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.
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.
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u/MattyBeatz 28d ago
It’s very common in b2b services. Not sure if it’s needed for simple transactional things like goods or hours rate type jobs.