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Discussion Starter · #1 · (Edited)
When a customer believes you are a commodity compared to all other "competitors" then price is the only intelligent consideration. You will NEVER change this.

Trying to change unchangeable, universal, rational behavior into irrational buying behavior paying more than considered necessary will NEVER happen. That is the wrong approach to solving your underbidding problem.

TRYING TO CHANGE RATIONAL BEHAVIOR WILL SUCK THE LIFE OUT OF YOUR ENTHUSIASM. IT WILL FAIL.

The definition of a commodity? "Potential customers" believe you are a commodity if they see NO DIFFERENCE between you and other available contractors.

Who's fault is it when "potential customers" see you as a commodity? IT'S YOUR FAULT. In other words, consistently investing your time into bids you lose because of you getting under bid, IS YOUR FAULT. The sooner you TAKE RESPONSIBILITY FOR FIXING instead of blaming it on customers rational behavior and lower priced "competitors", the sooner you can solve this maddening issue for yourself.

If a customer sees NO DIFFERENCE (commodity) between you and those you bid against, either you are severely lacking in your marketing skills attracting the wrong prospects or you are severely lacking in your qualifying, sales and presentation skills. EITHER WAY IS YOUR FAULT. Taking responsibility is the FIRST STEP to FIXING your underbidding problem.

If these prospects are right that you are NO DIFFERENT, then why would they pay you more for the SAME THING? THEY WONT

Why is the word "competitors" quoted? If you are unique then you have no "competitors". "Unique" is the opposite of "commodity"

How do you solve the problem? It's a three step solution

1. Develop a USP. Unique selling position.
2. Drastically tighten up your qualifying process
3. Develop sharp, effective, perfected sales presentation skills

STEP 1 Develop a USP. Unique selling position.

Here are examples of USP (Unique selling position) available. Some are very crowded (slave wages) others are very rare (high margins)

High margin USP's (scarcity demands highest prices)

A. Highest quality
B. Fastest
C. Best service
D. Most reliable
E. Emergency service
F. Trouble free transactions
G. Highest degree of competence and professionalism
H. Credentialed by industry organizations
I. Referrals from satisfied customers that place high value on quality and "high margin" service
J. Legitimate business licensing
K. Highly trained staff
L. Above legally required insurance coverage
M. Above average safety programs
N. Long term security of warranties
O. Highly professional appearance and behavior of staff

Mid margin USP's (average product and service results in average margins)

A. Good quality
B. Reasonable speed
C. Good service
D. Reliable
E. Timely service
F. Minor challenges to transactions (voice mail phone tag, no financing)
G. Average competence and professionalism
H. Experienced
I. Referrals from satisfied customers that value mid margin services
J. Legitimate business licensing
K. Average or below average level of staff training
L. At legally required insurance coverage
M. Average or below average safety programs
N. Unpredictable security of warranties
O. Average or below average appearance and behavior of staff

Low margin USP (flooded, bottom feeder, crowded markets result in unprofitable business killing margins)

A. Average or below average quality
B. Inconvenience
C. Average or poor service
D. Unpredictable reliability
E. Untimely inconvenient service
F. Substantial challenges to transactions (can't get in touch, goofy funding, customer buys materials, etc)
G. Barely competence or incompetent
H. Inexperienced
I. Referrals from customers that value low margin services
J. No business licensing
K. No staff training
L. No insurance coverage
M. No safety programs
N. No or bogus warranties
O. Unprofessional appearance and behavior of staff

STEP 2 Drastically tighten up your qualifying process

If you are bidding on projects you have no chance of getting because you are competing on price with low margin "competitors" for "potential customers" business that value "low margin" quality, then ask yourself what the hell you are doing that for and then STOP DOING IT. YOU WILL EVENTUALLY GO OUT OF BUSINESS.

Instead develop a "potential customer" QUALIFYING process that eliminates these unprofitable, time wasting investments of your time and focus ONLY on customers that value "High Margin" quality.

STEP 3 - Develop sharp, effective, perfected sales presentation skills

If your "potential customers" can see NO DIFFERENCE between you and "low margin" competitors offering "low margin" services, then YOUR PRESENTATION STINKS. It is YOUR FAULT because your "prospective customer " qualifying skills and sales presentation skills are weak or misguided.

