Once I had gone to one of our customers for a meeting. There was another supplier sitting at his office. He introduced me to that supplier. The supplier was into printing business. He supplied material related to printing - pages, printing machines, colors, etc. He was not having good time, but he came to our customer and asked for some references. Our customer told him one idea, do not see short term loss or profit. Think Long term.
The idea was to give the bar code label printer at wholesale price. A price at which none of the suppliers could retail. This will make sure that he gets the entry into business. Normally, when the capital cost is low, people have perception that the regular supplies should also be at lower cost. This gives an edge over other suppliers and this would give long term business to the printing material supplier.
There are some businesses where there is one time purchase. In this kind of business, the profit margins have to be kept quite high. But their is another category - regular purchase. In such businesses, you need to keep the initial costs low keeping in view the long term pictures. Take 10 Rs. less today, but you get a regular business for long time which will return you more than what you think you lost.
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