Big shift in how contractors do business?

Discussion in 'Landscape Lighting' started by steveparrott, May 31, 2011.

  1. steveparrott

    steveparrott Sponsor
    Posts: 1,182

    There have been many posts about itemizing the (marked-up) cost of products in a proposal vs. submitting a non-itemized bundled proposal. Most of us favored the bundled proposal. But there's a problem. . .

    There's a rapidly growing trend that sees homeowners less and less willing to let anyone in the supply chain add mark-ups to products they purchase. They wonder, why should I pay A + B when A is the real price, and B is the contractor's product mark-up? It's very easy for them to search online and find (what they assume) is less than retail price and they're savvy enough to know the contractor gets a discount from that.

    They're very willing to pay for design and installation, but if they think the proposal is being fattened by product mark-up then they suspect they are being overcharged.

    This kind of thinking is not new, but savvy business forecasters predict that this thinking is becoming the norm and that homeowners are becoming much more aggressive and smart in searching for lowest-possible prices for everything they buy.

    Now, I'm not ready to suggest a departure from a fully bundled quote. But has anyone considered itemizing products at a lowest-advertised-price, then providing a bundled quote for design and installation? Design and installation are the areas where you can make a case for prices based on your unique values as a company.

    Like it or not, lighting designers are not fixture salesmen, and the days when they can expect to extract a profit from products are probably numbered.

    Thoughts?
     
  2. Richie@

    Richie@ LawnSite Member
    Posts: 187

    I am using a new price model which is 5% mark up on fixtures an lamps then I start my bid on design - trenching - cable install - hubs an connections - transformers - power for GFCI receptacles with in use bubble covers - night aiming - control panels if desired and other Incidentals , will update how it goes.

    Richie
     
  3. bcg

    bcg LawnSite Bronze Member
    from Tx
    Posts: 1,835

    My feeling is that the service I provide after the install and my warranting the labor on a filed fixture increases the value of that fixture and I deserve to collect that increased value when I sell it. I think if I'm warranting an install for 10 years then I need to make enough on the install to insure that I'll still be around to honor that warranty.
     
  4. Zohan

    Zohan LawnSite Member
    Posts: 136

    If they want a shopping list and pick it apart they can go with that and get joe schmoe to install it....when things go awry it will cost them just as much for the professional to come in and either fix or redo......on the other hand if they want it designed and installed correctly with quality product and a company that not only knows what it's doing but also stands by their product, then they can hire us....you get what you pay for.....I tell clients that my proposal is not broken down into a shopping list because I am not selling parts, I am designing and proposing a lighting SYSTEM as a complete package....
     
  5. INTEGRA Bespoke Lighting

    INTEGRA Bespoke Lighting LawnSite Platinum Member
    Posts: 4,102

    "Like it or not, lighting designers are not fixture salesmen, and the days when they can expect to extract a profit from products are probably numbered."

    Although we are not 'fixture salesmen' there should be no reason what so ever for Lighting Systems Contractors to forego making a profit on the products that they handle and install. Why should the contractor be the only one left out of the supply chain business? I would argue that the contractors should realize a higher profit on component delivery than the manufacturers or the distributors. Do people really think that procurement time/procedures, inventory control, storage, and accounts payable time / expenses are free and have no value? It takes time and money to order, receive, store, assemble and ultimately pay for all of the components required in a system. To suggest that the contractor should only rely upon billing for design and installation time is simply not feasible.

    If you are operating your business and not recouping the 'soft costs' of operation, then you are doing yourself no favours and might be jeopardizing your long term viability. Recouping the true costs of operation by making profit on the materials that you supply is absolutely necessary.

    All that being said, there is a way that you can protect yourself (somewhat) from 'value seekers' who are looking to pay wholesale prices on materials and then tack some labour on for you. Simply stop promoting the brands of products that you install. I see it all the time... Contractors trucks emblazoned with Manufacturer A, or promoting Manufacturer B in their proposals. Why, I really have no idea... I am pretty sure the Manufacturers are not paying for this prime positioning. By removing all reference to the make and models of the components you are using and focusing your marketing on your self, you will streamline your proposals so that "fixture shopping" is not possible. Basically, take the opportunity to promote your self, your design, your installation, your service and your reputation. Believe me, the client is not too interested to know that you use A-brand transformers, and B-brand path lights and C-brand connectors, and D-brand wire, etc. They simply want a great system, that looks amazing, performs flawlessly and lasts indefinitely! It is your job to figure out what components you need to satisfy the client's needs wants and desires.

    If you are in the habit of using catalogs to showcase the products you supply and install, well simply stop. Take some time and build your own catalog. After all, the client is not looking for an A-Brand lighting system (if they were, they would probably call the A-Brand company) They have you there because they are interested in what you do. We don't sell Auroralight, BK, CAST, Hunza, HK, Nightscaping, etc systems... we sell INTEGRA systems! Try it out yourself... you will be doing yourself a big favour in the long run.

    I also like what Zohan has to say above: "I tell clients that my proposal is not broken down into a shopping list because I am not selling parts, I am designing and proposing a lighting SYSTEM as a complete package.... " A system is truly worth more than the sum of its parts. There is inherent knowledge, skill, experience, and performance that is built into any well designed system. I think that these inherent factors should be rewarded by realizing some profit on the components used in the system.
     
  6. emby

    emby LawnSite Senior Member
    from Ontario
    Posts: 380

    Well folks, James has just posted the best comment on this forum since its inception. Read it, think about it and implement what he has just shared becauase it works 100 percent.
    Very well said James.

    Ken
     
  7. Will P.C.

    Will P.C. LawnSite Senior Member
    Posts: 965

    I am a consumer who will pay for high quality, reputable services and fixtures. My father is a consumer as well who will pay for the absolute best system/products for whatever job we are talking about.