Do you have a pitch book? Consistent, well thought steps in your presentation process with a specific purpose for each? Do you have a checklist to be sure you touched on all important points that present your USP so you are not seen as being a "commodity" by your "prospective customers"? Are you eliminating time wasting, tire-kickers and unrealistic cheapskates with no budget that value "low margin" quality exclusively with your well developed reliable qualification process? Do you know how to close sales in fewer steps or more efficient and more satisfying processes than "competitors"?

Why is that?

Invest your energy more wisely. If the "prospective customers" you offer a bid to can not tell the difference between your "high margin" business services and "competitors" offering "low margin" services, that is PATHETIC, YOUR FAULT and you have way too much work to do FIXING YOUR PROBLEM to be burning energy on whining and blaming the WRONG subset of "potential customers" and "competitors" for UNIVERSAL RATIONAL BEHAVIOR THEY WILL NOT AND SHOULD NOT CHANGE.

"Low margin" contractors and "customers" are part of the food chain. GET OVER IT. IT WILL NEVER CHANGE. INVEST THAT ENERGY IN FIXING YOUR SALES AND MARKETING. THEY ARE NOT THE PROBLEM. IT'S YOU!!!!

Here is the good news, YOU CAN FIX YOUR PROBLEM WITH STEP 1, 2, 3

P.S. If you CAN NOT AFFORD to DQ a prospect that is wrong for you then there is another step. STEP ZERO - Develop a higher volume of more highly qualified prospects by learning more about marketing your business to the right target audience. That is a subject for another thread but as long as "leads" are so scarce you feel FORCED to take all comers, then you WILL CONTINUE TO LOSE YOUR TIME AND EMOTIONAL INVESTMENTS IN BIDDING DUE TO PRICE because you are fighting a battle with NO WINNERS. You, the competitor and the customer ALL LOSE. If you can get this figured out you will be the only one of the tree that knows there are no winners in that MONEY LOSING market battling low quality, incompetent and illegal work.

Tag line from a successful business in my area "An educated consumer is our best customer". BE THE EDUCATOR by PRESENTING your USP with SKILL
 

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I thought I was the Kink Of Long Posts!

I am stressed, frustrated and depressed. My company is doing very well and much better than my competition (I think) because I am super aggressive with advertising, but it seems like when I work harder I get worse results and regardless of what I do I can't do what I used to do a few years ago.

The USP you talk about is a terrific theory and most of the items on your list make sense, but it is very difficult to come up with a USP when every competitor is already offering everything on your list. I think the biggest problem with customers is they don't have the ability (intelligence) to compare apples with apples and this makes a USP much less valuable.

The only good USP I can think of would have to be something like you have an exclusive product that customers will kill for, a service that no other contractor offers (and that is a hard one), or a price that no contractor can complete with. It could take several years for customers to realize a USP and meanwhile I would go broke waiting.

I don't think a USP is the answer. I am reducing all my advertising campaigns substantially and I am hitting hard with door-to-door because it has some super advantages. The best part of door-to-door for my company is after I train a canvasser for a few weeks my advertising budget is almost zero because I pay only a commission after training.

For the past few years, most of the advertising that worked very well for forty years no longer produces the results I am used to. Only a few days ago, I made up my mind to seriously change my business model and focus on door-to-door.
 

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Discussion Starter · #3 · (Edited)
I always enjoy your posts even if I sometimes differ with your views

I am stressed, frustrated and depressed. My company is doing very well and much better than my competition (I think) because I am super aggressive with advertising, but it seems like when I work harder I get worse results and regardless of what I do I can't do what I used to do a few years ago.
Current results which are less substantial than previously from the same effort is a function of the current economy which will bear less fruit the prior years. It is mistake to attribute lesser results to methods that have paid off MORE in the past without considering if indeed your results BUT FOR the comparison would be satisfying.

Your current approach of throwing out what has proven to work ONLY BECAUSE of comparison to prior results might be a mistake for reason stated. Noting that will relieve your "depression" Slow it down and analyze more before uprooting your proven, but less satisfying approaches until something else PROVES itself more effective in the CURRENT economy. If you can afford in time and capital to continue to do both, all the better.

When working harder results in fewer results the law of diminishing returns is at play. There is an upper limit called reality. Expansion to other areas, other mediums, other services is often more effective if you have the resources to invest rather than MORE OF THE SAME which diminishes impact. There is a sweet spot where more of the same becomes unproductive. Perhaps you have past that line.

