[JimLewis]

This is the type of question I usually like to respond to, not ask. But in this economy I am getting underbid like freakin' CRAZY! So I need to now only use my usual responses but maybe have a few backup responses in my back pocket as well.

So when you give a bid, you know you bid it right, and the customer calls back and says, "Well, we really liked your company and your presentation the best. But after we got the other bids, yours was a little higher than all the others. We were wondering if that was your best price or if maybe you could bring your price down to be a little more competitive. We're really looking for a reason to go with you guys but price is obviously a big factor these days...."

I mean, with stuff like irrigation or hardscapes or retaining walls there are some great responses in regards to how long your product will last vs. the cheapo guys. But when it's just something simple like a sod installation, what kinds of things do you say to explain why you're more expensive and why someone should overlook the other, lower priced, contractors and go with you instead?

Again, I have my own usual responses to this. Just looking to start a conversation about this and maybe I'll pick up on something that I haven't tried or used before.

 

[richallseasons]

I generally will not respond on the spot, what I will do is simply ask for the other bids, in writing if possible and then tell the customer that I will double check my calculations and ask them to please be patient as I want to make sure that I have all my bases covered, I then tell them that I will get back to them within 24 hours. This gives me the time to figure out weather I can meet the competitions price or not (sometimes you just cant) then if I can generally I will say that I got on the phone and made some calls and found the material at a better price or that I can adjust some labor time to save a few dollars but I will have to use less help so the job may take a day or two longer, or I simply cannot do any better as this is my best price.

 

[The Lighting Geek]

I have historically been the highest bidder my entire career and I currently have a 95% closing rate. I believe the reason my closing rate is so high because I don't believe it is necessary the play the game as it is being played, I change the rules and make everyone scramble to catch up. Now that said there are a few things I need to make clear. I prequalify heavily, and I earn the trust of the client quickly. I have worked in residential, commercial, installation, maintenance, and of course the last few years landscape lighting. I believe commercial is a different beast and it is by far more difficult to overcome being the highest bidder, but it can be done. That said it is even more difficult in this economy. You need to find what you are unbelievably good at it and let your passion speak to the customer. For everyone that can be very different, but when your passion is from the heart, the customer knows they are going to get a great job. Don't be afraid of doing a little dreaming with your client, talking about how they would use the new yard, or how their customers would love the new look, etc. Act as if you are going to do the job without being arrogant. Be confident in your skills and the skills of your employees. Point out the difference, 'our employees are highly skilled'. Use terms that ring with the customer, which you will find out by asking questions. Pull their desires out and talk about how that will look. You get the point...

 

[JimLewis]

Tommy,

I always appreciate your responses here on LS. Good to hear from you again!

It's a little hard to talk dreams or get people too excited when the job is something basic like just a sod installation. The common belief is that most any company is going to do sod about as good as any other company. And it's not something where people care about the warranty or anything. On a simple job like that, it's hard to distinguish yourself against the others.

Even though I know the guys who are outbidding me will be out of business in less than 5 years, it doesn't matter. The customer doesn't care about that. They don't care that the company doesn't know how to run a profitable business. They just care about the here and now and if they can hire that company and save a few hundred bucks, that's groceries for a few weeks. How do you overcome that?

 

[The Lighting Geek]

I have always said, that if they don't understand the difference, they were not my customer to begin with. I always find that when I am faced with that situation, just sod for instance, maybe I am in the wrong part of the business. I am competing with the wrong people, and need to find my niche. A good niche that defines you makes it hard for the others to beat you. It took me about 2 months after taking over the Landscape division to figure out what makes this company unique and what do the customers that call want from us. I researched old phone calls and what the responses were. I talked to every customer that called, and in the beginning I did not get every job. We had a list of 10,000 past clients and 25 years of a great reputation in arboriculture. I found the niche in providing the same level of customer service that clients were used to, in a service that fit the company motto, 'The Kemper Way'. I redefined our services to fit and now I am booking jobs in April in stead of 3 days out.

I think you need to find a very specific need and then become the expert they are looking for.

 

[letsplay]

Jim,

Don't be scared to make your proposals or estimates stand out from others either. It just might be a sod installation today but two months from now it might be a new tree and shrub installation etc. We take just a little extra time on our proposals to add "Options". The client probably did not ask for it but we have found that it shows to them that we might know their property better then the competition b/c we have taken the extra time to consider enhancements. Maybe you have a 1000sqft sod installation but you also add the option to do bed edging or metal edging. You might not get the sod installation but the customer might call you back to do the bed edging and or metal edging or refer you to someone else that asks about those services.

Don't be scared to be creative and show clients why your are different from the competition. Another brief idea is just sketching or drawing a simple diagram of what or where on the site you are planning on doing work. Many clients have a hard time seeing what they are going to get and a simple drawing helps. Now don't go crazy and design an entire front yard project for the competition to bid on........keep it simple. We have actually been asked to bid on projects at the last minute for landscape installation projects and gotten the job and options such as night lighting because we took the time to reduce the landscape design drawing and show the owner exactly where we would install light fixtures.

