As a professional painting contractor, you’ve likely faced competitive bidding situations in which the “winner” was simply the bidder who offered the least expensive option. But if you’re the winner in such a scenario, what exactly is your prize? And could it be in your interest to provide a bid that is more in alignment with the challenges of the task at hand?
Business blogger Jim Connolly (jimsmarketingblog.com) cautions that the “race to the bottom” might not be one in which you want to be a leader.
“The winner gets, wait for it… the privilege of building a business on a dangerous foundation of customers, who will leave them the moment a cheaper provider comes along. It’s a high risk, low return strategy. It requires you to constantly look for ways to lower your overhead, cut corners and speed things up. All this, in an effort to attract the least loyal profile of customers in the world: Those who switch from provider to provider, looking for the lowest prices.”
That said, what’s the alternative to winning the race to the bottom? Reduced sales and an idle crew? It’s a tricky proposition, to be sure. Here are some considerations to make as you decide whether you should be charging more for your services.
Evaluate the relationship value of your customer base
Many prospects are value shoppers, and a project for a price-cautious customer often turns out to be time well-spent. However, keep your radar on for the lowest-price shopper that has complaints about other trades, appears generally disorganized, or has unrealistic deadlines. Your own intuition might tell you that such a customer can create an unpleasant working environment that could result in dispirited employees on your team who simply don’t want to face a regular beatdown from a difficult customer.
Do more work for people who value quality
If you’ve created a higher perception of quality for your business — and are able to deliver on it — you can find yourself with more customers for whom price isn’t the sole consideration when sorting through bids. Your higher price is showing the market that you believe in your services, and customers who respond are more likely to be people who appreciate the quality differences between you and the low-price leader.
Simply put, it’s harder and more time-consuming to do your job than it was a year ago. You’ve likely had to make additional accommodations just to ease the comfort levels of your customers. Keeping your crews as socially distanced as possible, offering them personal sanitizing opportunities and masks are all the right thing to do, but each chips away at overall productivity. Keep this in mind as you bid your projects either in your rate, or your hours.
This will oversimplify to make a point. Let’s say a low-price strategy leaves you with two customers, whom you work hard to please even though it may be impossible. A higher-price strategy leaves you with just one customer, to whom you can devote your full attention to satisfying and who will appreciate and pay for your efforts. The stressful two-customer scenario produces the same amount of revenue in the same amount of time as the quality- and customer-focused one-customer scenario. In which setting would you rather spend your working time?
Using higher quality products justifies higher prices, but simply citing the use of a higher end product and requesting a higher rate to apply it won’t do the trick. Be sure to listen to potential customers in your pre-bid discussions, and then propose a higher-end product as a specific solution. If you learned, for example, that your customer has specific air quality concerns, an upgrade to SuperPaint® with Air Purifying Technology from Sherwin-Williams Living Well™ Collection, which contributes to cleaner indoor air quality by reducing VOC levels and common indoor odors while inhibiting the growth of mold and mildew, would demonstrate that you listened to their needs. Or, say that your customer entertains often and has a discerning eye for color; a living room upgrade to Emerald® Designer Edition Interior Latex Paint, available in an exclusive collection of 200 designer colors, would also help position you as a contractor who offers premium value and quality.
Will the math work?
Good question, and one that will answer differently for everyone. You’re likely to lose some volume if you don’t participate in the race to the bottom. Whether you can make it up in profitability depends on how effectively you can position yourself as a quality service provider.
Make your case
Your higher-priced bid might prompt a “what’s-up-with-your-price?” inquiry. It’s a fair question. View it as an opportunity to differentiate your services with photos, videos, reviews and referrals, not to mention your alliance with a local Sherwin-Williams store as a quality supplier. Remember that appearances of you and your equipment matter if you’re asking your customers to make a quality distinction. Send the message that you are higher priced because you deliver higher customer satisfaction and value!
In the end, there isn’t necessarily a right or wrong when it comes to pricing strategies, but they will go a long way toward determining what kind of business yours will become. Sherwin-Williams Projects Bids tool can make it easy to adjust your rate and hours as you determine exactly how pricing will shape the future of your business.
Get more ideas about how to build and manage your painting business in the PPC magazine archive.