Tips for Competing with Low-Priced Competitors

As a result, the professional firm will organize itself with a division of labor, a series of systems and the best quality people available, which will substantially reduce the risk of error. Indeed, some of the larger and more progressive firms have recently been introducing management information software into their operations to help control the voluminous detail in their projects.

It’s been proven that the extra costs of these services at the contract stage save up to 20 times the money wasted in correcting mistakes and oversights, either during the job or at a later date.

Accepting Obligations

When it comes to kitchen remodeling projects, as with most things, people usually get what they pay for. The professional firm has both a vested interest, and an obligation, to have prospects know what to look for when evaluating two competing proposals with pricing that may be 50% apart – or more.

After all, the professional firm knows how complicated (and costly) a kitchen remodel can be to design and produce…how difficult it is to make it “fit like a glove” with a minimum degree of dislocation. The professional firm knows that it’s accepted industry practice to use customer deposits for working capital purposes. And the professional firm knows that it’s possible to remain in business for years in this industry, operating at a loss but with a positive cash flow, due to these customer payment terms advocated by the National Kitchen & Bath Association.

An unusually low price isn’t a conclusive indicator that a competitor is going out of business. It’s more likely that this competitor has a lower regard for the costs, effort and services required to produce a kitchen with acceptable functional design, aesthetics, scheduling, coordination, workmanship, on-site care and cleanup, and overall performance.

Identifying Price Differences

There’s an awful lot more to buying a kitchen than just picking out a pretty set of cabinets at a showroom. And unique to intangible products, such as a newly remodeled kitchen, is the fact that the customer is seldom aware of being served well. With intangibles, customers usually don’t know what they are getting …until they don’t get it.

It’s only when their friends wonder out loud why the cabinet doors don’t line up evenly that the clients become aware of what they bargained for – faulty installation – as one of a host of possible undesirable conditions.

Professional firms must identify those areas of difference engineered into the project to enhance its quality, appearance, performance and satisfaction. By placing fair values on these differences, your prospect is then in an informed position to assess the risk of taking the lower price proposal versus paying for the worth of the enhancements in the higher price proposal.

Ken Peterson, CKD, LPBC, is president of the Chapel Hill, NC-based SEN Design Group and an instructor for the “Best Business Practices for 2012” seminar, co-produced by KBDN. Peterson can be reached at 1-800-991-1711 or kpeterson@sendesign.com.