Are You Leaving Money on the Table?
The start to just about any work day begins with me walking purposefully into the local coffee shop for my first cup. Some days it’s the Starbucks not too far north of my house, others it’s the more local, less cookie-cutter Colectivo just south. They’re different in many ways, but one similarity is that prominently displayed at each store’s checkout counter is a tip jar. I like my coffee black—no cream, no sugar—just coffee. I like the people in both stores, and despite the relatively little effort it takes for them to fill my order, I almost always leave the change in the tip jar.
I admit to being less of a fan of McDonald’s, but absent other options, their coffee works well enough. I order it black there too, and it’s served up just as quickly as it is in my preferred locations, generally by a friendly server. But I leave no tip. Nor do I tip at Subway, Hardee’s or Burger King. Think for a moment why not.
I recall the story about a wealthy New York real estate developer who was visited by Jimmy Carter shortly after Carter lost his reelection bid to Ronald Reagan. Carter was seeking contributions for the Jimmy Carter Library. When asked about the size of the donation he was seeking from the developer Carter responded, “I would be very appreciative if you contributed $5 million.” Carter’s audacity left the developer speechless, but drew the developer to the conclusion that the reason Jimmy Carter had become president was that he had the nerve and the guts to ask for something extraordinary.
The reason I leave a tip at Starbucks, but not McDonald’s, is because Starbucks has the guts to put the tip jar on the counter.
Should finishers be more inclined to put out the tip jar? When we go above and beyond, bend over backwards to fill a customer’s request or provide a higher than standard level of service we often do so without touching the customer’s price. We don’t have the nerve or the guts to ask for more.
Many projects require up-front work in advance of winning the business. Customers may be willing to pay for process engineering time and other resources consumed in developing a better method for processing their parts. Similarly, finishers may be able to recoup costs associated with requisite specification development and quality approvals. They shouldn’t be shy about asking customers to pay for sample runs or for investments in new equipment or tooling required to process production orders.
Consider adjusting price for non-standard services such as deviations from the standard finishing process, custom packaging processes or materials, storage of inventory pre- and post-processing if required by the customer and for quality or inspection requirements or reporting if they are inconsistent with standard processes.
Some finishers charge an extra fee for expedited orders or if a customer requires that the finisher break in to an existing job to run an emergency order. For those who run their own transportation fleets assessing a fuel surcharge when the price of diesel fuel fluctuates is another way to offset cost and augment revenue and others who don’t operate their own fleets may mark up the cost of pick-up and delivery services provided by contracted carriers thereby creating additional margin.
Implementing an energy surcharge to cover volatility in the cost of natural gas and electricity presents another opportunity to increase revenue. One finisher even initiated such a surcharge at zero percent for a year and then adjusted it upwards when natural gas cost later spiked. Instituting a surcharge to offset fluctuations in materials and metals can pay dividends as well.
Finishers who provide free consultative services to customers may also be missing an opportunity to charge. I know of one supplier to the finishing industry who regularly attended, assisted and even facilitated continuous improvement events for his customers and charged them for doing so.
Finally, don’t be afraid to charge more to customers who regularly stretch payment terms. The days of near-zero interest rates won’t last forever, and when the party’s over, the cost of financing the accounts of customers who delay payment for more than 30 days will not be minimal.
A finisher needs to exercise care in whether and how the additional revenue opportunities above are implemented. Every finisher and customer relationship is different and not all of the above will be appropriate in every instance. I pride myself in being a generous tipper, but a server who, when picking up the check and my payment, presumptuously asks if I “want any change” is guaranteeing himself a haircut in the amount I leave. In the same fashion a finisher must take care not to risk upsetting a customer to the point of adversely affecting the relationship.
On the other hand, finishers who accommodate extra service requests from customers and then fail to charge for them are, in essence, doing so on the backs of the customers who don’t require such extra efforts. In other words, they end up charging all customers for the non-standard requests of a few. What’s more, often when required to pay ratably for an increased level of service the customer may come to the conclusion that the extra level wasn’t quite so important in the first place.
The beauty many of the additional revenue opportunities above is that often there may be no incremental cost to the finisher. Thus, to the extent they can be implemented without compromising customer relationships the additional revenue drops right to the bottom line.
Incremental, cost-free revenue. Now that’s a tip worth taking.
Originally published in the January 2016 issue.
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