Stop Competing on Price

I have a wonderful story about good marketing. It’s about a barber who has a successful barbershop until a discount hair salon moves in next door and offers haircuts for $10. After building a business for over 20 years, the barber feels he’s going to lose what he has developed over that time. As several of his customers begin to sample the services of the discount barber next door, he calls a marketing expert. He explains what is happening, and the marketing expert says, “I know what to do”. The very next day, the marketing expert shows up with a new sign that is posted in the barber’s front window. It says, “We Fix $10 Haircuts!”

Does any of this sound familiar? Are some of your project estimates being undercut by discount pricing offered by other remodelers? I hear these stories a lot. Again and again, I’m hearing about estimates that are not only for less but that some of these estimates are for less than the actual job cost. Forget about making a profit. How will they pay for the job?

These discount contractors won’t be in business for long. Their lack of business expertise will take care of itself, and some unsuspecting homeowners are going to get what they paid for. To address this, let’s go back to the very first sales call to see if we can assist homeowners with their buying decision. There are ways to respond to low estimates, and it’s not by lowering your prices.

Homeowners have only been taught one way to differentiate contractors — price. It’s our job to move them away from price and demonstrate value. Here is a simple question: Are all remodelers created equal? If not, what differentiates them? When I was a design/build remodeling contractor, I wanted prospective customers to see how I did business. I let them see this through my presentation portfolio, which contained the following sections:

  • Company brochure/bio.
  • References and testimonials
  • Completed pictures
  • Sample design agreement
  • Preliminary design schedule
  • Sample construction schedule
  • Sample memo forms
  • Project specifications
  • Sample change orders

Let’s review each. Your presentation materials need to demonstrate your value. Do your presentation materials show prospective customers why they should work with you?

The company brochure tells your story. Where did you come from, what do you know, and what industry-specific education have you received. Simply, what qualifies you to work on their house?

References and testimonials sell you. If you are excellent at what you do, let past customers sing your praises. Let them tell prospective customers how good you are. It’s much better coming from them.

Completed pictures demonstrate the kind of work you do. Make sure you get a professional photographer to take these pictures. Don’t skimp on paying to get this done right. While demonstrating your past work, good photographs also provide future clients with project ideas.

Show them a design agreement. Get paid for your design time. You’re not doing free consulting. Let homeowners know you work with a design agreement, and let them know the deliverables they will receive in return for their design fee. Show them what they will get for their money.

Preliminary design schedule. Most homeowners don’t understand how long a design process may take. Show them a sample. Help them understand each step in the process, and let them know you will be a resource to guide them through each step.

Provide a sample construction schedule. Most homeowners are afraid of projects going past agreed upon completion dates. Show them a sample schedule that you will provide them when their project starts. Address that fear before they even ask about it.

On your first appointment, show them a sample memo form. This is the form I used with customers once a project started. At each homeowner meeting, I would document what was reviewed, what was happening by the next meeting and who was responsible. I gave them a copy. This created a clear paper trail, eliminated confusion and demonstrated project proficiency. These meeting notes differentiated me from other remodelers.

Project specifications. Show them your project specifications. Let them know that this is how you document interior and exterior selections and how this eliminates misunderstandings regarding project materials.

Show them a sample change order form. This is how you eliminate cost overruns. Let them know how a change order works and how you process them.

Homeowners want to know that you are good at what you do. Show them! Show them the value you bring to their project. Most homeowners will pay more if they know what they are paying for. Now, not every homeowner will be impressed with this. Some won’t want to pay the price for this quality of service. That’s OK. Sometimes the best projects are the ones you don’t get.

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