Overselling

 
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Old 10-22-2007, 05:01 PM   #1
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Overselling


I've had my assistant do some random quality control audits on recent leads that we've worked. Overall they have been fairly positive but I have seen a trend which I am not liking. I call it overselling, when the customer wants a roof but you try to sell them a new home. Exagerating but you see what I mean.

So since this is costing us sales, I need to combat it. I have written this up and plan to insert it with the estimator's pay checks this friday. Tell me what you think.

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Overselling

Overselling is when you, the estimator, bid more work into the project than the customer may want. This might be done for a number of reasons including greed (higher sale = higher commission), or perhaps the customer needs more than they want. However the practice of overselling is very touchy and requires major finesse or YOU WILL LOSE JOBS.

First and foremost because we are not closers, do not assume your spoken word will explain your proposal. It is better to let your proposal be your voice. The customer may forget what you said a week later and only have your proposal to go on. Assume this to always be the case. What you say means nothing, what you write means everything.

The only way to successfully oversell is to first give the customer a price for what they want and then an option for what they need. Focusing on what you want (Greed) is unethical and will not only earn the company a bad reputation it will lose you the sale.

Letís assume John Doe contacts us and asks for copper gutters on his home. After inspection you see that John has all aluminum flashings on his roof so you try to sell John new copper gutters with all new copper roof flashings because it will look funny to have both on the same home. The way to approach this is to first give a base estimate for the copper gutters that John does want but an optional upgrade for copper flashings. Having the price broken apart will show John that the work is optional and recommended, but NOT mandatory.

Now letís assume Mary Smith contacts us and wants half of her roof replaced, however you decide to bid the entire job. Mary probably has a pretty good reason for only wanting half replaced. Pushing a full replacement on her will probably cost you the sale. A way to approach this would be to bid the half, and slightly mark it up, then bid the full job as an option. When Mary compares and sees she may upgrade to a full job for not much more $$$, she may decide to do it. Or maybe she just doesnít have the funds and she decided to only do half as planned; if you bid the full replacement as the only option you risk losing the job.

Ultimately if the customer wants us to do something that we simply can not stand behind for quality purposes, and then you should over sell, but if quality is not a concern bid what the customer wants. Imagine if you wanted to buy a Chevy Camaro, but the salesman ONLY wanted to sell you a Chevy Corvette. Youíd probably move along to the next dealership because the salesman is trying to sell you something you donít want to buy.

Just remember 11% of something small is better than 11% of nothing at all.
The two examples are real, except I changed the names. We lost both jobs because of overselling, and when pushing for more info found we could have easilyc losed both if we only bid what the customer wanted.
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Old 10-22-2007, 05:39 PM   #2
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Re: Overselling


Great idea. I know I oversell a lot and I have started cutting back. I like to build a certain way... And most call it overbuilding. But when everyone else is bidding just barely passing then I need to bid the same and offer an upgrade.

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Old 10-22-2007, 06:13 PM   #3
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Re: Overselling


Robert, all I do is pass along the knowledge to my guys that I have from the past 6 or so years selling the same products and services they are selling. All I do is tell them what works for me. I "try" hard to be passive and allow my guys to do what ever work since everyone sells different, but when I see something like this happening repeatedly and I have a proven method for comabting it... I feel I must strike like a viper and nip it in the bud.

The fact is, this is a win win situation. It allows the estimator to "over sell" but also allows the customer to buy within their comfort zone. It turns the over sell into an upsell. I also decided I am going to coint he phrase "11% of something small is better than 11% of nothing at all." when ever I see my guys getting greedy.
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Old 10-22-2007, 06:25 PM   #4
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Re: Overselling


How many jobs do you lose in a year due to this practice?

How much does it cost you in profit?

How much profit does this practice make you a year?

I think you are on the correct path but I felt the need to ask my 3 questions.
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Old 10-22-2007, 06:28 PM   #5
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Re: Overselling


I normally present proposals with Good, Better, and Best options. This lets teh customer choose to what extent they'd like to buy. This prevents me from overselling, and permits them to over buy if they want to. On the computer, it's really only 5 extra minutes work and a few more sheets of paper.
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Old 10-22-2007, 06:42 PM   #6
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Re: Overselling


I do similar to mdshunk, though it isn't presented as good/ better/ best. I just give the customer options.

For example, they may want the walls painted and I know that the trim is going to look horrible when we are done. I'll give them an option for the trim, and maybe even break that down into different options.

Sometimes I'll even do this when they say they want the trim painted. My reason is that several smaller numbers are less shocking that one big number.

I often use something that I call Production Cost Savings, particularly if I'm giving a bunch of options that won't be efficient if done alone-- such as a price for each bedroom. I explain that the crew will be standing around watching paint dry and I'm going to charge for that. Instead of the customer paying for the crew to do that, the same money could get another room painted. This helps when I know I can't sell a bedroom for $600, but could probably get 2 for $700.

