Too many contractors believe “The only thing my customers care about is price.” But the top contractors in your market aren’t claiming this, are they? The truth is, you’re probably attracting those homeowners without even knowing it.
How? That’s our topic in Part 3 of the Personality Prescription for Contractors.
Your Competitors Complicate the Math
In every market there are several lone contractors running a single truck out of their garages. Their overhead is much lower than ours. They’ll try to make a living by charging 10% or 15% below what we charge. Count on it.
A lone operator might be able to eke out a living at these prices. We simply can’t run leaner than a single technician operating out of his garage.
And our cheap competitor will never scale up from that bottom feeder position in the industry. As soon as he tries to add a second or third technician, one or both of the new techs will be less productive than the boss. By its nature the lower price advantage is limited in size.
The Slowest Path to Bankruptcy
Suppose I’m wrong. Maybe we could operate with prices 10% – 15% lower than the market. But, if we operate at 15% below market, we should start preparing for another competitor to drop his prices to 20% below.
That leaves us in the unenviable position of being the second lowest-priced contractor.
Which customer ever asks for the second lowest price?
When we compete with low-profit contractors, we’ll be slicing margins impossibly thin to get the jobs. And we’ll do it right up until we’re forced out of business.
This is a major reason for the constant turnover in the home services contracting trades.
Final Word on Price Sensitive Homeowners
They are never loyal.
Many business owners have convinced themselves “If I can just get them to try our services, or sample our merchandise, they’ll be so impressed they’ll be back.”
Sadly, they will not.
The next time a Price Sensitive Homeowner needs our services, she’ll grind us for an even lower price.
Then watch how quickly she’ll call another contractor and try to use our new lower rate to negotiate even farther down the profitability scale with the next guy. That Price Sensitive Homeowner will go over to the new company so fast she’ll leave skid marks.
I can almost hear several contractors in the back saying, “Yeah, but the only thing my customers care about is price.”
That’s probably true.
Especially when the advertising you’ve been doing attracts cheap customers. Do your offers look like any of these?
$200 off a Complete Forced Air Zoning System.
$25 off Plumbing, Heating, Cooling Service Call.
$19 Yard Care, First Mow.
Service Calls only $59.95.
Furnace Installed $1495. Furnace and AC Installed $3495.
Get $20 Off Lawn Care Subscription + FREE Soil Test!
10% off Any Boiler or Furnace Repair.
$90 off Any Repair.
$59.95 Air Duct Cleaning and Free Crawl Space Inspection.
Water Heater Installation as low as $1,200.
Sump Pump Inspection only $37.
Free Inspection and up to $500 Foundation Repair.
$75 off duct cleaning.
$66.36 Interior and Exterior Pest Prevention and Elimination Treatment.
$83 (44% OFF) Garage Door Tune-Up and Inspection.
FREE air conditioning & Heating Service Call with Any Repair.
$85 Drain Evaluation.
$25 Off Dryer Vent Cleaning.
Purchase a Water Softener & Receive a FREE Reverse Osmosis System.
FREE Estimate and Up to $4,000 Off Your New Roof.
$250 off Any Water Heater Instillation.
$89 Drain Cleaning.
Garage Doors as Low as $395 Installed.
$39 Water Heater Flush.
Only $150 for $500 Worth of Roofing Services.
$149 for Whole House Serge Protection.
50% Off First Lawn Service.
Save $500 Today Foundation Repair.
Buy 2 Windows, Get 2 Free. Special Offer Ends In 5 Days.
Foundation Repair – $0 Down, 0% Interest, 0 Payments Until Next Year.
$200 Off Any Waterproofing Project ($2,000 or More).
Get a Vacation Voucher as Soon as Your Windows are Ordered.
When any contractor advertises lower prices, it shouldn’t surprise us that those ads attract cheap, demanding, low profit, completely disloyal customers.
Making a living with Price Sensitive customers is a tough slog.
If these Price Sensitive Homeowners are those you don’t want, which do you want? We’ll explore that in Part 4 of the Personality Prescription series.
The content for this series of posts was taken from Chuck McKay’s The Personality Prescription for Contractors, available on Amazon.
Links to previous posts in this series:
- Personality Prescription, Part 5 – Let’s Sell Something - August 8, 2022
- Personality Prescription, Part 4 – Other Homeowners’ Motivations - August 2, 2022
- Personality Prescription, Part 3 – You’re Choosing Cheap Ones - July 25, 2022