Date: Apr 21, 2020
Once upon a time, I was a home builder before I turned computer geek. This was a time before the Internet provided a transparent world. To get the materials I needed, at a good price I had to have good relationships and contacts. The key to good service and pricing was making your sales rep like you. Also, doing a lot of business with him (or her) was helpful too.
Recently, as sort of a weekend project, I got back into construction. I added a second floor to my house and did some major upgrades to the rest of my house and I was very surprised to learn the local construction supply industry has not changed a bit in 15 years. It is about who you know and how you treat them. Like a good little lemming, I made an effort to build relationships again, and it paid off…. I guess.
To get a sense of the price discrepancies between customers I started to compare pricing with contractors who do this for a living every day. The contractors that play the game and build relationships with their sales reps get great pricing and those who don’t do not. For example, I was talking to a 2 man siding crew. They likely buy around $100,000 in siding a year from a local supplier. I will likely buy $8,000 this year. My pricing on the siding was 15% less than this crew. The difference is I got to know the sales rep I spent time building the relationship. This local supplier has a 15% higher margin on a much bigger customer because this siding crew did not play the game.
While I am thankful for the price break I got on siding, I also recognize I got screwed when buying from suppliers I did not put the time into. The complete lack of transparency in pricing, and the gamesmanship involved sort of makes me root against these types of suppliers. Why can’t we treat all customers as if they are the same?
For the most part, I have found this trickery with pricing comes from older more local or regional companies (tho some big companies do it as well, looking at you Ferguson Plumbing Supply). The bigger national brand such as Home Depot tends to be more transparent and fair with all its customers. Home Depot used to be more tricky with pricing, tho over the years I have noticed they have become way more transparent, and many other brands have followed suit. I blame Amazon for this. Amazon is a very transparent company when it comes to pricing, and treats all customers the same. What you see is what you get. Amazon also does a great job of driving prices down so all competitors need to compete with that price. Other vendors know customers are price checking against Amazon so there is no reason to try to sell something at a higher price.
Don’t get me wrong I am all for rewarding good customers with better pricing but that should be transparent. Home Depot for example often gives bulk discounts if you by over a certain number of a product (this number is listed right on their website per product). Home Depots will also give around 20% off on orders of $1,500 or more via their Pro Xtra program. What defines a good customer is very clear. Customers can strive for good customer status if they choose. No relationship is going to get you better pricing over someone else.
To explore these pricing differences a bit more I called up a few managers of these price tricky suppliers to try to get a better understanding of pricing. I was hoping to get a road map of what I needed to do as a customer to get the best pricing. Two of the three companies I called point blank said “our pricing is a competitive secret and we do not give it out”. The third just gave me a song and dance but never clearly answered.
In this modern age, I just get disgusted by trickery in pricing. Whenever I purchase something I want to know I am getting a fair and honest price. I want to know I am not getting taken advantage of because I did not schmooze some sales rep. Upon realizing this I tend to support more straight forward vendors even if I am buying from a big national brand instead of supporting local companies. There is no reason not to treat all customers equally.