Spall: Get A Charge Out Of …
Yeah, I complained. While I received a standard reply that such a charge is allowed in the company’s rates and regulations, I also got FedEx to take it off the bill. And I also resolved to increase a companywide effort to use the ‘Net for faster delivery costing much, much less.
A few MBAs might holler that I cost the company extra money for that FedEx delivery; I’ll grant that it added a bit to the corporate effort, but I’d also note that FedEx likely made allowances for that as part of its operating overhead, just like airlines once figured in the cost of transporting baggage and serving some weird cheese-and-pasta concoction on the midday LAX-DFW run.
In other words, you never got anything for “free” in buying a product or service; you paid for it as part of the base cost. What we’re seeing now is the addition of standard overhead costs (including anything resembling service) as surcharges without a corresponding lowering of the base price. This increases the potential for incidental profits on a regular basis, which translates in customer terms to being nickel-and-dimed to death.
What’s this got to do with the stone trade? Plenty. The past decade saw a near-crazy unbundling of costs to drive down the base costs of fabrication, installation and maintenance. The low price got customers to buy, many of whom assumed that everyone in the trade charged extra for seam-matching, cutting of returns, sink cutouts, shimming and protecting floors and carpets with plastic sheeting.
The concept of breaking down a job into components holds plenty of merit. Some stone-shop owners surely know the man-hours and consumables needed for every part of a standard residential or commercial project. It’s a sure thing that an equal number of owners use hunches and guesses, and still find plenty of profit in almost every job.
Auditing your in-house workflow and in-the-field performance isn’t a bad idea at any time, but it’s crucial as you’re searching for any loose change to pay the bills. You can’t cost-save your way to a profit, though, and trying to develop a pricing strategy on the time-and-motion scale is a dicey way to build a good customer base.
There’s a big difference between job-costing, where you figure labor and materials to the minute and the penny to calculate overhead, and ala-carte price lists where customers order off the menu for everything from moving slabs in the yard to wiping out the sink after installation. The former allows negotiation; the latter locks in prices and attracts extreme value-driven customers (often defined as cheapskates).
Trying to unbundle everything in a job also offers a potential hazard; if you charge for specific items and services, people expect higher-quality goods and attention. Give them the same ol’ stuff – or less – and they’ll feel peeved and cheated. Just ask the hapless baggage clerks at airports where luggage keeps getting lost, and passengers think they should get better service for $25 per suitcase.
Times are still tough, but there’s no substitute for offering good products at a reasonable – and not necessarily rock-bottom – price, where you occasionally give a little to make a customer happy. Stone is still a premium item that requires first-class workmanship to get the job done right.
Don’t sell your work like today’s airline ticket. You won’t get many happy returns.
Emerson Schwartzkopf can be reached at emerson@stonebusiness.net. You can read his blog at Stone Business Online and stonebusinesseditor.wordpress.com. And don’t forget to keep up with Stone Business on Twitter and Facebook.
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