The Customer is Not Always Right

We’ve been working with a number of firms in recent month.  In most cases, their failure is that they are too customer oriented.  They do a great job listening to and solving customer problems.  Their service and support people are responsive and always get the job done.  Their technical people do a great job making sure the products and services work.  Each of these companies read the book on customer satisfaction and make sure that all of their people know that their job is to satisfy customers.

The problem is that few of these companies make a good return on these efforts.  Their profits are low.  Miserably low.  Why?  Because those customers who love the products and services, who really appreciate the support and are glad to be buying from those companies have turned procurement over to professionals who have learned that when they negotiate hard, prices will fall–even for high value goods and services.

It doesn’t do us any good to service our customers well if we aren’t going to get paid for it.  Good pricing is all about understanding our value and subsequent pricing power.  Procurement professionals’ job is to get us to forget that.  Their job is to convince us that there is no value and to get us to panic and drop price.  Our job as pricing professionals is to understand when that is happening and stick to our guns and insist on the value is real and that our prices are fair.

Customer orientation is good to a point.  And the point that it stops is when we don’t get paid for the things we do for customers.  Good pricing people do understand that and take those things away when customers don’t want to pay for them.  That is good negotiating.  That is playing the game that procurement people play.  We’ve got to learn to play it at least as well as they do.  Now, if we could just get our senior executives to learn to play the game as well too!