“A low-baller is ruining our market!” It’s a common complaint but many times the complainant is just being out-maneuvered. Let’s look at some classic reasons why this may occur.
Reason No. 1: It’s not the truth. Customers often tell contractors that their decision was based on price when it wasn’t. It’s a convenient excuse for customers to avoid an uncomfortable discussion about some other reason for not awarding the work to the complainant.
This is the classic example of a company blaming a lack of customer loyalty when, in fact, it was because of the lack of relationship-building by the contractor. When the relationship between the account manager and the customer is not great, bad things happen. It’s not the customer’s responsibility to explain this to the contractor.
Reason No. 2: The “low-baller” may have a different cost structure, which allows them to price lower and still be profitable. They may simply be more efficient or have lower overhead than the complainant.
This is the classic example of one contractor having an advantage over another and leveraging this advantage to win work. Vast differences exist between some companies in terms of equipment, experience, technology, size, etc. These differences allow some companies to price much lower and still maintain sufficient profit margins.
Reason No. 3: The “low-baller” may intentionally be pricing low to gain market share, hoping to find other ways to recover profits. They recognize that gaining a new customer at a discount is really just a marketing cost.
This the classic example of an aggressive contractor undercutting its competitors. This may be “low-balling” in its purest form, but it isn’t done out of ignorance or with the hope of driving down market prices. On the contrary, it is done with a strategy in place. As long as everyone else in the market doesn’t follow suit, market prices will not be affected.
Another way to look at this timeless issue is that there will always be someone to do the work at a lower price. This is true for every service in every industry. However, it’s not about price. It’s about value. If you focus on value and not price, you’ll find that there are customers who understand and appreciate the value your company brings. Seek out more of these customers and develop deep relationships with them. When you do so, price becomes almost irrelevant.
Now go forth.
