Taking proper care of them is still the most profitable thing a business can do
Runaway inflation has become an ugly reality. The government claims it’s around 8.5 percent, and that’s based on the CPI, or Consumer Price Index.
The price of gasoline has more than doubled in little more than a year, dramatically raising the cost of commuting to work and elsewhere. Home heating oil, natural gas, propane and electricity have also had substantial increases.
All these forms of energy are needto-haves rather than nice-to-haves for many of us.
And of course, we have to eat. Food prices are rising steadily, and it seems like each week’s grocery bill is substantially higher than the week before, even when economizing and foregoing the more expensive treats we enjoy. Have you priced a steak lately? Although we can easily put off the purchase of a new couch, a new TV or some article of clothing, giving up food and energy is simply not an option.
What this means is many of our customers have far less discretionary income to spend on many of our products and services.
At the same time, many organizations are trying to recover some of their losses from the pandemic. The temptation to jack up prices is enormous, especially when everyone else is doing it. As tempting as that may be, it’s probably not a great way to increase revenue in many cases.
For instance, I went by one gas station charging $4.319 per gallon for regular gas. There was nobody in there buying anything. Just down the road a little more than a mile away, there was another gas station charging $3.999 per gallon, and they had lines.
I’m sorry, but price competition does not disappear during inflationary times until there are major shortages — something we hope not to see. If anything, price competition becomes even more severe.
How much more can you make selling gasoline at an extra 32 cents to nobody when your nearest competitor is selling it cheaper to everyone? Who’s going to make more money?
Additionally, many customers don’t seem to remember the good we do for them, but they seldom forget the feeling of being screwed. Even if it’s somehow profitable in the short term, trying to take advantage of them is seldom a long-term winning strategy.
Admittedly, we have to make a profit to stay in business. No one can sell at a loss indefinitely, but in tough times narrow margins can often be more profitable and less damaging than the more substantial ones.
The automobile industry seems to care little about this reality. Because of the chip shortages (thank you, China), they can’t get as many cars as they can sell, so they’re trying to make as much money selling fewer cars.
A friend’s truck started burning oil.
Fixing it is probably not a good investment, so he went to buy a new truck.
“I’m not giving them $5,000 over the sticker; I’ll buy oil until they become more reasonable.” If and when that happens, do you think he’ll buy from this dealer, who he’s bought from for years?
How many of his friends do you think he’s telling about this?
I should probably buy a new car, but I’ve heard so many of these stories, I can’t be bothered. My car runs great, so there’s no urgency.
Another friend just splurged and bought a luxury car. The car was just a few weeks old when he got into an accident. They were able to fix everything but one damaged module. It’s on order. Admittedly, the manufacturer would rather ship a new car than a new module, so he’s been waiting several months.
In the meantime, he still has to make car payments and pay for a rental. He’s looking for a lawyer and telling everyone who’ll listen.
Can we buy enough advertising to overcome this sort of word of mouth? Such stories often go viral on the internet. Taking proper care of our customers is still the most profitable thing we can do.
Ronald J. Bourque, a consultant and speaker from Salem, has had engagements throughout the United States, Europe and Asia. He can be reached at 603-898-1871 or RonBourque3@gmail.com.
