Published March 2008

Low-ballers in Town

By Ted J. Rulseh (page 10)

There will always be competitors who cut prices and cut corners. Smart contractors fight them by focusing on customers who demand value.

It’s a story we hear often: a reader calls or writes us at Cleaner to report on trouble with a competitor who is taking away business while operating without a license, cutting prices, and taking all manner of shortcuts.

Most recently, a plumbing, drain and septic service company in California shared with us a complaint the owner filed with the state’s fraud investigative team about a competitor who had won a large share of the work connecting sewers to homes in a gated community with 78 lots.

Upon investigation, this owner found that the competitor’s bids had come in at about half the price quoted by his and other local businesses. As best this owner could determine, the cut-rate competitor was operating with questionable licensure, no insurance and no workers’ compensation, and was probably paying its workers in cash.

What to do? Well, in such circumstances, complaining to the right regulatory agency is certainly a legitimate step. The fact remains, though, that there will always be price- and corner-cutters, and a business simply has to learn to deal with them.

The high road

The contractor in this case is not tempted to cut his prices or his standards — to mud-wrestle with his new competitor. But beyond filing a complaint, how should a business respond to such a threat? The short answer is: by sharpening its focus on customers who understand value and are willing to pay for it.

Sure, it’s annoying when a company that is not thoroughly professional comes in, slashes prices, and takes business your company might otherwise have had. Sometimes that company isn’t doing anything illegal or unethical. It could be someone just starting out and trying to buy market share. It could be a solo practitioner offering low prices because he has very little overhead.

It seems whenever one of these outfits goes out of business (and most eventually do); another crops up to take its place. There are always people who think they can succeed by charging less than everyone else. In any market, at any given time, there will always be bottom feeders.

Fortunately, in every market, there are also customers who live according to the words of fashion designer Aldo Gucci: The bitterness of poor quality is remembered long after the sweetness of low price has faded from memory. Businesses that know how to find and win these customers can largely ignore the price-cutters.

Do you really lose?

Sure, it hurts to see homeowners and businesses giving jobs to ill-qualified, low-ball operators. But are those really your prospects in the first place? Are they — the perpetual price-shoppers, the Yellow Pages quote seekers — the kind of people on which to build a business?

Bargain hunters are notoriously fickle: Win them over once and next time they’ll probably go to someone else who is five bucks cheaper. Furthermore, their ranks include many who don’t like to pay their bills — on time or at all.

So how do you focus on value-conscious customers? One way is simply to stay away from situations where the deciding factor is price. Mass advertising — like Yellow Pages — attracts price-shoppers. That doesn’t mean you shouldn’t run Yellow Pages ads. It does mean your ads should stress quality, value and reputation. And it does mean you should train your staff to identify and cultivate callers who are not strictly price-driven.

Another way to find customers who buy value is to analyze your customer base. Who are your best and steadiest customers? Where do they live? What do they do? Where do they work? Target their neighbors and co-workers with direct marketing.

Most of all, know who your best customers are and hold on to them for dear life. They are the heart and soul of your business. It costs far less to keep them than to find new ones like them.

Enough to go around

As for Cheap Charlie competitors, take action against those who cheat or otherwise violate the law — they are bad for the profession and bad for the public, too. Otherwise, try not to lose sleep over the customers you might lose to them.

In an important sense, those were never your customers, anyway. Remember: You can’t lose what you never had. And you won’t miss what, deep down, you never really wanted in the first place.

If you keep value front and center, you’ll always deal with the kinds of customers you favor, and you’ll compete against other contractors you respect. That game may not be easy, but at least the field is level.