WE HEAR IT ALL THE TIME. Established dealers are bombarded by barebones competitors quoting jobs at unbelievably low prices. How can they do that? How can we compete with that? How are we ever going to stand up against those prices?
Unfortunately, the answer that many established dealers have resorted to is attempting to go toe to toe in a true price-war manor. This is a no-win situation. If you get the job, you don’t make any money. If you don’t get the job, you’re likely to quote even lower next time.
The best way to play the price game is to not play it at all. At least, don’t stoop to your competition’s level. There are five points that can help you avoid the price war:
Having the lowest price is not always the best thing.
Find out the customer’s needs and what you must do to meet them.
Sell value, not price.
Understand the importance of upselling.
Be known for something.
The established dealer who understands these principles knows who he is in the marketplace, and what his company has to offer can not only get a higher price, but will also make the customer feel good about it at the same time.
The Best Deal
So many dealers worry about having the lowest price. Is the lowest price always the best deal? Usually it isn’t. When you make a purchase based solely on getting the lowest price, the potential for problems increase significantly. You may find that you’re getting inferior products. Or, you’re dealing with someone who is unprofessional in his business practices. He may take shortcuts every chance he gets. He may not show up on time for appointments. He may not honor the warranty. He’s probably not licensed or may not carry liability insurance. In other words, if you have a problem after the install, good luck!
A customer that’s bent on getting the lowest price no matter what, is probably a customer you don’t want. This might be one to let your low-priced competitor have. Quite often, the customer that fights to get you down to the lowest price is the same customer that calls back with numerous warranty calls for frivolous things.
Our industry is flooded with dealers that are practically giving away their services. Yet in other products that’s not always the case. We have found that some garage door dealers also install entry doors. A typical entry door, which is much smaller than a garage door, can easily sell for $1,200 to $1,800 installed. Why is it that you see ads for garage doors installed for under $600 on a regular basis?
I have been in the garage door industry for a little more than 25 years. As I look back, I can make some interesting observations. Twenty-five years ago, I bought my first house for $90,000. Today it’s worth about $600,000. Twenty-five years ago, a gallon of gas cost about a buck. Today it’s in the neighborhood of $3 a gallon. Twenty-five years ago, an average new car sold for about $8,000. The cost for today’s new car starts at $20,000. And yet, 25 years ago, garage door openers wholesaled for $100 to $140 with transmitters for $10 to $15. That’s not too different from today.
I am not suggesting that manufacturers raise their prices. What I am suggesting is—as an industry—I don’t think we need to emphasize low prices as much as we do. Don’t be afraid to offer higher-priced models.
Two years ago, steel prices went crazy. As a distributor of steel garage doors, we got notices of price increases almost weekly. After raising our prices on sectional doors for the second time, we had customers tell us, “We can’t absorb another increase.” When we asked why they weren’t passing the increase on to the homeowner, they said, “We can’t raise our prices.” Why not?
The steel situation was widely talked about in the news and was common knowledge. The homeowner can afford that price increase easier than you can afford to absorb it. If you’re quoting a job for $1,000 and you stand to make $400 on the job, an extra $20 is a 2 percent increase to the homeowner, but if you absorbed it, it is 5 percent of your profit. Not only that, the homeowner is only paying the extra $20 once. If you’re trying to absorb it, you’re eating that $20 on every door you sell. Depending on how many doors you sell in a week, it could amount to hundreds or even thousands of dollars every week.
Uncover the Customer’s Needs—and Meet Them
Ask your customers lots of questions. Pay attention and listen to their answers. Find out what your customer is really looking for, and what they’re willing to spend. Get them talking. The more they talk, the more you can learn. Ask if they have other quotes, and, if so, what did they like or dislike about them. Pay attention to the nonverbals as well. You can tell a lot about what they’re thinking or feeling by postures and expressions. Once you find out what they really need, determine what you must do to meet that need.
Sell Value, Not Price
Don’t get me wrong, price is important. I’m not saying to double your prices, but try to think of it in terms of value. What is the customer getting for the price you’re quoting?
Your competition may be cheaper, but what do you offer that they don’t? These are the things your customer needs to hear about:
You’re insured.
You have a storefront with a showroom.
You’re licensed by your state.
You have “x” number of service trucks.
You keep your appointments.
You stand behind your work.
You honor warranties.
Much of your business is from referrals.
Saying all these things is fine, but they need to be true. Talk is cheap and customers will find out real quick if it is just talk. For example: If you bid a job for $1,250 but the customer goes with someone else who bid $1150, why did you not get the job? It’s not because their price was lower, but because you failed to show the customer why you were worth the difference.
A customer will go with the lowest price if they don’t have a reason not to. If they can clearly see value for the extra money, most will pay for that value. Few people are happy about getting the lowest price if they realize they’re getting poor service or an inferior product.