More to the original point, it seems that overselling would mean that the salesman isn't listening to the customer. Certainly what the customer wants and what they need may be different, but that difference could be presented as an option or upgrade rather than the base price.

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Old 10-22-2007, 07:52 PM   #7
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Re: Overselling


Quote:
Originally Posted by dougchips View Post
How many jobs do you lose in a year due to this practice?

How much does it cost you in profit?

How much profit does this practice make you a year?

I think you are on the correct path but I felt the need to ask my 3 questions.
Doug the answer is I don't know, I don't know and I don't know. It's imposible for me to know exact numbers. I can tell you how many jobs are lost but not why each one was lost. I can tell you that from the examples mentioned each one lost $2,000.00 gross profit. And I do know that the likleyhood of selling those 2 examples would have increased simply by breaking the base from the over.

I really can't speculate on answering your questions. But I do know one lost sale is too much if it is preventable by 3 minutes of extra work when preparing the written estimate.

MD I usually just do Better Best, I think the good better best strategy works but I have found it can often confuse some customers... so really what I usually do is feel them out with conversation try to figure out what they reallyw and then give them an optional up sell upgrade.

brian, I agree several smaller numbers never seems as much as one large big number. The numbers are the same but it's a sphchological thing "It's only ... more." Emphasis on the "only".
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Old 10-22-2007, 09:33 PM   #8
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Re: Overselling


I always feel some customers are open minded and want a professional opinion while others have their minds pretty well made up?

If they have there minds made up and you try to point out "options" they seem to demonize you....I always say you can lead a horse to water but if they won't drink it f-em

When I had the sales "persons" working for me I found they did things I didn't like all the time. I found out more years later but we will save that for another thread.

Be careful and try to get your point across... If you get negative feedback dump their assses I wish you luck!
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Old 10-22-2007, 10:18 PM   #9
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Re: Overselling


Sometimes you don't overbid, but your competition severely underbids.

We get a bunch of sub work from a local flooring shop.
The owner told me a guy came in saying he could do his next floor tile project for $.80 a square foot for labor.

I told the owner I couldn't open the door to my van or set up my tools for that price.

The owner ended up passing the guy over, just cus the price was too low.
But man, that's low. These guys must be starving.
I wonder how their work is. If I don't get callbacks I'd like to have these wetbacks as subs.
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Old 10-22-2007, 10:20 PM   #10
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Re: Overselling


...great...
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Old 10-22-2007, 10:45 PM   #11
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Re: Overselling


Grumpy,

Your version of successful selling could be made into a "System", which is the direction you want to head anyways, for your entire business model.

They too should stick to the system, and you are the man who suffers or gains over the long run.

I still believe in the Good, Better, Best, but you can also change the levels of your starting point and make it Better, Best, and Ultimate Supreme.

I throw a hissy fit mentally when the other guy only lists 2 options.

Always bid the other half of the roof, but have the 1st half include the entire disposal fee and the entire commission and profit margin and the upgrade to the entire roof is not that far of a stretch.

Also, similar to the Good, Better, Best, you can have a Bronze, Silver and Gold, or Platinum version of each selection.

Bronze is just the minimum basics.
Silver includes some and options some upgraded choices.
Gold and Platinum include the whole kit and kaboodle.

Different warranty lengths can be designated to each upgraded selection.

A post job follow up inspection and/or a yearly maintenance service could be a part of the upper level selections.

Short term in house financing could be made available.

Remember, that you are the man in charge and the staff needs to follow your wisdom and direction.

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Old 10-22-2007, 11:17 PM   #12
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Re: Overselling


The letter gives too many examples, and itself stands as a good example of a different kind of overselling. The kind where the prospect "gets it", is ready to make a committment and the sales person talks the prospect out of a sale.

Cutting about 50% from the length may result in a stronger message.
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Old 10-22-2007, 11:45 PM   #13
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Re: Overselling


My sales approach is to get everything I can, but in stages. By stages, I don't scare the mark off with this and that and whatever else I have up my sleeve.

Stage 1 is what they called me out for. Bid that first and shut up.

Stage 2 is to do a really good job to gain confidence and then really start the sales pitch;

Stage 3 is after I've gained their trust that everything is fine and we really are plumbers, point out other things that could be done while we are there and did I mention that extras get 20% off book?
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Old 10-22-2007, 11:51 PM   #14
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Re: Overselling


Quote:
Originally Posted by Putty Truck View Post
My sales approach is to get everything I can, but in stages. By stages, I don't scare the mark off with this and that and whatever else I have up my sleeve.

Stage 1 is what they called me out for. Bid that first and shut up.

Stage 2 is to do a really good job to gain confidence and then really start the sales pitch;

Stage 3 is after I've gained their trust that everything is fine and we really are plumbers, point out other things that could be done while we are there and did I mention that extras get 20% off book?
Sounds like how most people teach you to use the flat rate books.
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Old 10-22-2007, 11:59 PM   #15
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Re: Overselling


Quote:
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Sounds like how most people teach you to use the flat rate books.
"off book" gave it away, huh?

