Every once in a while, I receive an invitation from a neighborhood poker group asking me to play Texas Hold’em. I don’t play often, but when I do, I’m rarely the last one standing. No matter the quality of my starting hands – Aces, Ace/King, etc. – my conservative nature and perception of the game always place my hand below my opponents. I never seem to value the cards I’ve been dealt.
At MAPP’s annual Benchmarking and Best Practices Conference, expert price negotiator and keynote speaker Casey Brown said in her opening that the predominate perception of most plastics industry leaders when it comes to asking for price increases is that the processor’s leverage is not as good as the customer’s. In other words, suppliers too often assume that their customers are holding better cards, and this slant significantly impacts the outcome of most negotiations. This sentiment was confirmed with real-time data at the conference when only 20% of the 550 industry leaders present indicated they have “a great deal” of pricing power in the marketplace.
Pricing is a business leader’s largest leverage point in improving profitability, yet most executive teams do not routinely address this lever in their business strategies. In fact, another real-time polling question revealed that a strategic intent to address pricing is not as prevalent as it should be during continuous improvement activities. While manufacturing teams take actions to enhance quality, improve efficiencies and boost delivery times, there is not one activity that impacts the sustainability of a company and its employee base more than ensuring adequate compensation for delivered products.
I know that many reading the content of my letter are saying, “Yes, but there’s so much competition in the automotive space,” or “We can’t afford to lose this customer,” or “They told us they can’t pay another penny for our part.” You’re downgrading the cards in your hand. Instead, according to Brown, companies must become excellent at pricing by bringing pricing to the top of the continuous improvement spectrum. This means ignoring the discomfort and ensuring resources are allocated to ensure the best possible price is being received for everything you sell.
As Brown explained, the easiest way to deal with discomfort from a pricing standpoint is to immediately discount the price of your offering. But you can eliminate the discomfort by being prepared for the objections. Show me a company that is excellent at pricing, and I will show you a company that has devoted itself to creating fool-proof answers to all pricing objections.
As leaders in the US plastics industry, our industry is not a commodity, but rather an integral cog in the wheel of progress and innovation across nearly every economic sector. However, plastics industry executives frequently assume that customers and prospects in our sector hold the stronger hand in negotiations. This leads to a suboptimal valuation of the immense value we consistently bring to the table.
I was shocked to see a complete shift in thinking by the 550 conference attendees at the end of Brown’s keynote presentation – a whopping 255% increase occurred in live polling, with executives now believing they have “a great deal” of pricing power in the marketplace. In 60 minutes, this change in perception happened because the professionals in the room took a second look at the cards they are holding: strong cultures, great technology investments, robust processes and a belief in the ability to be the best supplier for their customers. Plastics manufacturers already are holding aces in their starting hand!