Question

Topic: Customer Behavior

Customer Lead Times

Posted by hans on 5/4/2007 at 4:13 AM ET 250 Points
Hi,

I wonder if any of You could fins a category where customers are prepared to pay some extra for getting more attention and where lead times are minimized. Could be for example food business with ready made food were You just put them in the oven. Travel companies offering extra to minimize waiting and so forth.

Our client is in the car business and we wan't to give them examples of businesses where customers are prepared to pay for shortened lead times.

Best regards
Hans
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RESPONSES

  • Posted by adammjw on 5/4/2007 at 4:22 AM Member
    Hans,

    You can find quite many examples of this price optimization you mention in your posting.Take planes for example; if you book well in advance the price will be much lower than if you book one week ahead of your flight.
    Another example can be price differences between sales ex-stock( more expensive) than when customer is ready to wait for 4 months to have the order delivered.Here the differences may run up to 30%-40%.

    Rgds

    Adam
  • Posted by hans on 5/4/2007 at 4:25 AM Author
    Hi Adam,

    Many thanks for Your quick response.

    Best regards
    Hans
  • Posted by telemoxie on 5/4/2007 at 6:59 AM Accepted
    Printing, delivery services, dry cleaning, MarketingProfs "URGENT!" questions, some services e.g. home appraisal services... you can also do a Google search on words like "expedited" and "rush prices" and "express delivery" and see what you see...
  • Posted by Chris Blackman on 5/5/2007 at 11:36 PM Member
    Hi Hans

    More examples: First class, business class airline and train travel. Express mail. Fedex same day.

    You say your client is in the car business... How? Are they a manufacturer, servicer, repairer, cleaner or what?

    A bit more detail might get you some better-targeted responses.

    ChrisB

  • Posted by steven.alker on 5/6/2007 at 12:56 PM Accepted
    Dear Hans

    It might surprise you that the well planned process chemical, instrumentation and control industries operate a premium service for short deliveries.

    Most manufacturing plants operate 24/7 and 365 days a year, so to avoid shutdowns through unplanned maintenance (Otherwise known as a breakdown!) they would need to keep an inventory of every single critical component in stock. This can prove prohibitively expensive, so they use planned maintenance and an emergency supply service to get them out of a hole.

    I used to be the EMEA manager for a bursting-disk manufacturer (Disks which go pop when the pressure gets too high, rather than having the plant and the adjacent town wiped off the map) and a non-replaceable disk could cost £120. With most plants employing about 100 of them, keeping a surplus inventory would cost about £12,000. However, if they don’t keep spares, shutting down the plant can cost £12,000 an hour in lost profits.

    I set up a programme where we offered customers and users of competitor’s disks alike an emergency service which operated when they needed it. For about £1,200 they could have a single replacement disk delivered within 24 hours if they were unfortunate enough to need it. Usually, one or two would do the trick to rescue a situation and they could order some extra disks at ordinary prices so that they could replace other disks which might have been showing stress earlier than planned maintenance suggested.

    I used to worry a bit about the 10 times premium we charged for getting our factory to do something quickly. That was until Dow lost all their disks one December and Europe lost its nylon production. We got the emergency replacement order on Christmas Eve and on Christmas day we delivered the replacements to the airport. In cargo, the only plane waiting was a 747. Apparently that was all that they could charter on 25th December, so our bill paled into insignificance to the cost they were prepared to pay to get them delivered quickly.

    I hope that this is useful to you


    Steve Alker
    Unimax Solutions

  • Posted on 5/16/2007 at 12:18 AM Accepted
    Dental laboratories often work under time constraints and dentists will typically pay more for shortened lead times.
  • Posted on 5/16/2007 at 12:20 AM Member
    Dental laboratories often work under time constraints and dentists will typically pay more for shortened lead times.
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