I have also seen and heard about so many contractors losing projects b/c they just drop off their proposal at the front door or mail box and do not have any face to face time with the client to even briefly explain their proposal. In this time and age of email, texting, voicemail, etc I think clients really appreciate just ten minutes of your time to show you care and that you want to earn their business. Infact this is one way we weed out clients by their reaction to us proposing to meet with them and go over the proposal or atleast call them first and then send the proposal. If they just want us to send the proposal by email, fax, etc and have no interest of talking then it is a pretty good indication they are just shopping numbers and looking for the lowest bidder which we rarely are.

This is just my opinion but even in this econony I think contractors leave money on the table for projects. Now there are always going to be lowballers that are going to go out of business sooner or later. I agree with Toms advice above that if you can find a niche that you can be competive in and that you truely enjoy doing....it will make a big difference in your sales pitch and how often you seal the deal and your not the lowest bidder. Well I have written a novel, Good luck.

 

[letsplay]

Lighting Geek,

Where does the saying the "Kemper Way" come from? I ask because that is my name and you don't see it used very often so just curious.

Thanks

 

[AGLA]

Jim,

If the problem persists on these types of jobs (and you really want or need them) and you still can't come up with a reason why you shouldcharge more than someone else, what is that telling you?

If you are knowledgable (a given in your case) and don't know why you should charge more then maybe there is no good reason. Just as there is good reason to raise your prices when the economy is growing, sometimes there is good reason to lower them when it is shrinking.

I'm not saying it is good to lower prices, but if you have to, you have to.

So I'll ask you. Why do you charge more?

 

[White Gardens]

The few times I've been bid against, I've asked the customer what the other companies credentials are.

As soon as I bring up insurance, I usually here " Well I don't know if they are or not. "

Then I also bring up quality. Have they shown you any work they've done in the past etc.... I always come armed with my portfolio in case there are any questions about my work.

In the end my customer service, extended warranties, and image have seemed to land me the job.

It's a tough economy out there right now. The only thing I like about it is that it's going to weed out the low-ballers who want to do work for nothing.

It's frustrating non-the-less. :hammerhead:

 

[Az Gardener]

I think there are quality issues in every sale, even sod. Is the other company prepping the soil, are they bringing grade up to walkways and other hard surfaces so people are not "falling off the sidewalk for years twisting ankles". Are they going to bring unseemly characters into the neighborhood to do this job. Are they going to do a good job cleaning up and not destroy other things in the process.

If everything goes right it is simple but how often does everything go smoothly especially for people who are cutting corners.

So you gotta ask your client "Are you feeling lucky?'"

 

[PROCUT1]

Jim

This is the exact battle that I had when I was in the business. Unfortunately the "simpler" the service the harder it is to justify a price difference. Mowing was the worst.

There is a tipping point in the business where references and quality become the determining factor over price but even that is not foolproof.

A prospective customer will see a neighbor get a beautiful wall built and they will want work at their house like it. They will probably be shocked when they get prices from the professionals. It may be out of their price range.

But then you get a guy from the local paper that shows up and says "I can do what your neighbor has and it will be xxxx" Much cheaper than the other estimates.

Now the customer is deciding whether to not do the job, or to take the chance with the unknown guy that may be able to do it. Going back to the professional and asking him to price match is to give them the peace of mind that it will get done.

In this economy its only going to get worse.

The reason I target only large commercial work in the sealcoating business is because it is such a "permanent" service, customers are wary of what can potentially be a long lasting irrepairable screwup.

When I meet with them I take the attitude of an equal. They are a powerful realestate owner and Im a powerful contractor. I use no sales pitch. I dont talk about lowballers and such.

In my market, Im able to "throw out names" of other big realestate players that I service and I start the conversation with my resume and references. That immediately sets the tone.

The customer knows right off the bat they are dealing with someone who does this every day, knows it inside out, and is not wetting his pants to do the job.

In their mind their shopping center is a big job. When they meet me they see that we do properties twice the size of whatever they have with our eyes closed.

That makes the tone a lot different than the guy the pulls up who seals driveways and tells the owner "he can pull it off".

Its just like when you go to the store and see prices on the shelves. You know walmart has a system of pricing to be competitive and ensure they stay in business. You dont even think to negotiate there because its so matter of fact.

I do the same.

Even in my business I still run into the same problem. I dont PUSH residential work but I will do it.

My pricing for driveways is higher than most of my competitors. I find that many people will pay the little bit more to have the same contractor that just did the local shopping mall do their little driveway.

Others will see my price of $200 and pound the heck out of me why others want $150.

Many times I just have to say "no thank you"

I dont know if I made any sense in this post, Im just kind of typing out loud.

I guess it comes down to sometimes you just cant justify the higher price in a way that the customer cares.

 

[PROCUT1]

Like with mowing.

