When and how distributors raise prices
For many distributors, pricing pressures are taking more of a toll now than at any other time in recent memory. When is the right time to level a price increase, and what is the best way to help customers accept it?
MHEDA members express concerns about the rising costs of oil and gas, insurance, steel, plastics and a number of other factors that will affect their bottom line in the coming year.
Pricing is always a sensitive issue for Rick Mize, sales manager at Allied Equipment Service Corp. (Indianapolis, IN). “When confronted with a price increase, some customers give you the look like you’re trying to stick them. Usually, once we explain it, they are okay with it.” Mize says the company had three price increases last year, in both lift trucks and industrial batteries.
For the first time since 2003, Advanced Battery Technologies (Greensboro, NC) will raise its prices. President Ken Fearn is instituting a labor rate increase in 2006. “We can increase labor immediately, but on new quote activity we usually transition over a 90-day period.”
Richard Sinclair, president of Jefferds Corporation (St. Albans, WV), believes that prices will increase in 2006 due to numerous factors, including the costs of steel, rubber and fuel and an emerging Asian economy. “By the time we get around to announcing price increases, it’s a fait accompli because our customers know about it already.”
“We’re getting price increases every week on plastic products,” says Rod Jack, president of Storage Solutions (Knoxville, TN), adding to the already volatile steel and energy markets. The good news, he says, is that most customers understand that price increases are just a current cost of doing business. “Most of them use the same products we do, so they know already. It’s not really an issue.”
“I expect the pressure on pricing to continue because we’re in a world market. Like it or not, all domestic manufacturers have been pressed to compete with what’s being offered from offshore,” says Century-Fournier (Youngstown, OH) President William Petro. The way to reconcile increased prices, Petro says, is to pay attention to what the customer is willing to buy. “You have to supply the products that they’re willing to pay for. Beware, though, because many customers are very price-focused.”
For Conveyors & Drives (Atlanta, GA) President L. Gary Ashley, introducing price hikes to customers is a non-issue. “We don’t think it’s good practice to go out and say that we’ve had a price increase. We just quote them a price. If it happens to have gone up since the last time, we just quote a new price and answer any questions as they come.”
“We expect the cost of service to go up, both to us and to our customers. We’ve already seen this with respect to fuel costs and environmental impact costs,” says Bill Ryan, vice president and general manager of LiftOne (Charlotte, NC).
Ryan says he’s already had 3.5% increases from his primary manufacturers, and figures that interest rates will continue to rise, causing the customer to pay even more. “We maintain an ongoing dialogue, particularly with our key customers, because we often look at it as a cost-plus arrangement. We share our cost increase impacts with our customers to help us all understand if the proposed solutions are still effective for both of us.”
“We’ll get hit with more price increases from vendors than we’ve had in quite a while,” Paul Mohrman, president of Lift Power (Jacksonville, FL), says. “Luckily, most customers already have an understanding of it from other parts of their business. It’s not nearly as difficult to broach the subject with them as it was ten years ago.”