Actually, I developed it from almost 30 years in the field. Once the customer saw that I knew what I was doing, they would give me more work. Eventually, it became a system that works really well.

The drawback is that you have to know what you are doing....know the trade...talk the walk and walk the talk.
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Old 10-23-2007, 06:46 AM   #16
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Re: Overselling


Yes Ed, currently there is a system. (However until I can be proven wrong the 3 tier good better best selling method will not be a part of it.) But each sales guy can throw his or her own spin onto the system. (I just find that time and time again when bidding too many options the customer and I both get confused) I am not with them when they make their appointments, I am not with them when they write their proposals, thats why I needed to add this into the system.

I liked the idea about adding ALL the profit into one half of the roof. That's similiar to what I might do however I usually pick some arbitrary number to add to the base, then subtract it from the upgrade.

2ndlook, shortening it hmm... I don't know what I can remove. I wanted to give two examples of different scenarios that the salesman might come up against, then a 3rd example to cause the salesman to put himself in the customer's shoes.
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Old 10-23-2007, 09:34 AM   #17
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Re: Overselling


Quote:
Originally Posted by Grumpy View Post
Yes Ed, currently there is a system. (However until I can be proven wrong the 3 tier good better best selling method will not be a part of it.) But each sales guy can throw his or her own spin onto the system. (I just find that time and time again when bidding too many options the customer and I both get confused) I am not with them when they make their appointments, I am not with them when they write their proposals, thats why I needed to add this into the system.
You are definitely on to something. Depending on where you are at, 1st of the bids, or last can make a big difference. If a customer has already talked to someone competent you aren't going to shoot yourself in the foot with add ons. If you're the first, that's a toss up.

If a customer has never talked to anyone yet they generally have no clue what things cost. If your salesman keeps adding on and on and on and ends up at $20,000 and the next guy comes along and just addresses what the customer called him for and is a $11,000. The customer almost 100% of the time is not going to even think about "What was the difference between the first guys $20K and this guys 11K?" that's way to much to expect from your customers.

Most likely what will happen is the customer will ask the 11K guy what about this or this, he will already know he doesn't want to spend 20K so he will already know not to ask the 2nd guy to bid on everything the 1st guy came up with, but only the most important add ons. He will also now have them broken out, he will know what his 11K will get him and what the 2 add ons will cost him.

It's extremely tricky situation, if you were only selling yourself you could easily ask some questions to know what path to follow, but having to rely on staff salesman, you have to build all systems to follow an average path and dumb everything down or they will shoot themselves in the foot.
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Old 10-23-2007, 09:45 PM   #18
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Re: Overselling


Quote:
Originally Posted by Grumpy View Post
2ndlook, shortening it hmm... I don't know what I can remove. I wanted to give two examples of different scenarios that the salesman might come up against, then a 3rd example to cause the salesman to put himself in the customer's shoes.
Then you could break it up into two letters and deliver them at different times. Sometimes less really is more.
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Old 10-24-2007, 10:03 AM   #19
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Re: Overselling


One comment Grumpy, and bear in mind that everyone had different management styles, so this is just my opinion. I would choose to not use the word "greed". It often has a negative connotation and would probably be considered by some as an accusation of unethical behavior, which is never good for employee morale. The paradox is, a sales job is inherently driven by "greed". (As Gordon Gekko in "Wall Street" might say, "Greed is good...") Commission based compensation rewards those that sell more. If they aren't hustling every dollar they can for you (within the framework of your company's vision of service) they aren't doing their job.

The key point I would stress is "FULFILL THE CUSTOMER'S NEEDS".
  • If you really want to make more money, find out what the customer truly needs, bearing in mind what they know they need and what you know they need are not the same thing. Listening, responding, educating, and then building a consensus are paramount.
  • Highest in bid price DOES NOT correlate to highest in total sales.
  • A 2/3 tier pricing model allows you to differentiate between "must-haves" and "nice-to-haves". Personally, I would make it mandatory.
Follow each of these up with real examples of "poor execution vs. good execution" to show the difference.

Finally, the estimators need to know they will be held accountable for this request. Otherwise, everyone will say "OK, I will do it" and then a few months down the line its back to the old days. Accomplishing this will depend on how you run your business, but they need to know that you are watching and that their compensation will suffer if they do not follow through with your directives.
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Old 10-24-2007, 11:22 AM   #20
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Re: Overselling


Back when I did that kind of work I did as Grumpy suggests. I would give a bid of what they asked then give upgrade options.

On additions I would generally try to design/bid a project different than others. I found on many jobs I could sell 20% more work for 50% more money.

Many people will pay more if you give them a reason that they can understand. They will start asking for cheap because they don't want to get overcharged. When the other guys come in all pricing vanilla and you give the chunky monkey option, the customer has a reason to go with you and pay more.

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