The USP you talk about is a terrific theory and most of the items on your list make sense, but it is very difficult to come up with a USP when every competitor is already offering everything on your list.
If everyone else is doing the same thing it IS NOT UNIQUE NOR A USP. Believing there is nothing unique about your company is the kiss of death to this exercise. Gotta challenge yourself. So far it appears admittedly YOU DONT HAVE YOUR USP FIGURED OUT. Dismissing the concept while not grasping USP by definition won't fix that for you.

Many (most) members here claim to be different (better) than competitors. A good share of members complain about losing bidding wars to "low margin" competitors because they are presenting their USP poorly if at all AND to the WRONG customers.

It is a three step process not just one.

I think the biggest problem with customers is they don't have the ability (intelligence) to compare apples with apples and this makes a USP much less valuable.
You make my point for me. WRONG customer base. POOR presentation.

The only good USP I can think of would have to be something like you have an exclusive product that customers will kill for, a service that no other contractor offers (and that is a hard one), or a price that no contractor can complete with. It could take several years for customers to realize a USP and meanwhile I would go broke waiting.
That is your limiting belief. You honestly believe your competitors consistently hit on all points in the "high margin" list? C'mon now?

I don't think a USP is the answer. .
Because you don't understand what it is. It is not exclusive products that customers kill for. It is hitting all points in the list of "high margin" quality. The "exclusive product customers would kill for" is the well known pcplumber, over the top definition. It is your admitted personality to be "aggressive" but in my view you sometimes push the envelope past the point of usefulness as you have done here.

I am reducing all my advertising campaigns substantially and I am hitting hard with door-to-door because it has some super advantages. The best part of door-to-door for my company is after I train a canvasser for a few weeks my advertising budget is almost zero because I pay only a commission after training.

For the past few years, most of the advertising that worked very well for forty years no longer produces the results I am used to. Only a few days ago, I made up my mind to seriously change my business model and focus on door-to-door.
Print advertising is dying off in place of digital search having been replaced by pc online which is being supplanted quickly by mobile smart phone.

Other than that, I recommend

1. Take heart of the points made about the economy versus prior results
2. Get a grasp on USP. No one here disagrees pcplumber is unique except pcplumber. Identfying your USP is STEP one
3. Don't skip two steps
4. Yes of course the mediums you used are changing but the message not so much
5. Dont throw the baby out with the bathwater improperly attributing a slow down entirely to medium
 

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This is a really good topic.

I think it can be distilled down to one sentence.

The prospective customer should be able to as " Why should I hire YOU?"

and we should be able to answer in one clear and verifiable sentence WHY.

The answer can't be something like " We do a quality job at a fair price"- that's not a real answer and it certainly isn't unique------almost EVERY contractor is going to give some version of that--which re-enforces that you are really just a commodity.

when I am asked "why should we hire YOU?"-- I smile and take off my hat so the customer can look past my baby face and see that I am really a bald,old man(51)---and I look them right in the eye and I say..............." I am the 4th generation and my sons are the 5th generation of our family in this business"

Immediately one of 2 things is going to happen------------

1)some people aren't going to care------- and you can see this in their eyes---or even a look of pity will arise as if to say" I can't believe in 5 generations y'all were not smart enough to find another line of work.

that response is OK----- because I know they ARE then looking for a commodity and don't respect what we do.........

2)- however- the people that DO become our customers????? they will instantly say something like REALLY?, wow, that's un-heard of..... how is that even possible?

That's the response I am looking for because they are inviting me to elaborate and I can now tell them how my great grandfather moved here with his 5 sons
and how they had all been trained as carpenters. We will talk about how at that time( first decades of the 20th century) our town TRIPLED in size in a decade.
My customers KNOW the year their house was built-and you can see them wondering if my family BUILT their house
We will talk about how my dad worked with HIS dad back before WWII

and how my sons are working with me today

and I will show them some of the equipment we used is/are the actual same tools/equipment that my dad/grand dad used
and we will talk about what a rare privilege it is to work every day with my grown sons

If appropriate we will talk/show other near by slate roofed houses that we take care of

If the house has a ceramic tile roof-we will talk about inventory---we talk about how amazingly long tile roofs last , how rare the pieces can be. I travel with a book showing most of the ceramic roof tiles ever produced in The US.( Certainly everything ever used in THIS area ) and then we talk about MY inventory.- I also travel with a list of my current stock and how it won't be a problem for ME to match their tile because I already own 317 of their field tile and 27 of their left hand rake trim and 22 of the right hand field trim and 12 of the main ridge caps, and 57 of the hip caps........and so on and so forth.

