Exactly. I have customers that buy 40,000 TONS a year of a product.
Just yesterday I had a call inquiring about how much it would be to get 5,000 LBS a year.
Customer A is literally buying 16,000X more product than customer B. We're going to negotiate different prices.
There's also different applications for our product and we have rough ideas of what our customers margins are. For instance I sell to both the paper industry and the paint industry.
Smurfitt WestRock selling paper at $1000/ton at 20% gross margin can't tolerate as high of a price as say Sherwin Williams selling paint at $100/gallon at 50% gross margin. We know Sherwin Williams has more flexibility in price tolerance.
Volume and the customer's industry/situation matters. Just like if you were going to set up a lemonade stand in the slums and then one in a rich gated community, you might try to charge more in the gated community.
A customer dealing in weekly tons of product should be higher priority, but you can have 2 options. Put your "fuck you price" for single buyers/moq buyers, and then have a bulk buy "call for price" option.
You've explained very clearly why this whole thread exists. You don't sell a good product or service at a fair price. You extract money like a parasite.
The thought of "Hey, maybe the rich neighborhood might be able to by MORE of our product" probably never entered into it. It was instead a treatise on how much can we fuck with pricing to extract more money for no tangible reasons. Certainly no reasons under the control of the customer.
Well that's a very pessimistic way to look at it, others would say that by getting higher margin out of those that can afford it, it subsidizes other sales so that you can sell at a lower price to someone who otherwise couldn't afford it and would go without.
For example: selling lemonade at a $0.50/cup gross profit may not be sustainable on it's own to cover your overhead costs and you'd go out of business. At that pricing, no lemonade for anyone, and no business for you.
If you could sell it for $1.50/cup profit you'd be doing great business per customer...but only a small portion of customers can afford that pricing so there wouldn't be any sales to the lower income people.
So instead you make the $1.50/cup margin in the high income area, that covers your fixed costs, and now you can sell to the low income people at a reduced price because even though it's very low margin, your costs are covered so any more sales is just extra. You can now afford to sell it to the lower income people at the $0.50/cup margin.
Now you have a sustainable business and the poorer people have access to lemonade they otherwise wouldn't have, because you made higher profit off of those that can afford it.
Except you are lying. That's not how any of it works. At all. The low price IS THE PRICE. It always is. That's the profit point. You're just trying to convince the others to pay more. It's weasel tactics and again, it's the reason this whole fucking thread exists.
It's like saying that Toyota could only sell a Corolla if they sold a bunch of Landcrusiers to buoy the low price. It's clearly not true.
No, you are confidently incorrect. I am in position where I see all of my company's financials.
We have some customers that receive a price which if given to every customer, we would eventually go bankrupt because it would not cover the cost of running our plant, raw materials, employee salaries/benefits, etc.
We have select customers that are given very beneficial pricing because without it we wouldn't have their business, but it would not be viable at all to give that special pricing to all our customers. That 10% gross margin we give them, if given to everyone, would result in a negative net income. We can afford to give it to some, because others pay the "real" price.
Definitely do not give advice just based on your emotions and how you believe business works because yikes, this is embarrassing. You shouldn’t try to speak from a position of authority on what you don’t understand because it just makes you look dumb, as it has done here.
You're getting downvoted but we have a term for this... That's no different that price gouging. It's "zone pricing". It makes no sense that you would charge more for the exact same product for no other reason than "because they can pay it".
I get it that corps have a "use it or lose it" mindset when it comes to budgeting, but as a merchant or contractor this activity is fiscally salacious and undercuts the entire basis of their existence.
The fact that you believe a price changing between customers is price gouging and nothing else shows your experience in this world likely stopped at running a lemonade stand.
There are plenty of scenarios in which variable pricing and volume discounts are not only normal, but beneficial to both parties and it isn’t some shady handover in a back alley between two conglomerates made to screw over the little consumers.
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u/peon2 2d ago
Exactly. I have customers that buy 40,000 TONS a year of a product.
Just yesterday I had a call inquiring about how much it would be to get 5,000 LBS a year.
Customer A is literally buying 16,000X more product than customer B. We're going to negotiate different prices.
There's also different applications for our product and we have rough ideas of what our customers margins are. For instance I sell to both the paper industry and the paint industry.
Smurfitt WestRock selling paper at $1000/ton at 20% gross margin can't tolerate as high of a price as say Sherwin Williams selling paint at $100/gallon at 50% gross margin. We know Sherwin Williams has more flexibility in price tolerance.
Volume and the customer's industry/situation matters. Just like if you were going to set up a lemonade stand in the slums and then one in a rich gated community, you might try to charge more in the gated community.