How to Grow without Lowering Prices
Do your customers already have a budget in mind or are they shopping around to learn how much their home improvement project might cost? Either way, contractors often fall into the trap of lowering their project estimate to win the sale. While offering a discount now and then won’t ruin your business, doing it consistently can hurt your bottom line. So, when a customer’s project is dependent on a certain price point, what do you do?
Option 1: Go Cheaper
The first impulse some contractors may have when presented with a budget is to start cutting costs. Cheaper materials, a scaled down version of the project or a dip into your profit margins can add a bit of flexibility to a project’s cost. However, with this option, you lose out on revenue and the customer ends up with an upgrade that may fit their needs, bud doesn’t fully meet their expectations.
Option 2: Spread Out the Cost
You don’t have to cut your price to minimize your customer’s payment burden. Instead, spread the cost out over time. The more payments the cost is broken into, the less your customer will need to pay per month. This creates minimal impact on their monthly budget and preserves their savings, allowing for more flexibility with the overall project cost. This can help your customer afford the project specifications they really want.
Focus on Value, Not Cost
Before a project, customers may be more focused on cost, rather than the value their project will provide. Instead of going straight to lowering your bid or downsizing the project, walk them through why the project costs what it does – labor, materials, insurance, etc. and point out all the ways their project is an investment. This will help you protect your margins and set you apart from competitors who focus their value on the price.
Build Financing Into Your Business Model
You can find customer financing at no cost to yourself, but special promotions and lower interest rates may include a charge. When creating your project estimate, add a percentage to cover your profit goal, financing expenses and any unexpected costs that may arise.
Being “the cheap option” isn’t a strong growth strategy. Instead, focus on the value you bring to the table and find other ways, such as special promotions and financing to help your customers get the home improvement options that they really want.
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