Friday, February 02, 2007
Warren Buffett Worthy
Warren Buffett bought a multi-million dollar company back in 1972. The company was See's Candy. The business is still alive today. In fact, it's thriving. Buffett asked one question before he bought the business. The question, "How long do you have to wait to raise the prices"? And that's how he decided to buy the business. That quick. That simple.
Buffett states it best. "If you are an airline today and you try to raise your prices, an hour later, you will be lowering them because of competition. Not the case with a brand like See's. You can't damage the See's brand in the minds of the 30 or so million Californians. Only See's can do that. Their brand is their promise to provide the quality and service that people have grown to expect".
Think about it. You purchase gas because its cheaper than the gas down the road. You purchase copy paper because its cheaper than the other alternatives. You purchase these cheap products because you don't recognize any value in the product. The only value is price.
So here we are at a crossroads. Two Maids & A Mop hasn't increased our rates in more than two years. In the meantime, our wages have increased because the pay for performance plan only works when the top pay level is well above the nearest competitor's top pay. The pot has got to be big at the end of the rainbow. If not, there is no incentive to work. No reason to care.
Yes, we've decided to raise rates. Not a lot. Just a little bit. But not because we want to stuff our wallets. Just the opposite, we want to stuff our employees wallets.
Rate increase letters have been sent out and we've lost eight customers. And in each case, the customer didn't perceive any value in our services. We must have been cheaper than someone at some point. But the comments have been puzzling. Take a look at what they're saying.....
"As usual, the ladies who cleaned did a superb job. We were very pleased and rate them at 10. Please terminate our service."
"Thanks for all your help. You've been great, but I can't afford you any longer. I'll refer you to anyone that asks."
"I would give them a 10. I received your letter increasing my fee. I have been paying 79.00 for more than 2 years…and I do not feel that I should pay more than $79.00, so I will discontinue the service."
There's more puzzling comments, but you get the picture. Now we've got over 500 customers. And we've only lost eight since we raised our rates. So we're not about to jump off any bridges. But I just don't get it. What more could we have done to prove to these eight people that we are the best option? It's obvious that they enjoyed our service. It's obvious that they were happy. At least it's obvious to me. But apparently not to them.
The good news is that nearly 500 customers think that our service is worth a little extra money. That tells me that our service is valuable to a lot of people. For some, we're just cheap gas. But for most people we're much more than cheap gas.
What we are is Warren Buffett worthy. And that, my friends, is the best compliment a business can receive.
P.S. Click Here To Read A Recent Speech From Warren Buffett