Here in Montana we have Madison Buffalo Jump State Park. This park offers a unique cliff feature where numerous tribes of Native Americans dating back to 500 B.C. and ending around 1750 A.D. stampeded bison off the cliff without the aid of horses or guns to slaughter countless numbers of bison for food and clothing.
These frantic bison were startled into a stampede and numerous bison would follow the leader right over a cliff to their death. This may seem brutal to our modern eco-sensibilities, but in their hunter-gatherer society, it was essential for their very survival.
This imagery is remarkably similar to the "Follow the Lowball Price Leader" in the granite fabrication industry. Countless numbers of fabricator/contractors are simply responding to the low price panic and following the "lowballer" over the cliff to financial ruin. Most often these "fabricators" (and I hesitate to even give them this distinguished title) come to town with a SkilSaw and a wet polisher and persuade "value-seeking" homeowners into an outrageously low installed kitchen price. The recent Stone World fabrication market survey cited lowball competitors as "a very real threat to their businesses." These operators enter a new market and since they have nothing of value to offer, they leverage "price" to lure unsuspecting consumers into a low price installation. Often, these companies are not properly licensed or insured.
This situation is nothing new. It has been happening in virtually every industry and every market since the beginning of time. What is an appropriate response? If you respond by "Matching any Competitors Prices" you may have begun a never ending Price War that may lead you right into bankruptcy. Before even considering this as an option, it is best that you fully understanding your cost structure.
Sadly, many fabricators have not completely counted their true costs of doing business. Every fabricator needs to know what your hourly shop rates are including all direct costs, while also fully considering all overhead expenses. Once you fully understand these costs, you will be better able to determine if offering lower prices is an appropriate strategy.
As industry professionals who have made significant investments in equipment, training and facilities, you have many tools in your belt to counter the low priced competitor. Before I suggest several strategies, let's acknowledge the fact that there will always be certain individuals that only respond to price. No amount of "valueadded" will matter to them. These type of customers are the ones that you must simply "let go" to the lowball players. These customers are loyal to price, not to you. Just let them go and put your effort into other vital tasks.
As you know, when Wal-Mart began to make inroads into the American marketplace, there were many fears that this low price leader would drive small mom & pop stores out of business. Many stores in small town America did indeed succumb to the giant often as a result of not being prepared, and not providing sufficient "perceived value" to retain their customer base.
Today we know that Wal-Mart has become the world's largest retailer, but many small stores were successful in developing strategies to ensure their survival. The most obvious strategy is to offer better service. Now, that is a novel concept in today's marketplace, isn't it? Service is one of the most cherished commodities, and yet one of the most misunderstood and illusive attributes in commerce today.
Good service often begins with good listening. When customers come in to your facility they come in with an armload of wants and needs. Often business people don't consider how valuable a resource this walk-in client is. How much money was spent in marketing and advertising to have this person enter your premises? When you fully realize what a significant investment has been made in this prospect, you may begin to adequately position yourself to capture this client's business as you begin to hone in on this client's needs and expectations.
When confronted with a customer with a lowball price, one of the best ways of dealing with this type of customer is to be very prepared. As is often the case, many stone fabricators are small operators with limited staff and budgets. Often times fabricators develop their skills and talents as stone artisans, but haven't spent much time honing selling skills. In many instances, the words "selling or salesman" often do not have a favorable image but are one of the most necessary skills a business person can acquire.
No doubt you know someone who is a "natural salesperson;" for them it comes as easily as breathing. As I observe these individuals, one of the most striking attributes is that they genuinely love people. They greet them with a warm and friendly smile, disarming their defenses. They show a genuine interest in their client's needs and spend a great deal of time trying to understand the motivations and interests of their client. They learn as much about their client's objectives, as they do about the project. This is the beginning of good service.
So often we recite sales scripts to introduce our company or our products to prospective customers. Often times we spend more time telling them about ourselves, rather than listening to the needs of these customers. By "active listening," you will ask questions when appropriate to show that you really want to understand the client's needs. This develops a rapport that often can bridge the price gap.