In my town I have ONE serious competitor ----- he is an EXCELLENT guy and I will frequently recommend him to customers if the job will require extensive copper work. He is a really good guy----and if I was in HIS shoes I know How I would respond to " why should I hire YOU?"

the customer is going to be well served either way- but both of us have our strengths and I know how to emphasize MY strengths-and also what I would say in HIS shoes to emphasize HIS strengths.

We now cover 5 counties- I have a serious competitor in one of the other counties . I know what HIS strengths are/were--and I know that he has totally lost one of the 2 advantages he had over me-and that I have effectively nullified the only other advantage he had----- so I know in that market/against him all I need to do his highlight my strengths and if cost isn't the deciding point I will win the job.

My advantages are unique to me and my line of work. If I was in a different trade I might well be emphasizing different things.........

Ideally-----distill your advantage to ONE sentence and present it in such a way that the customer begs you to expound on that.........

Best wishes, all,
stephen
 

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Good post! I think Ocowonoc has a bunch of posts that can help anyone working on getting their names out there, and getting the right customers - he's a plumber as well, and he has some great marketing posts.

If someone doesn't ave the money for your services, they aren't going to use and pay for them. Beyond that, most people will buy value if they perceive your service as more valuable than the cost / competitors' value.
 

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if you dont want to compete on price alone then i recommend having a business theme that blows off the 50%+ that shop for price alone...you choose your customer...they dont choose you

when i get an obvious price shopper i give them the info as quickly as possible and move on....i will never be the low bid

get your business to the point where most of your jobs are from referrals....

dont even try to compete on price.....many of my referrals calls dont even ask how much per hour, they say come over and get it done
 

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Polebarn: good topic.

I highly agree with your USP. Service is what sets me apart from my competition, not quality.

First a thing about my business model: I flip rentals. With a focus on interior repaints for now.

Now this is a CLASSIC low baller field most legit contractors shy away from. They just don't know HOW to compete.

I use 3 words to make a sale: Efficiency through quality.

That almost always sparks a conversation. Which I gladly elaborate on.

By using quality tools, less downtime for me a.k.a faster job cimpletion times.

By using quality employees we are more RELIABLE with LESS callbacks.

These things create seamless work flow & billing. No headaches for you the customer. We are here for you.

That's how I can walk in an apartment complex, bid higher, & get the job. And once I'm in I feed them occasional small freebies that keep them hooked. I've been in the bathroom & heard my clients tell other companies "We are happy with our painter & not taking bids"

It can happen in any market, high end or low end.
 

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I bid a job a few weeks back and the customer contacted me a few times after asking questions. The other day he contacted he saying another local company bid the job $200 less for the exact same thing. He asked if I could match the price. I firmly said no and that my prices are very competitive and are usually inline with other companies of similar licensing and insurance. After he thought about he decided to go with me as he felt I knew more about the product and what needed to be done. So in the end he is paying the extra $200 for my knowledge.

He did give me the other companies name and I'm not sure why they would be bidding gas pol heater work in the first place.
 

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Discussion Starter · #11 · (Edited)
This experience of winning a sale where a "lower margin" competitor was OUTSOLD by Gastek showcases the point of the thread rather well.

Customers at first says "I see you as a commodity so far in our discussion" in using different words by saying "for the exact same thing"

$200 less for the exact same thing
Gastek first gently plants some possible doubt about the credibility of the competitor without losing ground by gently suggesting basic credentials sometimes missing from competitors with lower bids.

my prices are usually inline with other companies of similar licensing and insurance.
Then because of the skilled prior presentation of his competence and the reminder of credible legitimacy, the customer was gently provoked to think it over carefully and chose Gastek over a lower bid after realizing THERE WAS A DIFFERENCE. Gastek is NOT A COMMODITY.

After he thought about he decided to go with me as he felt I knew more about the product and what needed to be done. So in the end he is paying the extra $200 for my knowledge.
In other words Gastek's presentation made it clear he was NOT A COMMODITY. It was clear there WAS A DIFFERENCE IN SKILL, KNOWLEDGE, COMPETENCE.
 
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