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Colby, Kansas | Oh but Tim, thank you for providing an opportunity to point out the economies of scale. I sell seed for one of the majors, does it cost the same to produce each unit of seed? Of course! Does it cost the same to market? NO WAY!. Lets imagine it's fall and I'm making sales calls. Which makes me more money: driving 20 miles to meet with one customer for one hour that purchases 250 units or driving 50 miles to meet 5 customers, for 5 hours and they buy 12 units each. Why shouldn't I give the discount to the volume customer, he's a cheaper customer to maintain, service, etc. Take this scanario times 2 when it comes time to deliver in the spring. Don't get me wrong I have a lot of business come from and grow out of 12 unit orders, but I struggle with why people tag economies of scale as evil. So should I treat everyone the same even though it means I loose money and am out of business in several years???
This is no different rather its seed, fertilizer, machinery, you name it. I suppose if we are truly wanting to keep the "small family farm" alive then I propose a ICBS (inefficient customer base subsidy) for input suppliers to keep them alive as well. Until that subsidy arrives in my mailbox I have no choice but to offer volume discounts.
Best Regards,
Lucas Haag | |
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