If you lack advanced salesmanship techniques, seek out great books like Zig Ziglar's Selling 101: What Every Successful Sales Professional Needs to Know, consistently rated in the top 20 of all sales books. Studying great sales leaders will help you develop skills to aid in countering the low price competitor.
Be prepared by knowing your-as well as your competitor's-strengths and weaknesses. By knowing who your competitors are and how they operate, you will be better prepared to counter the low price competitor by highlighting your strengths, special skills or services.
Remember the famous quote, "Keep your friends close, and your enemies closer," a quotation attributed to Sun-tzu, a Chinese general and military strategist from 400 BC. In some markets I have seen established fabricators develop a friendly relationship with their "good competition." This often encourages better quality among the leaders in a particular market. It also helps to better coordinate defensive strategies when a predator lowballer comes to town. Good competitors know where a legitimate "price floor" is and will honor this threshold.
Provide uniquely superior quality. Customers will often pay more if they're convinced your quality is demonstrably better than the competition's. Include features in your price that the competition charges extra for. Keep your shop neat and clean and offer tours to your customers to highlight the investment made in equipment and personnel. Homeowners are usually very interested in "how the process works." Allow them to be involved in the template layout to help them feel that they are part of the process.
Develop a niche that sets you apart from the crowd. Are you known as the "artist" that commands higher prices and only takes on highly artistic projects, or are you a "production" shop? If you have the equipment and personnel that allows you to regularly install dozens of kitchens per month, you have something to leverage against your competitors. Find (or create) something that sets you apart from the competition, and capitalize on it.
Create a hassle-free experience. Customers will pay extra if they know your product or service is easier to buy than the competitors. Find out what your competitor's weakness is and find a way to take advantage of this. If you have a better location, feature this in your marketing materials. Provide map links on your website.
Make it easy for customers to find you. Providing complimentary on-site estimates are one of the ways to demonstrate your hassle free service, particularly if you can print off a proposal and present it to your client before you leave the job site. Clearly identify all the "value added" features that your company offers in your presentation or proposal. By offering extra services, you may walk away from the consultation with a deposit check in your hand.
Provide a referral list. Over the course of your fabrication career (if you are good), you will have many complimentary customers. If they offer thrilling compliments to your installation, kindly ask for a written recommendation. By explaining that you build your business on developing "satisfied customers," many customers will make the effort to write glowing reviews of you and your company. Frame these letters and feature them prominently in your showroom or sales area.
Another method of developing a great reputation is to send hand-written thank you cards following a successful installation. Showing your clients that your are grateful for their business can develop a great referral network of satisfied customers.
Develop relationships with affiliated leaders. By developing professional relationships with cabinet makers, designers, architects or flooring companies, you can build a relationship with these affiliates that enhances your professional credibility. Feature these affiliates in your marketing materials or your project proposal (with their permission). The more you are perceived to be a respected industry leader, the more people are willing to pay for your skills and services.
Maintain membership in professional organizations. By featuring the logos of your professional affiliations on your website and marketing materials, you continue to build and maintain your credibility. Another undervalued element is highlighting the fact that you are fully licensed and bonded. Explain to your customer that your install crew is covered by workman's compensation and in the event of an injury or accident on their property, your insurance is primary. Offer your homeowner customer a copy of your insurance certificate naming them "Additional Insured." This may give your customer the peace of mind they need, and may set you apart from the uninsured lowballer.
By investing in your sales techniques and salesmanship skills, you will be better prepared to engage the "value-seeking" customer and better position yourself in the competitive marketplace. By assessing and promoting all your unique trade skills or experience, you can develop a list of strategies to highlight your reputation in the market and better position yourself as an industry leader. By combining these two strategies, and with extra effort, you will develop a reputation as the "go-to" leader in your community and be better able to sell above the low price opportunists.
Torin Dixon is owner and director of Montana Stone Gallery, an importer and distributor of stone slabs in Missoula, Montana. Contact him at tdixon@montanastonegallery.com
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