Cut Profits or Increase Prices?

Christina Lewellen
September 7, 2011
THE TALK...
I found a cool survey this week from our friends north of the border. Canadian business owners indicate that they’d sacrifice the profits of their businesses in order to protect their employees or customers from price increases. This got me thinking about how these questions would have been answered 12 months ago, or six months ago, or perhaps even six months from now.
So this week for the Talk, I’d like to ask straight out—If I held your feet to the fire and made you select only one (not a combination of both), which would you do: increase prices or cut profits?
With everything that we’ve been through in this market, we've all been forced to make adjustments. Given that business is not always black and white, I’d like to encourage you to vote in my black-and-white poll, but then post a comment below or send me an email to explain what shades of gray have worked for your company.  Have you maintained your profits?  Have you had to cut expenses that might hurt in the long run?  Have you been able to raise prices? What creative ways have you adjusted either revenues or expenses? 
 

Survey Results as of 09/12/2011 :

 

If you had to make a choice today, and these were your only choices, would you?

Increase prices

  

 

67%

Cut profits

  

 

33%

 This is a really interesting set of results this week. Honestly, I am a little surprised. Maybe the answers fell the way they did because, given the long and drawn-out recovery, there's just no room to cut additional margins in window and door businesses.

Still, can your customers shoulder a price increase? Has the turn-around come to the point where customers—whether your customers are manufacturers, industry dealers and distributors or homeowners—will tolerate the hike? 

Every once in a while, our poll questions spark these types of follow-up questions. I'd like to hear what you have to say. Consider sending me a quick email to explain why you think industry readers voted the way they did. Will customers tolerate increased prices?

Let's Talk.

Contact Christina Lewellen, senior editor, at clewellen@glass.org.

Comments

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Lewellen,

 

Thanks for the thouht provoking questions.Well, right now we are increasing sales and we're doing it at a loss (so far). So I guess my answer is we're not raising prices as of yet, and our profits are down. However, we're having a record sales year and I knew we wouldn't be making much if any money in this year's growth spurt. In addition, I''m learning that right now is like the perfect storm. September is the shiniest month of the year and we're heading for a record month and hopefully a profitable one too.

I'm writng this mostly because our sales are good. We just need to increase our margin right now to make up for what we didn't get earlier this year.

Regards,

Kevin McCann, President

I wish window and door demand was so inelastic that the choice was this simple.  Unfortunately, demand is fairly elastic, particularly in this environment, so it likely needs to be both.

 

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