Understand the Importance of Upselling
When you think of upselling, what’s one of the first things that comes to mind? For me it’s McDonald’s and their famous question. “Would you like a hot apple turnover to go with that?” I usually think, “No, if I wanted a hot apple turnover, I would have asked for one.” But, I’ll bet a lot of people say, “OK.” As a result, McDonald’s probably sells a lot more hot apple turnovers than they would if they didn’t ask.
This principle has been proven many times, and there are a number of approaches you can take. One way is to start by offering your low price models, then point out why they may not be the best value. You could say:
“If you’re looking for a low price, this is what I can offer. However, if you want something you’ll be happy with for a long time, here is another alternative. I would love the opportunity to come out and measure your opening, show you a sample of our basic door along with some other options so that you can make an intelligent decision on the best door for you.”
Tell your customer their long-term satisfaction is what you’re interested in, and that’s why you think they would be happier with spending a little more now. It’s very important to be able to read your customer so you can know which direction to go with your approach. If you meet a customer that’s very matter of fact, bottom line, no frills, then chances are you may not want to spend too much time getting him to upgrade. Quote him a fair price and move on. If your price is not low enough for him, let him go. If on the other hand, you visit a customer and you see evidence that he appreciates nice things, use that to your advantage. Point out the benefits of the more expensive products.
Always be looking for opportunities to upsell. Offer add-on products or even things that are only loosely related, such as garage storage, garage floor coatings, or even window and front door replacement. The more products and services you offer, the better the chance of adding something to each job—and to your bottom line.
Be Known for Something
It’s important to have a good reputation as an honest, reliable company. It’s also helpful to have an identity. What are you known for?
Back in the early ’80s, there was a fascination with the Rubik’s Cube. Many people bought them, mixed them up, then spent weeks trying to get the colors back in the right order. Few people succeeded. I was also intrigued with this little puzzle. One day while shopping I saw a pamphlet called “Solving the Cube.” I invested the $1.49 to purchase it and began studying. It involved memorizing a plethora of steps that had to be followed in an exact order for it to work. I spent the next six months learning these steps. Why? Because I wanted to be known as the guy who could solve the cube.
Some people back then could solve it in less than 30 seconds. I was never that fast, but even today I can still average about 3 minutes give or take about 30 seconds.
What does that have to do with selling garage doors? Well, nothing directly. My point is that I was known for something that made me different from others, and that’s what I am suggesting for your door business. Find something that makes you different from the other guys.
Consider the following name brands:
Nordstrom
Starbucks
BMW
Hummer
None of these companies are known for having the lowest price. On the contrary, they’re typically the most expensive within their field. Nordstrom is known for exceptional customer service. Starbucks makes a premium cup of coffee in an upscale environment. BMW is the “Ultimate Driving Machine.” And Hummer is the biggest, baddest SUV. People will pay higher prices for these products because there’s a perceived value associated with these brands.
What can you do to differentiate your company from everyone else in the phone book? This is where you have to be creative. You could certainly start by doing everything you can to build a good reputation. If you do good work, have fair prices, are honest in all you do, and stand behind your products, that in itself will help build a good reputation. Then it becomes a matter of finding your Rubik’s Cube.
Maybe you take a before and after picture with the customer and present it to them upon completion of the installation. Perhaps you’re the guy with the shiny purple service truck. Maybe you make a point to sweep the floor and leave their garage cleaner than you found it. Do you give the customer a can of lube with every new install? Or movie tickets if they refer a sale to you? The bottom line is to have a good reputation, but also have something unique about your company that helps customers remember you.
Taking it to the Next Level
Competing by playing the low price game is a no-win situation. You can avoid it by applying these five principles:
Show the customer why the lowest price is not always the best deal.
Find out the customer’s needs and what you must do to meet them.
Strive to sell value, not price.
Understand the importance of upselling.
Become capable of painting a picture for your customer of why your dealership is different from every other guy in the phone book.
People will go with the lowest price if they don’t have a reason not to. On the other hand, in most cases, people will gladly pay more if they see the value of a better product or better service.
Bob Laher is vice president/general manager of Multi Sales Inc., a wholesale distributor of residential and commercial door products. Laher has been with the La Palma, Calif.-based company for more than 25 years. He has also served on the board of the California Operator and Door Association, including two years as president. Laher has been married to his wife, Ann, for 22 years, and they have four children. To reach him, call 800.421.3575; visit www.multisalesinc.com.
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WE HEAR IT ALL THE TIME. Established dealers are bombarded by barebones competitors quoting jobs at unbelievably low prices. How can they do that? How can we compete with that? How are we ever going to stand up against those prices?
