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Margins... When is it too much?

Discussion in 'Christian Philosophy & Ethics' started by Cleansed44, Jul 23, 2011.

  1. Cleansed44

    Cleansed44 Guest

    I work as an "Account Manager", sales rep, for a company that sells products at obsene margins sometimes. Some of the products we manufacture, others are commodities. I understand running a higher margin on some of "our products", but we get away with as much of a margin as we can wherever we can. Is this ethical?

    I have several problems with it. I don't like stressing about when I am going to get caught "speeding" and look stupid. I don't like not knowing what our costs are, I don't even know if we are speeding until the customer calls mad. I don't like putting out these fires because it keeps me from spending time on new business opportunities. I don't like feeling like I am taking advantage of a customer. I just want my margin to be the same everywhere that way I know I am giving the customer the best pricing I can and can develop more trust as opposed to begging for them to stay with us.

    I get even more upset when my boss prides himself on running his business with Christianity as a compass. Then turns around and tells customers/prospects "we developed this specifically for you." When really its just a product cut back and its pricing is developed based off of the extremely high product they were using, not the reasonable price we could provide and still make good money.

    What do you think? I think we should give our best number no matter what. It would make talking to a customer feel less like a lie for sure.
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  2. heron

    heron Legend

    In Relationship
    Your boss sees the overhead that might not be obvious to you.
    Insurances. Facilities. Marketing. Staffing. R&D. His payroll expense can be double what it appears, after all the benefits and insurances.

    While the apparent expense of a product may not be much, it has to represent all the time on the phone, the software in the office, the air conditioning, the legal fees, accounting.... he might not even be making money.
  3. sunlover1

    sunlover1 Beloved, Let us love one another

    United States
    I was thinking about this problem recently and I realized that we must consider the market too. If I lower my prices out of the ball park, then I
    risk hurting all of my competitors ....
    2 cents
  4. heron

    heron Legend

    In Relationship
    Since you have seen customers complain, it would be worth investigating more. Tell your boss what you told us -- that you need a little more information to feel comfortable with what you are promoting.

    I was looking at the pricing of commercial real estate rental and purchase recently, and saw a significant difference in location cost. It is amazing that businesses can survive, keeping all equipment maintained, with regulations met.

    Several of my friends own and run businesses, and some still absorb losses personally, when they have worked double time for decades. But I would agree that the markup is often ridiculous, especially when a store has to hold inventory that might not sell.
  5. homewardbound

    homewardbound Senior Member

    As long as your boss isn't misrepresenting what he's selling, or asking you to be dishonest with customers, I don't see anything ethically wrong with charging whatever customers are willing to pay for goods/services. That's what a free market society is all about. If customers don't feel they're getting value, they can ask for their money back or take their business elsewhere.
  6. heron

    heron Legend

    In Relationship
    Online Calculator
    Profit Margin Calculator

    "Malta claims that profit margins of 15 percent are low and not worth wholesalers' time, though 15 percent is a mere 5 percent below the Wholesale and Retail Guide's reported average. On the other hand, Malta states that in wholesale, 30 or 40 percent profit margins represent the upper limit of what small wholesalers can expect."

    The Average Profit Margin for Wholesale | Small Business - Chron.com

    Here's an article quoting typical restaurant expenses.
    The Average Profit Margin for a Restaurant | Small Business - Chron.com

    Their data:


    32 % of each dollar on the cost of food and beverages
    33 % on salaries and wages
    5-6 % on restaurant occupancy costs

    Restaurants with checks under $15 showed a profit of 3% .

    Checks from $15 to $24.99 profit margin 3.5% .

    Checks of $25 profits 1.8% .

    (With this model, for a $25 dinner, the restaurant makes about 50 cents, for a $20 dinner, 70 cents)

    Limited-Service Restaurants

    32 % of every dollar to the cost of food and beverages
    29 % salaries and wages
    8 % restaurant occupancy costs
    6 % Profit before taxes

    "...60 percent who fail within three years or less.."
  7. Niemander

    Niemander Guest

    The answer to "How much is too much" is really a subjective one.

    Ethically, even thinking in a Christian perspective, one ought to charge as much as the customers are willing to pay. They are the ones who set the value at what you do/provide; that your customers are willing to pay you say, $100 for something it costs you $1 to make/produce isn't an ethical issue - per se.

    There can be a lot of intangibles involved in the establishment of a product/service's markup too. Risk is a huge one; seasonality another; niche another; first to market another. Usually it's your competition that will end up driving your margin to some steady mean.

    "Ethics" is a subjective issue - the Golden Rule typically applies to any ethics issue. It may not be a margin you're comfortable with, but one your company (for whatever reason) is. I'm sure there's more involved too....
  8. heron

    heron Legend

    In Relationship
    In general, I agree with what you said... I tend to play devil's advocate too often to balance a discussion. I think that right now, everyone is struggling to hold things together.
  9. Niemander

    Niemander Guest

    There is no doubt that's true. These are difficult times indeed, and in my opinion, only destined to get worse...
  10. fortheus

    fortheus Newbie

    For margin, just let it to the market. Law of supply and demand. There's nothing wrong with it. If no one want the product at that price, the price will be adjusted or the business just go dead.
  11. Niccole1

    Niccole1 I Shall Fear No Evil in The Valley of Death

    Some companies need high margins to cover their opex (because they have insanely high opex, which may be due to hiring many folks who need jobs). Even then, would it change your mind if it was your Church selling the product at high margins, then using the profits for noble causes?
  12. andyboylester

    andyboylester andyredeemed

    If you're in business, then you want to make a profit, and as has already been said, if the customers want to buy at your price, let them!
    it's a bit of an extreme example, but if an artist paints a really nice picture, he'd be nuts to sell it for the cost of materials, plus his time, with a bit added on for profit.
    you could buy a Picasso for $20, in that case!
    In any case, capitalism is inherently evil (even if we have to put up with it as the least evil choice of evils), so don't loose too much sleep over degrees!