A lot of things have changed in business over my working lifetime but I think that one of the most fundamental and far-reaching changes is our attitude to price.
All of us in the wet leisure industry are both buyers and sellers. We buy products of all sorts and sizes; from a spa to a valve, from chemicals to pool covers, a van to deliver them in and a printed business card to leave behind.
We sell that huge range of products, sometimes to others in the trade and sometimes to the public.
And we use the money we make from those transactions to buy a car for the wife, cornflakes for the breakfast table and a 43” plasma TV to watch the football on.
We have a different relationship to that word ‘price’ in each of those transactions and it seems to me that that relationship is getting more and more complicated every day.
‘Once upon a time…’
I started out in pool construction in the late 70’s. When we had an enquiry, we would produce an estimate and the bottom line on that quote was a sum that we considered ‘a fair price’. Fair to us in terms of margin, and fair to the customer.
For the equipment and materials we needed to build that pool, we would have talked to our usual suppliers and would have accepted the prices they gave us; because they were fair.
As far as I can remember, a box of cornflakes was about 30p, and that seemed fair enough.
And then things began to change. From where we all stand today it is all too easy to point a finger of blame at the Internet but the web is just a tool. It’s just a machine that lets people do what they want to do.
In 1980, the web was still over a decade away but the 80’s brought us consumerism and the fierce competition that came with it. The 80’s saw the growth of the global market and the first real tide of cheaper imports. The 80’s saw Michael Douglas, as Gordon Gekko, say that ‘greed is good’ and Jack Cohen, who’s business motto was “pile it high and sell it cheap”, began to dominate the retail environment with Tesco.
It seemed to become harder to know what we all meant by ‘a fair price’.
People got the idea of the web as a place to buy and sell stuff pretty quickly; Amazon.com and eBay both launched in 1995.
Almost 20 years on, the web has a dominant hold on one aspect of our relationship with price; if you want to know the price of something, look it up online. From cornflakes to cars, pool covers to chlorine; the web will give you a price.
With a bit of research, people can find the lowest price; but where do they find the ‘fair price’? The price that has enough margin in it to offer good service, technical backup, advice and support along with whatever the product happens to be.
Enough margin for a business to make a fair profit.
Go and compare.
Because of the web’s obsession with lowest price, I think that we all get a little fixated on that as well. But anyone who is competing purely on price is playing a very dangerous game.
Looking at the price that a competitor – web based or otherwise – has put on a product doesn’t give you the whole picture. You don’t know why they have set that price where they have.
The price might be a loss-leader; a price at which they loose money but it draws customers to their business. They might be dumping old or excess stock. They might be looking to build turnover at the expense of profit. They might have done their sums wrong.
Being aware of what other people are charging is a good idea; simply following them or undercutting them probably isn’t.
Ideally you want to get as much of your business as possible out of the price-war game. The more value for your customer that you and your business can add to any transaction, the less price comparisons will matter.
That’s harder at the lower end, but chemicals and consumables can come with a smile and some advice. For a customer who regularly buys all their chemicals and filters from your business, that might mean you offer them 24/7 service support.
At the other end of the price spectrum, a full design and build of a pool, spa or sauna is a unique offering for that particular client where you are adding all your years of experience and skill. A price comparison is impossible.
A fair day’s work for a fair day’s pay.
We all work in this industry to make money. We all run our businesses to turn a profit.
Sometimes, it seems to me, our ego’s get in the way of remembering that. We decide that we want to sell more spas than anyone else, that we want to have more turnover than our competitors, that we want to be the biggest and forget that we might gain more by trying to be the best.
Looking outside our own industry, the High Street has seen some giant companies who put turnover above profit margin and came to a sticky end. Woolworths and Comet spring to mind. Other business issues may well have been involved, but I’d certainly ask, what added value did either of them bring to their customers?
And, once again looking outside wet leisure, I see a lot of success stories from smaller, specialised and very personal businesses that offer great value at a fair price. In my life they are bike shops and independent restaurants.
I think that idea of a ‘fair price’ is so much easier to attach to something that is a little bit special, comes with good customer service and is sold by someone who’s hand you can shake.
Turnover is all well and good, but I don’t know how much day-to-day satisfaction you can get from ‘pile it high and sell it cheap’? Perhaps what you profit from trying to be the best, rather than the biggest, isn’t just counted in money.