In 30 years of consultancy, first at a government agency and then independent, I could compare the performance of many companies and conclude that most of the existing difficulties are surmountable.
One of these cases was that of a traditional label and sticker printing industry, Labelset.
The company’s founder was the retired father of the director who hired us. The business has been successful for many years but recently has faced financial, price, and profit troubles.
We started the work by getting to know the company’s facilities and its managers, listening to the concerns of its director, and analyzing the sales and profitability reports by product, besides the financial statements for the last five years.
The diagnosis confirmed the director’s concerns. Sales and profitability were gradually falling, and the equity situation was deteriorating. Several measures were necessary, both short—and long-range.
The first short-term measure to take was about the company’s budgeting system.
The label and sticker industry operates to order. The customer defines their needs, the provider prepares a budget, and the sales agent presents the budget and discusses adjustments with the customer. The Labelset needed quality and reliable software to elaborate their budgets better than the current one.
Another area for improvement was the proximity to the market. The company did not do courtesy or post-sales visits, as it did not contact the most resistant prospects. The top leader did not do field work, only at the office. It was not Labelset’s habit to distribute gifts or invitations and sponsor commercial events. Either it did not post customer news on the company website or social media.
On the other hand, the company has had a strong bond with its major paper supplier since its founder’s time. This supplier was good quality, but its prices were high. He made no price concessions, not even when dealing with large volumes. The Labelset buyer justified the centralization from this supplier because this was the company’s guidance.
Finally, Labelset’s pricing policy was quite strict. The company included its total fixed costs in all budgets, and its price manager did not give up a generous profit margin.
When the new sales representative, who had a large portfolio and a lot of experience selling printed products, presented some budget requests with special conditions, he was not met, confirming that stance. Thus, after several similar attempts, he withdrew from representation.
Even though other printing companies achieved good results, Labelset resisted the necessary changes.
Well, I do not need to tell the end of this story.
(Labelset is a fictitious name).
C. L. Eckhard, author of Pricing in Agribusiness: setting and managing prices for better sales margins.
Claudio Luiz Eckhard is a former professor, business consultant, and author of the books “Ajustando o Rumo”[Adjusting the Business Course], “Gestão pela Margem”[Management by Margin], “A Empresa Saudável”[The Healthy Company], and “Pricing no Agribusiness”[Pricing in Agribusiness].