    I can get on the internet or call some friends and find out what each fixture/part costs and spend a ton of time breaking it down figuring out what the contractor is taxing me. I prefer a bundle estimate w/o itemized listings. I am paying YOU to deal with everything and I expect YOU to make your money.

    If I wanted to take on the headache of going through someone and ordering the parts myself and calling in some cheapo to install everything, I have far too much time on my hands or am trying to live above my means.

    I am all for getting things done at a bargain or buying products at a bargain, but this comes with time and work.

    A 10 year warranty on parts and labor doesn't mean anything to me. How will I know you will even be around in 3 years? I have had too many jobs done where I have paid extra for that extra warranty only to find out that once that person gets their money and 6 months down the road, they barely will return a call.

    The internet/media has created a DIY type mentallity for the people that make a decent salary, but aren't millionaires.

    INTEGRA pretty much hit the nail on the head. They simply want a great system, that looks amazing, performs flawlessly and lasts indefinitely! It is your job to figure out what components you need to satisfy the client's needs wants and desires.
     
  8. Alan B

    Alan B Sponsor
    Posts: 406

    Excellent advice. Sell yourself, your service, your design, your quality, your expertise-- not fixtures. Don't even bring brands into the equation or your emphasis is in the wrong place. Believe me 95%+ of your good prospective customers have no idea who ANY of any of these brands anyway. If they've heard of a brand it will likely be a consumer lighting brand.

    If brand comes up or system quality, simply say:
    "we only use top quality professional fixtures (with a lifetime warranty if that's the case). Here is an example... (and hand them 1 or 2 samples of your heavy weight cast brass fixtures so they can see and feel the quality--nothing beats holding a quality fixture). State some of the features (such as solid cast brass, tinned copper wiring, beryllium copper sockets, pre-greased, silicon sealed, heat shrink tubing over internal connection, no powder coating to flake off, water tight, etc.). When they feel a true pro grade fixture and see your professionalism-- that's all they need to know. If they push, tell them you select the best fixture for each lighting application. Nuff said. Fixture is now out of the selling equation... go back to selling your exclusive service, your expertise on creating a beautiful result with the proper layout and connections that will provide a trouble-free system.

    Emphasize not just the importance of using quality products but that with outdoor lighting, due to the harsh environment, quality installations are almost more important than the fixtures. This puts the focus back on you. (use this time to discuss Direct burial connections so they can see your expertise and how important the intangibles they can't see are. This will let them realize they will probably get what they pay for if they get a cheaper quote).

    Customer don't know brands. Sell your expertise and professionalism... they are buying your service and trust. Sell the complete package.

    In my humble opinion is is somewhat out of touch for industry people to think that consumers have heard of any of these niche pro outdoor lighting brands. Customers want to know you are using quality product but they don't know it by brand-- put a 4 lbs fixture in their hand and they'll know it. Secondly any wealthy homeowner is buying your service and reputation.

    Self-promotion disclaimer.... I recommend to our contractors to bring a VOLT® Tank or VOLT® Big Splash that weighs 2-4 lbs and say "this is an example of the top quality fixtures we use. I will select the appropriate fixture for each application." When they see/feel it (without mentioning the brand) it puts aside all questions about system quality. A builder isn't selling 2 x 4's. An irrigator isn't selling pvc pipe, and even a landscape installer isn't selling plants. Likewise you are not selling fixtures. Use any brand you like-- choose one that is heavy and clearly pro grade.

    The only part I disagree with James (and only in semantics) is his first paragraph. That is because I think it should be taken a step farther. Contractors are not in the business of making money on the fixtures mark-up-- no more than a builder is in the business of making a mark up on lumber. A contractor should have a big enough margin that its not based on fixtures, its an overall profit on the job.

    Fixture manu's want you to focus on brand because it empowers them. You should focus on selling your reputation and expertise because it empowers you. Sell quality and build a great reputation. Don't be convinced by what a fixture salesman tells you is best for them, do what is best for you and your customer-- high quality for the customer and your reputation, high profit for you and your family.

    Sincerely,
     
  9. steveparrott

    steveparrott Sponsor
    Posts: 1,182

    I disagree strongly with this. There are tens of thousands of homeowners who have come to know our brand and recognize the quality we represent. many of them specifically ask contractors to install our fixtures. For them, the brand is very important. They've done the research and made their decision. Their final step is to find a contractor who will create the design, provide the fixtures, and install them.

    It's true that many prospective clients primarily research lighting installers and take their advice. But a growing number also research lighting brands and installers. I know from looking at our stats and taking calls from homeowners that a lot of them spend hours on our website and our competitors' websites.

    It's time to stop under-estimating the intelligence of the consumer. There are a lot of smart ones, and their numbers are increasing.

    I've heard many stories about contractors trying to change the minds of homeowners who request our products. Does that piss me off? Sure it does - not just because we lose a sale, but also because I don't believe that the homeowner is well served.
     
    Last edited: Jun 2, 2011
  10. steveparrott

    steveparrott Sponsor
    Posts: 1,182

    Sorry, but my blood is still boiling.

    The past ten years have been an intense effort from all the CAST staff (including the 50 dedicated workers in our foundry). We've worked night and day to produce the highest-possible quality products at affordable prices. We've amassed perhaps the most comprehensive landscape lighting knowledge base, put on extensive trainings, and worked hands-on with hundreds of contractors. We continue to develop new products, to innovate, and to never compromise.

    This is what's behind the CAST Lighting brand (one of the strongest and most distinctive in the industry). That's why I can't stay silent when someone suggests that brand is not important, and that contractors should not respect a homeowners request for a specific brand.
     

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