Can a Supplier Come Back From a Price Increase? (OPINION)

Price increases can be difficult — especially if your business is dependent on one basic product and that price goes up dramatically. This is exactly what Alliance Rubber Company faced in 2012.

Due to Chinese stockpiling of rubber and to speculators investing in rubber, its price increased threefold in a period that lasted between a year and a year and a half. During that time, as the price crept up, we waited for the price to drop — but it just kept climbing and climbing.

Our price contracts with retailers are set up for a year or more, so by the time we realized we had no choice but to raise the price to our customers, that increase was significant. And we had to tell them a price increase had to be put in place immediately.

We thought about it thoroughly and developed a plan explaining what had happened to the cost of rubber in that short time and its impact on our costs to our customers. We built a matrix for each of the seven industries in which we worked. It showed in detail what had happened to the price of rubber over that year and a half.

Then, one company at a time, we walked each client through the numbers and showed them the reason for the increase. In some industries, those increases were big. We answered all their questions and gave them the time they needed to understand.

Our plan worked well. In spite of our care and detailed explanation, however, Alliance still lost some of its customers, and our sales slipped. Since then, the price of rubber has fallen, and we have been able to lower our costs, recoup our formerly lost customers, and gain a significant number of new clients. Today our business has increased; it’s up 30 percent from its 2009 volume and up 50 percent from its lowest sales year.

I’m also excited about some of Alliance’s innovative products. In the 1980s, we pioneered printing on wristbands, but when Lance Armstrong began the yellow wristband craze and demand for silicone-molded wristbands increased, Alliance was out of luck. We could not make individually molded products out of silicone.

That Lance Armstrong craze was a real eye-opener for us, because we realized we needed to be innovative in this industry, so we didn’t miss out any additional opportunities. Ultimately that innovative attitude led us to products including Loom Bands, Gear Wrapz, Eraselets, and most recently the printed Resistor Strip we manufacture today.

The Resistor Strip is interesting because we are able to print in four-color, and we are the only rubber manufacturer in the United States to do so. These work-out bands and this printing process helped us expand our offering into the advertising specialties business, because we now can customize resistor strips with specific messages from various companies.

Price increases can be hard, no matter what industry you are in.

But my advice is to be upfront and honest with customers, and you can control the damage and minimize losses. 

Jason Risner is the strategic marketing manager at Alliance Rubber Co., headquartered in Hot Springs. To learn more about Alliance, visit www.rubberband.com, or contact Jason Risner at [email protected].