/gate manufacturers who seemed to be capable of making the gates. We exchanged a few emails with our potential suppliers as well as pictures of how we wanted the gates to look.

Supplier 1: They came back with a price of around £1,200

Supplier 2: They came back with a price of £650

Supplier 3: Called us on the phone, arranged to come and visit the house to find out what exactly we needed and then quoted £300.

We were initially surprised by the large price differences and logically you would think we immediately decided to go with Supplier 3.

Not so!

After a momentary pleasant surprise, Jo began to question Suppliers 3 ability to make the gates. She had doubts about the quality of the product and the ability of the company to do a good job and is considering one of the other options. At the moment it is far from likely that we will buy from Supplier 3.

Now we have looked into the situation a bit more we can guess at some of the reasons for the price difference:

• The cheapest supplier visited site, asked questions and found out we were having the front wall rebuilt therefore the gate fixings could be built straight into the wall. Also we did not really require installation as our builders could easily do that.
• They had a better manufacturing process and made more gates thereby allowing the cost saving to be passed on to their clients

The points that you can learn from this are:

• If you are significantly cheaper than the rest of the market it may be a disadvantage to you rather than a benefit. Human nature makes us question why there is a big price difference between suppliers.

• If you do have a rational, logical reason that you can offer significantly reduced prices compared to your competition then make sure you tell everyone you deal with — in every communication they have with you.

• Don’t assume that price is the determining factor. It very rarely is.

If you or your sales team is convinced that it is all about the price then maybe its time to think about sales training!

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