Warren Buffet once said in an interview: “The extraordinary business does not require a good management.”
That’s quite a claim. Perhaps, even a controversial one. But you can’t question the knowledge of a man like Warren Buffet, can you?
So if not good management, then what exactly is it that makes a business an extraordinary business?
In the same interview, Warren Buffet goes on to explain: “If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.”
What Warren Buffet is implying to here is the pricing power of a business; the ability of a business to push the price of its products without worrying about losing its customers to its competition.
Sounds great but how do you gain this power?
Contrary to what you may believe, it’s quite simple; you just need to make sure you’re meeting your customer’s needs and wants.
Let’s see an example in action from the automobile industry.
The automobile industry manufactures and sells vehicles. What makes a vehicle desirable to a customer? There can be a lot of things, such as build quality, safety features, handling attributes, fuel economy, fuel type, style, reliability, etc., etc. The vehicle that best meets the needs of the customer demands a higher price.
The result is that an Audi costs more than a Mercedes Benz, which costs more than a Fiat. Since Audi has all the needs of the customers covered, the company charges premium prices and its customers are happy to pay those prices.
Audi has the pricing power in the automobile industry.
Now you might say: “Fuel is a commodity and therefore, the best price wins you the game.” That’s not completely true. There goes more into fuel retailing than just offering the cheapest price.
This begs the question; what factors allow you to put your own price tag on fuel products?
Just as vehicle purchasers have a set of criteria that determines how well a vehicle meets their needs and wants, fuel customers have their criteria based on which they decide where to fill their tanks from. These include:
- Location of a gas station
- Type of fuel a gas station sells
- How well a gas station maintains its forecourt
- Operations of a gas station (whether they are clean, secure, safe and efficient)
- Brand of a gas station
These factors are customer magnets, and if you excel in them, you can “own” your pricing decisions without worrying about losing your customers to your competition.
So let us ask you:
Do you have the pricing power?
For further reading: Offer a cleaner fueling experience to your diesel customers