How to eliminate low-priced competition

Over the years I have had the pleasure (and sometimes the displeasure) of getting to know a lot of contractors. No matter where these contractors live, or their particular trade, they voice the same complaints, such as low-priced competition, insufficient leads, and the difficulty of finding good help. I am not going to address those particular complaints in this post, but rather the attitude contractors can take regarding them.

It is easy to complain. But complaining seldom does any good in and of itself. Complaining doesn’t change the actions that give rise to the source of the complaint.

Take low-priced competition for example. This has probably been a problem since the first caveman began offering his services, and it is likely to always be a problem. Complaining about it won’t change that fact. We simply aren’t going to change the attitude or the actions of discount contractors. We can however, change our attitude and actions and thereby reduce or eliminate low-priced competition as a concern.

To illustrate, consider Rolls Royce and Hyundai. Both make automobiles, and in a certain sense, Hyundai is a low-priced competitor to Rolls Royce—their automobiles are much less expensive. But these two manufacturers have vastly different markets, and I seriously doubt that Rolls Royce pays any attention to Hyundai’s pricing. It simply isn’t a concern because Rolls Royce offers much more value to its customers.

Contractors can take the same approach. We can compete on price, or we can compete on value. Which we choose depends on our attitude.

Many contractors firmly believe that clients focus on nothing but price. This is usually a self-fulfilling prophecy, as those contractors do little to offer more value. They look just like their competitors, and as a result, give the client no reason to pay more money.

But a contractor with a different attitude—a contractor who is value-oriented—recognizes the fact that a higher price demands greater value. Such a contractor does not complain about that over which he has no control—the pricing of his “competitors”—but instead seeks to distance himself from them and thereby eliminate them as true competition.

If you find yourself complaining about low-priced competition, you might do well to honestly assess your business and your attitude. You may not be offering enough value, communicating the benefits of that value, or both. And that is something that you can change.

Your prices and your image

Nobody likes to pay more for a product or service than they need to. Each of us loves to find a good deal. But as a painting contractor we must always remember that our pricing conveys a certain image about the services we are selling.

While consumers certainly like to think that they are getting a good deal, they also know that they get what they pay for. When you visit McDonald’s you do not expect the same hamburger that you will get at Fuddrucker’s. If you want more value, you understand that you must pay a higher price.

The same is true of your customers. If your prices are half of your competitors, consumers would be suspicious. They would wonder about the quality of your work. They would be concerned whether you would even be in business if they have a problem in the future. Your price would convey a specific image regarding the quality and stability of your business.

This is not to say that we should charge outrageous prices simply to convey quality. Our services must truly offer value. If we charge more, we must also offer more. And we can offer more in a variety of ways, from better quality to greater convenience, from superior service to a broader selection.

Certainly there are consumers who are more price conscious than others. And there are products and services–commodities for example–that are more price sensitive. But this doesn’t change the fact that cheap prices can convey an image of cheap quality.

Mid-winter marketing

One of the most cost-effective methods of advertising is customer retention, that is, marketing to past customers. Past customers already know your work and they are comfortable with your pricing. They are an easier sell than a new customer.

Most contractors know this, but they do little to actively market to their past customers. They take a passive approach to customer retention, and the results show it.

It is generally recommended that a contracting business contact past customers at least 4 times a year. This contact can be as elaborate as a 4-color newsletter or as simple as a postcard. But if you don’t stay in front of your customer and remind him that your are in business, he can easily forget about you.

As an example, I routinely have customers tell me that they hired a painter a few years ago. He did a good job and they were pleased, but they have forgotten his name or can’t find his number. So he didn’t get a call when they wanted more painting done. His loss became my gain.

I have done a quarterly newsletter for years, and the investment is well worth it. The 4-page newsletter contains information about our company, new products, articles on maintenance, and more. It costs about $2 per year per customer and every dollar spent typically brings in $25 to $30 or more. We also do a monthly email to those customers who signed up for it. (We use Constant Contact.)

Whether you want to do something as involved as a newsletter or not, you should regularly be contacting your customers. Even a letter thanking them for their business can be effective.

This is a perfect time of year to launch a retention program, particularly if your leads are slow.

Painting and women’s underwear

I’ve seen some painting contractors argue that our services are luxury items. Nobody, they argue, needs to paint their house.

This is not necessarily true. Exterior surfaces do need occasional maintenance. Paint does more than provide color– it also provides protection. While interior painting is more of a luxury–the house won’t deteriorate because the paint is flaking–there are psychological aspects to paint that can elevate it to more of a need. If for example, you buy a house with black walls, you may legitimately think that the walls need to be painted.

Dan Miller has an interesting post on the issue of needs versus wants. He talks about the difference between men’s underwear–which is generally a purely functional item, and therefore inexpensive– versus women’s underwear– which is generally viewed in a more stylish sense, and therefore more costly.

The same can be true with our businesses. If we just sell men’s underwear–the basic functional paint job–we are not likely to command a high price. But if we sell a frilly, lacy, sexy paint job, we can likely get a much higher price. Now I don’t mean this literally. I can’t imagine how we could sell a sexy paint job, unless we hired a bunch of buxom beauty queens to paint in bikinis.

But we can add to the value we offer. Women’s underwear does have a practical function, but it also offers other value– such as style and allure. I’m not an expert on women’s underwear, but I suspect that the most basic, plain panties are considerably less expensive than those that offer lace, sexy designs, etc.

Regardless, the issue is the value offered. When we offer more value, we can command a higher price. And that is true in panties and in painting.

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