90% of residential customers dont care about insurance, taxes, registration, uniforms, ZTRs, equipment, or anything that we think about.

They see tall grass and want someone to mow it thats not them.

So trying to sell them on all of the above as reasons to why your price is $10 a week more isnt going to work when they really want a "deal" which to them is the guy doing it on the side for cash.

 

[LB1234]

As other have said, bottom line, you need to pre-qual your potential customers. If I already provided the quote and its significantly higher and need to find out first if I screwed up my 'pre-qual' and they are the type were cost is the #1 priority. If they are, cut my losses and move on to the next one. Its not even worth my time to try and explain.

However, if price isn't their #1 priority than I need to get them into the realm of price isn't the only major factor in determining who to get with. Yes, track record (i.e. references) and quality are a definate. However, how about what happens when the competition is done with the job and when we are done with a job.

As for your sod example or a simple landscape install...

We would provide a maintenance write-up. How to water, when to water, when to mow, when to fertilize. For our landscape installs we provide a document with pictures and a write-up for maintaining the plants (when to cut back perennials, when to trim the hedges, etc.). We would let them know we would be stopping in periodically over the next few months to make sure they are not under/overwatering. We would let the know of signs of trouble or caution them for a potential problem. If they had a sprinkler system we would set that zone for them and then come back and reset as necessary. If they didn't have a sprinkler system we would explain what they needed to get for proper watering. Going a little further we would set it up at no charge if they had everything available the date of install. How about warranty issues? We might also ask who the other contractors are getting their sod from (say we had issues with a certain vendor yet they are cheaper). We would also go over the install step by step to make sure that other company is doing EVERYTHING we are doing. Who is there materials provider? Is the other company willing to walk with the customer at the nursery so they can get a close-up look of what the plants look like? How about plant sizes? Even a simple landscape install price can vary between utilizing 3 gallon versus 5 gallon pots or hardwood mulch versus cedar?

 

[PROCUT1]

The other thing to keep in mind. And this is the toughest one of all.

Sometimes the competition is cheaper and actually does good work.

We're all quick to think that anyone cheaper than us is going to do less of a job or poor quality.

Sometimes theyre cheaper because they dont know how to run a business and they are on the road to failure.

Sometimes theyre cheaper because they know something we dont.

Think about this.

If I prebuy a very large quantity of sealcoat I can save almost 30%. I would need over $100,000 to pay upfront for this.

If my competitor has the money and does that, he can beat me out on every job by 30% and make the same profit I am.

Not knowing that, i would be saying "How the heck does he do it so cheap?"

 

[PROCUT1]

If I do a great job with the same material and he does a great job with the same material and we both have impressive references, then how do I justify the price difference to the customer?

Now there would be a dilemma.

 

[LB1234]

great point pro-cut.

to add to that (and not wanting to start anything)...

they could be using illegal labor as well.

 

[AGLA]

All of the comments make a lot of sense, but when it gets to the point where you are not getting enough work, you have to adjust your price no matter how good you are or how equal you are to your clients. Until that happens, you should stick to your guns and get paid as well as you can.

When the economy is hot, being good gets you more money. When the economy is slow, being good gives you a competitive advantage to get work, but at the same price as your close competition.

It is not going to be as easy as a lot of people think as the year progresses.

 

[PROCUT1]

All of the comments make a lot of sense, but when it gets to the point where you are not getting enough work, you have to adjust your price no matter how good you are or how equal you are to your clients. Until that happens, you should stick to your guns and get paid as well as you can.

When the economy is hot, being good gets you more money. When the economy is slow, being good gives you a competitive advantage to get work, but at the same price as your close competition.

It is not going to be as easy as a lot of people think as the year progresses.

Excellent post. Exactly what I said but in much fewer more clear words....haha

Its gonna be a tough year boys.

People who didnt scrutinize price in years past will be this year.

Im doing it myself. Im going through every single bill and expense my company has and trying to cut it. Unfortunately in this climate it sometimes means severing long time relationships with vendors.

Im not doing that by choice. Im doing that because I HAVE to cut expense.

And dont think your "loyal" customers wont do that to you.

When theyre getting laid off and afraid of losing their homes, those $20 lawn flyers are going to get looked at. And youre not keeping the $40 account no matter how dependable you are or how good a job you do.

Two years ago, you would have. This year....Wait and see.

 

[larryinalabama]

Make a photo album with some high quality pictures of you work.

 

[JimLewis]

I think there are quality issues in every sale, even sod. Is the other company prepping the soil, are they bringing grade up to walkways and other hard surfaces so people are not "falling off the sidewalk for years twisting ankles". Are they going to bring unseemly characters into the neighborhood to do this job. Are they going to do a good job cleaning up and not destroy other things in the process.

If everything goes right it is simple but how often does everything go smoothly especially for people who are cutting corners.

So you gotta ask your client "Are you feeling lucky?'"

Thank you! Great response. I can use some of that!