The Perils of Price First

Grandma always said; "Be careful Sonny, you get what you pay for!" Ah, ol' Granny was right on the money! (To use an obvious pun.) The pressure
of a tight economy, fewer projects, and poor buying methods has created a sales quagmire.

The mentality driving the attitude that "the cheapest price is the best way to serve the customer" is crippling our industry. It is rampant across
the board. No architect, general contractor, subcontractor or vendor can state they haven't felt the squeeze. Fear not! What goes around comes
around. For everyone from a project owner to a contractor buying a drill bit, buying strictly on price is dangerous. Let me point out a little bit of
common sense and you be the judge.

When you focus on price you drive the supplier, whether of a product or service, to take his focus off of performing for the customer
to managing his cost to make a profit. As a result, corners get cut, change orders or extras appear, shoddy workmanship occurs, and exceptional
service erodes. As it trickles down on the customer, it causes long-term damage to both future business and the supplier's reputation. The
sweet taste of an order or project won at a bargain basement price soon turns into a profitless nightmare.

I deal with frustrated contactors,both subs and generals, that hate being so price focused, yet practice it themselves. By compromising your principles in order to win work, your short-term gain may affect your future success as your customers feel the tension of poor performance or focus. By not building the case for the value you bring to the table and thereby gaining competitive separation, you agree to compete on the price-based playing field. Of course, that's the easiest way to play. Selling takes time, work, and creativity. It's much easier to cut yourprice to the bone and hope to make a little profit on
the backside.

Most contractor owners I speak with express a desire to partner with their clients and establish a loyal, mutually beneficial relationship. Then they turn into snake oil salesmen at bid time. Many blame the customer for the position they're put in. Sorry, I don't buy it. How does the facility owner know the proverbial cost to build his or her facility? That's why he or she gets bids. Is there the potential for inferior bids? Yup! Then your job is to educate the customer on the pitfalls of poor construction and inferior performance. As well as the smoke and mirrors game being played in the pricing formulas.

This pattern will not last. The window is closing and will eventually slam shut. The buying community is becoming more astute and the trustfactor in construction, which was a challenge to begin with, is collapsing. This is a perilous sales dynamic at work. As prices are driven lower and lower, good contractors will struggle, reduce performance thresholds, and some will simply go under. Get ready folks – the "rub" is coming.

What's the solution? Put adequate time and resources into your sales effort. Not just your marketing effort, but your sales effort. As you're cutting costs and people, you cannot afford to cut your sales expense. Nope, it's not an extravagance; it's a necessity. The more you cut your customer entertainment or contact, the more you'll end up cutting staff.

Projects, work, or orders do not come in without hard sales itineraries. Partner with your suppliers and lock arms to approach the marketplace. Use sources that have good strong sales efforts themselves and combine strengths. The savings of loyalty to your sources far outweigh the short-term gain of an additional five percent or a few thousand dollars. Oh, and that bid that is so much lower than all the others is WRONG! They either made a mistake, are having financial
trouble, or are going to hit you hard with changes on the backside. Don't believe the unbelievable.

The fact that firms are practicing unrealistic selling and buying dynamics will skew the market. If you feel that you cannot gain business without playing this pricing game, you will completely fall prey to it. Those sticking to their guns AND working their sales effort diligently are doing well even in this tough market. It is imperative to truly analyze where you are as a sales organization.

Are you hitting on all cylinders? Is everyone busting tail to get in front of as many potential clients as possible? Are you easy to do business with? Are you really client focused or cost focused? Do you even have any pure sales talent in your firm? These are important questions to ask. With the cold edge of winter approaching, we're entering the hottest sales season. What's your plan, building value and driving sales activity or waiting it out till spring and then jumping right back into the price-first
abyss? Hmmm?

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