Tips for Competing with Low-Priced Competitors

Imagine your prospect’s sticker shock when your company’s price is 50% higher than other firms for what they perceive as essentially the same layout and cabinet quality. Let’s say the project is for a kitchen remodel; the drawings from each firm look pretty much the same to your prospect. So how could there possibly be a 50% spread in price?

Your company has a large, well-appointed showroom, multiple cabinet brands presented in complete room environments and a reputation for good design, quality work and business integrity. Your price is $39,980 for cabinets, countertops, installation, and tax…total client satisfaction guaranteed.

Operating out of smaller space, with more samples than complete displays, Competitor A has not been in business as long. Her price for the “same” project is $26,000…complete satisfaction guaranteed. And your prospect has received other bids in that same neighborhood.

Multiple Risks Involved

While the lower price may look very appealing, the discerning consumer knows there’s a bigger dilemma: namely, which price is the right price?

Actually, each party has considerable risks at stake:

• Your firm may have priced the job too high and risks losing it. Worse, being tagged with a high-price reputation will not only discourage referrals but limit growth potential.
• Your competitors may have priced the job too low and risk losing money on it. Once that’s realized, they risk losing credibility by asking for more money after the project is underway. Or, they risk losing interest in the job because they can make more money by selling the next one. The apathy and lack of follow-through will certainly limit referrals and future business, too.
• Your prospect shoulders the greatest risk of all: If Competitor A is chosen, they risk paying too little and getting a shoddy job that must be lived with for many years. In the worst case scenario, they could even lose their deposit money if Competitor A’s weak business management practices, a recessionary economy or a combination of both force this company to shut down. Then it would cost your prospect even more money and aggravation to find someone else to complete the project. On the other hand, if your firm is chosen, they risk paying too much and feeling foolish.

In such situations, you should understand your prospect’s predicament and try to help:

• Remind your prospect of the intangibility of kitchen projects.
• Complete a Company Price Comparison Worksheet with your prospects to help them understand where the differences are.
• Provide a Company Reference Verification Worksheet so they can research the credentials of each firm.

The Intangibility of Kitchens

Your prospect needs to understand that kitchens are intangible products. They become tangible only through a comprehensive process of interviewing, consulting, designing, estimating, ordering, scheduling, coordinating and installing an incredible number of products, fixtures, surface materials and minute details. Only then, after using the new kitchen, will your prospect know how well the tangible product will actually perform.

To accomplish all of this requires people with extraordinary and diverse skills, product knowledge and professionalism. So it’s these intangibles – the process and the people – that can make or break a kitchen’s success.

If a kitchen doesn’t fit as designed or specified, or if it doesn’t function properly for your prospect’s individual needs, the results can be terrible.

The Price of Performance

Being highly people-intensive, kitchen firms are subject to enormous quality control problems. There are hundreds of possible error sources in producing a kitchen…mis-measuring a wall, overlooking a heat duct, miscalculating the layout of the cabinetry, incorrect appliance specifications, etc.