I bet you have had a customer tell you, “Your price is too high.” It is probably one of the most common objections contractors hear. Almost all the contractors I speak with tell me they are one of the highest-priced contractors in their area. I can speak with two contractors in the same market area, and one tells me he is the highest and is charging $20 an hour while the other tells me he is the highest and he is charging $35 per hour. In reality, high price may have more to do with perception than the actual costs. Price is a subject we frequently address in our newsletters and seminars. (To sign up for our free newsletter, simply go to www.proofman.com.) Price issues represent the No. 1 reason contractors fail.
Start by understanding it is the customer’s job to tell you that your price is too high. What if a customer told you that your price was perfect? How often has that happened? Not very often. If a customer did tell you that, that evening you would probably be staring at the ceiling at 3 a.m. wondering what you left out of the estimate. You will never have the reputation of being the perfect price. You will either be “a little high but do good work” or “cheap and do cheap work.” Have you ever bid a job and were awarded the job but you were not the low bidder? What did the customer tell the other contractor? He was too low? No, the customer probably said he had a better price and contractor just assumed it was cheaper.
Combating Price Pressure
So defending your price can be tough. No one is out there demanding that you maintain your margins and keep prices high. All the pressure is to cut your price. So what are some things you can do to help combat this price pressure?
- Start by knowing your cost. We have taught overhead and pricing to contractors for years. After attending a seminar, most go up on their prices when they learn how to accurately relate overhead to jobs. Ironically, scientifically applying overhead and knowing exactly what the price should be increases many contractors closing ratios. Knowing what you must have to make a profit and stay in business builds confidence. Having such confidence is a sales builder when dealing with customers.
- Learn what to say back. It only makes sense that if one of the objections you frequently hear is about the price being too high, you should practice and have something to say in response. An approach we have taught contractors for years is to offer a potential alternative and see what the customer says. You could say something like, “I know it seems like a lot of money, possibly we could use a lower grade of shingle or use the same flashing, but would you be happy with that?” Another line is to say something like, “I know it seems like a lot, but here at Acme Roofing, we decided we were better off to charge a little more than to deal with the problems cutting corners causes. That is why over 50 percent of our work is repeat and referral.”
Another common sales tool is to use something like a parallel statement. A parallel statement makes a comparison to a personal situation and allows you to interact with the customer in a positive manner, whereas a conflicting statement takes on the customer and challenges their cheapness. A parallel statement would be something like, “I know. I had my car worked on last month and it was more than I expected. It seems like anything good costs more than anticipated.” A conflicting statement might be, “If you had bought your previous roof from a professional like me, you would not be having these problems.”
When confronted that your price is too high, it is natural to feel offended or attacked. You have just finished estimating the costs and they are now telling you it is too much money. How do they know? You put the estimate together. It feels personal, like they are attacking you. It is not personal and it is not an attack on your technical competence. It is merely a consumer buying objective or negotiation ploy.
- Know the market. There is no question that some segments of the market are more competitive than others. Some surveys report that 1 in 5 consumers only obtain one estimate, so that 20 percent of the consumer market certainly is not price driven. If much of your marketing is Yellow Pages and mass-market oriented, many of those people will get more than one price. If you are bidding new construction, those jobs are going to be much more cost sensitive than working with a commercial building owner you have performed maintenance for and helped build roof budgets. Don’t assume that having a lower price will automatically get you the work.
- Believe in what you sell. We might erroneously assume that a person with limited income may not need a good roof. This is illogical thinking. If I am on limited income and I buy a cheap used car, I do not have the extra money to fix it when it breaks. If I am on limited income and buy a cheap roof, I don’t have the money to pay someone else to repair and rework it. Knowing what you are selling is a professional roof installation can be a powerful sales aid. If you are in the grocery store and see former customers, you want to feel good about what you did for them.
In closing, if a customer tells you that your price is too high, hang in there. Don’t be too quick to fold and give up. Stick by your estimate. You know what it costs to run your business and you know what it takes to perform a good job. Remember, it is the customer’s job to try and negotiate with you.