June 11, 2021. – In the USA, the plywood people hear that the European buyers pay high prices to win the volume game. In Europe the same story is turned upside down: USA offers better prices and suppliers ship everything there. 

It sounds like there is a lack of reasonable explanations why suppliers continuously increase prices. Whatever story that helps to get buyers in digesting new prices, is welcome.

In cost-based pricing, price comprises cost and margin. When costs rise, suppliers ask for a raise. This is the easiest way to justify increases.

In value-based pricing, price is built on the value customers get using your product. For instance, the value can be gained by savings in the customer’s process. In industrial plywood sales, this type of pricing is possible if you have a niche product without too much competition. But in bulk items it is impossible, because there is always someone selling it cheaper.

Market economy is based on supply and demand. When supply exceeds demand, prices go down. When demand exceeds supply, prices go up. This is where we are today. I guess we can call it demand-based pricing.

For buyers the constantly increasing prices are a hard bullet to bite. Mentally it is easier to accept a price which is justified with higher cost. People expect some kind of reasoning. We all know how it feels to receive a cold price increase letter from the electricity company.

A written communication can help in achieving the pricing targets. But it is not enough. Personal contact and communication are needed and appreciated. That means a lot of work from sales reps. For the sake of long-term customership, the time and effort is worth it.

If you just dictate prices, there is a danger of becoming a dictator. That career path is seldom recommended.