Especially for SME’s – 24: Time.

26 January 2022

Mr. :Lowe: It does make business sense: Just think about it. Because you are quoting very high in non- competitive times, you get good profits and it shows in your life-style changes. People around you are looking at you. They start thinking: It looks like the product you make is a very profitable one! So why not we also make it? So my first objection to unreasonably high pricing is that you – through your pricing- are responsible for creating your own competition! Obviously that is not the purpose of your organization or is it?

SME 3: True, this happens- I have seen not only in my unit and in my friends’ cases as well. Also we are leaving our customer with a bad taste in his mouth that all this time we have been over charging him exorbitantly, until competition forces us to charge low. So the whole credit goes to competition! Why not take that credit by being reasonable at times when you can afford to be exploitative?

SME 2: But how to apply a brake on ourselves? We need to have some kind of a norm.

Mr. Lowe: Correct, we will evolve a norm shortly. But before that let us answer this question. What if a customer asks you for a very low price, because he also is an entrepreneur and thinks this is the time to push down the prices, or he knows you have low orders or he is on a project of cutting down costs.

SME 3: We have to say yes, and I am doing it day in and day out now in my present predicament. And I am undergoing losses in practically every order.

Mr. Lowe: How long can you take these losses and continue to serve your such customers?

SME 3: Not for long and I am already considering options such as closing down.

Mr. Lowe: Can we have norms for the lower limit of figures for our quotations also? SME’s: We cannot think of any general norm, it varies from case to case and that is where the risk in business and your entrepreneurship comes into play. Some of us go into playing even some dirty tricks of having an informant in all competitors’ units and getting to know the figure before we quote, so that we ensure we get the order.

Mr. Lowe: Suppose you are supplying now to a customer and he has asked for fresh quotes from you and your competition. One of them is keen to enter this customer and he quotes very low and your intelligence source from his company gives this figure. What will you do, quote lower than that abnormally low figure also?

SME1: In that predicament, I will be forced to quote low because, if I lose that order, large chunk of my unit will remain idle, as this customer is an A customer, in your terminology.

I will gain time even while losing money and try to get a few more customers in the meantime. Once I get more customers, I will quote back my old price to this customer!

Mr. Lowe: Is there no a better option to your suggestion? Suppose this price goes below the lower limit, you should quote your lowest – not influenced by your competition’s entry price and let the customer taste your competition’s experience too. Letting customers experience once in a while is an effective strategy for a unit that is confident of its delivery, quality and service. Of course you should time it well.

SME 1: But how to get this lowest figure we can quote and should refuse to go below that? ………..contd.