Sealed Air: Marketing Setting Price

So the pricing authority was clearly set at senior management, but would marketing deal with that then?

Yes, marketing. That would be the day to day job of a product manager or global product manager or a product line manager. That’s their job. Their job is to look at the raw material cost, to look at the positioning of the product, to look at the competition and, say, we have this film, at 30 gauge, which has these properties. Then the sales guy would tell you, yes, but competition X, Y or Z is at this price. Then marketing’s job is to say, for what product exactly? For a 29-gauge product. This is not the same. We are selling you a 32-gauge product, etc. Marketing is here to give ammunition to the sales guy, so he fights. But he is the guy who needs to take the marching orders.

We had past dues, like no tomorrow. We had about 22% of our receivables, which were past due. Then you say, how come? Because if you don’t have discipline in the functional responsibilities, you know, because of the definition I gave you, book the order, versus lose the business, he might give terms. If a customer was past due, he might say, that’s okay, I understand. We had over 20% of past dues, in our business. Unacceptable. By the way, the purchaser will play with a guy and he will know that, with this company, he can be past due and that with this company, he is going to be shut down if he is past due. Because the organization, the supplier will just issue a stop order. He will always play with the same guys.

It’s funny, because one day, we issued a letter to all of our customers saying that we have terms, we have to negotiate terms, but once we have negotiated terms, they have to be respected. One day, I was travelling to Mexico and the sales manager says, “Oh my God. We have a customer who really reacted very poorly to this letter.” What’s the issue? Is that guy, systematically, past due? No, no; it’s very, very rare. So what’s the issue? He really is taking exception to the fact that he will have to pay an admin fee and interest, if he’s past due. I said, I’m here; let’s go and visit the customer.

We went to visit the customer, who was a very good, large customer. I said, I hear you have issues with the letter. He said, I don’t think it was well-written and I don’t think that we should pay interest if we are past due and so on. I said, are you past due with us and the guy says, “No, I take pride in not having past dues with you or anybody.” I said, give me that letter. I tore it up and said, this doesn’t apply to you. He looks at me and says, but look at what you wrote. I said, it’s a general letter that says we have a contract between you and us. The contract is that you expect me to deliver product, on spec, on time. We expect you to pay, on time. If you tell me or if any customer tells me, I take a real exception to you imposing me to pay you on time, because sometimes I can be two weeks late and big deal, I’m going to tell that customer, not a problem, sir. Absolutely not a problem, provided you accept that when ask for the product on April 15th, I can deliver within two weeks. Then the guy said, absolutely not. Why do you do this? Is it because your plant needs it at a given time? Yes. So it’s not acceptable for me to deliver, at a point time, between April 15th or April 30th, just like it is not acceptable to me that you pay, at a point in time, between July 1st and July 15th. We have a contract. You respect your part and I will respect my part.

Those kind of things are obvious. Business is an art; it’s not a science. The problem is that there are some good artists and some bad artists. It’s common sense.