The Expanded and Annotated My Life and Work

CHARGE THE LOWEST PRICE POSSIBLE, AND 
NOT WHAT THE MARKET WILL BEAR
The next section stresses the need to reduce prices proactively through the 
reduction of manufacturing costs instead of reactively in response to poor 
market demand. This seems to contravene the basic economic concept of 
price as a function of demand, but it makes considerable sense. If the pro-
ducer cuts prices in response to a drop in demand, customers will believe, 
and often quite rightly, that the best strategy is to hold off on purchases 
to see if the price will fall even further. Ford and Crowther (1930, p. 9) 
elaborate: “If prices are used as baits for buyers, to be raised or lowered as 
the buyers feel about it, it is in effect a handing over of the control of the 
business to the buyers to do with as they like. That is a very real control 
and it is exercised in very drastic fashion.”
If, for example, a retail store puts something on sale for 25% off, custom-
ers will realize that the store can afford to sell the product for that price all 
the time. Smart shoppers will, therefore, let the item sit on the shelf when 
the price goes back up because they know the “real” price is lower. If, on 
the other hand, the store sells for fair prices all of the time but never offers 
discounts, customers will respect the prices and not game the system by, 
for example, waiting until end of season sales.
The latter is the editor’s recommendation for Chinese-made goods with 
made-in-America price tags, and the day after Christmas is a particularly 
good time to buy them. The lead time for delivery by container ship means 
that the retailer must order to forecast as opposed to actual demand. If 
the goods do not sell, the retailer must offer sharp discounts to clear them 
from the shelves to make room for the next season’s items, which it must 
also order to forecast rather than real-time demand. Smart consumers will 

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Starting the Real Business  •  33
also wait until the end of a car’s model year to buy because the auto deal-
ers and manufacturers must similarly offer incentives to clear away the 
unsold inventory.
Ford reinforces this concept with this chapter’s statement: “All the large 
and successful retail stores in this country are on the one-price basis.” The 
principle, therefore, is to sell for as low a cost as possible, but never raise 
or lower the price in response to demand. The seller must also reduce the 
cost through continuous improvement, and, specifically, through removal 
of waste (muda) from the entire supply chain.
* * *
This is not standardizing. The use of the word “standardizing” is very apt to 
lead one into trouble, for it implies a certain freezing of design and method 
and usually works out so that the manufacturer selects whatever article he 
can the most easily make and sell at the highest profit. The public is not con-
sidered either in the design or in the price. The thought behind most stan-
dardization is to be able to make a larger profit. The result is that with the 
economies which are inevitable if you make only one thing, a larger and 
larger profit is continually being had by the manufacturer. His output also 
becomes larger—his facilities produce more—and before he knows it his 
markets are overflowing with goods which will not sell. These goods would 
sell if the manufacturer would take a lower price for them. There is always 
buying power present—but that buying power will not always respond to 
reductions in price. If an article has been sold at too high a price and then, 
because of stagnant business, the price is suddenly cut, the response is some-
times most disappointing. And for a very good reason. The public is wary. It 
thinks that the price-cut is a fake and it sits around waiting for a real cut. We 
saw much of that last year. If, on the contrary, the economies of making are 
transferred at once to the price and if it is well known that such is the policy 
of the manufacturer, the public will have confidence in him and will respond. 
They will trust him to give honest value. So standardization may seem bad 
business unless it carries with it the plan of constantly reducing the price at 
which the article is sold. And the price has to be reduced (this is very impor-
tant) because of the manufacturing economies that have come about and not 
because the falling demand by the public indicates that it is not satisfied with 
the price. The public should always be wondering how it is possible to give so 
much for the money.
Standardization (to use the word as I understand it) is not just taking 
one’s best selling article and concentrating on it. It is planning day and night 
and probably for years, first on something which will best suit the public and 
then on how it should be made. The exact processes of manufacturing will 
develop of themselves. Then, if we shift the manufacturing from the profit to 

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34  •  The Expanded and Annotated My Life and Work
the service basis, we shall have a real business in which the profits will be all 
that any one could desire.
All of this seems self-evident to me. It is the logical basis of any business 
that wants to serve 95 per cent. of the community. It is the logical way in 
which the community can serve itself. I cannot comprehend why all business 
does not go on this basis. All that has to be done in order to adopt it is to over-
come the habit of grabbing at the nearest dollar as though it were the only 
dollar in the world. The habit has already to an extent been overcome. All the 
large and successful retail stores in this country are on the one-price basis. 
The only further step required is to throw overboard the idea of pricing on 
what the traffic will bear and instead go to the common-sense basis of pricing 
on what it costs to manufacture and then reducing the cost of manufacture. 
If the design of the product has been sufficiently studied, then changes in it 
will come very slowly. But changes in manufacturing processes will come very 
rapidly and wholly naturally. That has been our experience in everything we 
have undertaken. How naturally it has all come about, I shall later outline. 
The point that I wish to impress here is that it is impossible to get a product 
on which one may concentrate unless an unlimited amount of study is given 
beforehand. It is not just an afternoon’s work.