If You Sell Chevy’s And Deliver Cadillac’s, It Will Cost You!
Imagine going to your local car dealer and ordering a brand new Chevy. When you go back to the dealership to pick up your new car, the dealer insists that you take a Cadillac home with you at the Chevy price. This does not make sense and you can’t imagine that it would ever happen this way. But I see this kind of thing happen in businesses more often than you would think. Why would The Boss allow this?
The Boss stresses high quality in everything the company does. Without proper direction from The Boss, employees may tend to sell Chevy quality and deliver Cadillac quality for the Chevy price. When I see this, I will bring it to the attention of The Boss and I may hear “Our company is driven on top quality, we advertise top quality, and we deliver top quality!” I will begin the conversation by saying, if the customer pays for Chevy quality, they are expecting to receive Chevy quality. When you deliver Chevy quality, you have met the customer’s expectation and you have done your job well. If the customer expects Chevy quality and your company delivers Cadillac quality for the Chevy quality price, your bottom line of the company will suffer, and the customer may not even appreciate the higher quality for the lower price.
How do you know this is happening and how do we correct this issue of lost profits in your organization? I explain to The Boss that this can be discovered during the “job costing” phase of the operations. After each job has been completed, do an analysis of the costs versus the selling price of the job to uncover if the customer received a higher quality product than they paid for because the profit of the job will suffer. Higher quality is not a bad thing if the customer pays a higher price for that higher quality product. We don’t go into the Cadillac dealership and insist that we buy that Cadillac for the Chevy price. As consumers, we are trained to pay a higher price for better quality. It works that way with everything we buy, from our groceries to our new homes.
If the profitability of your company is lower than you feel it should be, you, as The Boss, have to find out the problem. Begin by investigating a few jobs. Check the costs against the expected profitability of that job. If the profits are not there, you may discover that you are delivering a much higher quality than your customers are paying for, or even expect.
As The Boss, you insist on high quality for your customers. Obviously, this is not a bad thing. As you train your staff, you must explain what you mean by high quality and meeting the customer’s expectations. When you over-deliver, the bottom line of your company suffers and the customer may not even realize they got a deal! As The Boss you must define what “high quality” is for your organization and stress that when you meet your customer’s expectations, you will have happy customers and have done your job well.
