Monday, March 16, 2009

Can I get a better price if I buy a dozen?

I was talking with a fellow today about weaner pigs, and he asked me if he'd get a better price if he bought a larger quantity -- in this case he wanted 2, but could go to 6 for the right price.

And I found myself instantly conflicted. Part of me wanted to make the larger sale -- more volume, little less profit, pretty standard business practice.

But the other part of me, which I took a while to figure out, said NO. Pretty strong no, as well.

I've run across this from several small producers; like when I was buying tuna from a fisherman on the Washington coast (you can get GREAT locally caught albacore tuna for $1.83/lb, bled and frozen on the boat, btw) and I asked the other side of this question -- can you make me a better price on the fish if I bought more. He surprised me by saying no.

The fisherman, like me, has a finite supply of fish to sell. He knew that he'd sell all of his fish at the price he set. If he sold the fish to me at a smaller price, he'd forgo the profits he'd eventually get. The cost of letting the fish stay in his freezer for a few more weeks or a month wasn't really an issue.

I'm at the same place with pigs. I've got a small supply of pretty good quality weaner pigs that are carefully hand raised. I guarantee their health -- I'll replace them or refund your money if they die -- and I'm pretty sure that I'll sell them all. So I set a price that I can make about $20 a pig, figuring that's a fair profit margin, and that's my price.

But if I don't sell a pig, there's a good chance I'll sell it as a barbeque pig this summer, for $80 profit. Or if I don't do that, I'll sell it as a whole pig for $120 profit. Or as cuts at the farmers market and make $200. So the cost of keeping a pig a few weeks or months longer isn't an issue. This is the first business I've been in where the output I can produce is very strictly constrained. It takes me 6 months to come up with a weaner pig; a year or so to come up with a baconer, 7 months for a laying hen, and so on. I pretty much have to lay out the quantities of what I'd like to have available for sale set 6 months to a year in advance.

So when this fellow asked for a better price for a larger quantity, my answer was "no".

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