O Tannenbaum, O Tannenbaum how lovely are your branches.O Tannenbaum, O Tannenbaum how can you price stay stable.
On Nov 23rd, WRAL in Raleigh, NC reported that, "Christmas tree prices hold steady for 2018 season" – this despite a muddy harvest requiring farmers to pick up vs. drag trees which doubled their labor, a ‘slight Christmas tree shortage,' and increased freshness and smell due to the high moisture content in the needles.
I thought to myself, wow, those farmers should add a harvest surcharge to address the unforeseen cost to serve increases due to the excessive rains from two hurricanes this season. Then I saw a farmer from West Jefferson, NC quote: "on the wholesale side, those prices are pretty much set before the harvest time…you can’t just jack the price up one year you know…" My next reaction was, how great, so glad these farmers have the right principles of loyalty to their customers.
Then a distant memory came flooding down on me. Once upon a time, I worked for a company who was impacted by flooding, in fact the whole industry was impacted by flooding. My company decided to buck the trend of charging our customers higher prices due to the resulting severe shortage in the market. So, we kept prices low. Our thinking was this would show customers we were fair with our pricing and they could count on us in times of trouble vs. the other suppliers. After all, this would certainly increase loyalty from our customers once the supply and demand came more balanced. We would gain more business and not be asked to meet price targets in return for our generous gesture during the flooding. Unfortunately, we were WRONG! What we forgot is that customers, and in particular procurement teams, have very short-term memories. Procurement uses tactics to obliterate any form of value delivered, including being fair in a time of shortage. They will continue to focus on getting a discount no matter how great they were treated in the past.
You might think that my inner Grinch is coming out – charge more for the trees I say! But no, I think there is a good lesson for us all in this story of dear Tannenbaum. If your cost to serve increases, holding contractual pricing sounds like a fair and reputable approach – just don’t do it blindly. Think long and hard about what you are doing and who receives the fair treatment. If you are selling locally to end-consumers, people might be more likely to remember your gesture and become more loyal. However, if selling B2B or perhaps to another wholesaler or retailer, look at their prior behavior. If they have shown loyalty previously, take care of them and hold to your contract; they are most likely a relationship buyer and your job is to make sure they are taken care of.
However, if past behaviors point to a traditional price buyer or successful poker player, then charge the heck out of them and point to your contract terms re: acts of nature as the reason you are applying that surcharge. And don’t forget to segment that beautiful Christmas tree inventory into good, better and best to provide the shapeliest, least muddy, and most fragrant trees at a premium to anyone who values those features and benefits and is willing to pay for them.
Happy holidays everyone and let’s all make a special toast to the hard work these farmers do to bring holiday joy into our homes in the form of fragrant and beautiful trees.