Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

Apr 10

Written by: Todd Anthony Puma
4/10/2013 1:30 PM  RssIcon

It happens in every industry, to everyone. It’s what killed Border’s and Circuit City. Price-shopping online. We’ve all felt the pain of a client taking our estimate, after we’ve put in hours of work to formulate the perfect package for them, and then calling us back a day later telling us how they can get everything cheaper online, completely ignoring our expertise and time put forth to recommend just the right product. I’ve found it tends to happen more in the middle-market (jobs under $30,000), but will still occur in the high-end as well.

While it is tempting to get into a negotiating and bargaining back-and-forth to salvage the sale, there are some other great tips I’ve learned along the way to help maintain margins and keep the sale. Some of these I’ve had the great fortune of being taught by people who’ve been there, done that, and some I’ve learned on my own through trial and error.

Just today, one of my very close peers got a call from a client in Queens whom he had gone to visit several months ago after Hurricane Sandy. The client was rebuilding his flooded basement and wanted to make it a family room and listening room. He was originally looking at a few different brands of speakers, receivers, and remotes but my friend steered him toward Paradigm Studio towers, center and surrounds, a Marantz SR7007 and a URC remote, along with all of the ancillary products. He was pinging the integrator constantly with questions, and I just knew he was trying to bleed him for information so he could either work with another integrator or try to do it himself.

I warned the integrator what was going on and gave him the tips I’ll give you. But he was too nice, wanted the sale too badly, and thought that if he didn’t give the client everything he wanted, he’d lose the sale. Well, fast-forward five months, and I was right; the client has gone and purchased everything on his own and now wants the integrator to install it all, but without the margin he would have made on the product.

After much thought I have dissected my experiences and ways to counteract the challenge of being price shopped on the internet into three scenarios:

The Information Gatherer. Just like the story above, this is someone wants to question you constantly and is digging for as much info as they can get. The best defense is to charge a consulting fee. You can make this refundable upon product purchase from you or not, but charging the fee has a two-fold result: it makes the client understand that your time isn’t free and it helps you make sure they are serious.

I tell my clients that the initial proposal is free, and I will answer basic questions about it, but once they start getting into technical specifications, comparisons with other brands and how the products will work together, I tell them that I will need to charge them a $200/hr consulting fee. I usually get one of two responses: 1) They understand that I am a professional and that my time and opinion has value or 2) they think the service should be part of the initial quote. For those in camp #2, I explain to them that my time, and particularly my knowledge, is valuable. Would they expect a computer technician to show them how to clear a virus for free, an architect to draw up blueprints at no charge, or a decorator to provide a floorplan before a retainer is signed? I do this in a very non-confrontational way, but am still firm about the value of my time and knowledge. If the client is very adamant, I will offer to refund all or part of the consultation fee if they buy the products recommended through me and hire me to do the job. That almost always seals the deal.

The Negotiator. This is the potential client who does all of the price checking online and then comes back to negotiate with you. There are a few ways to combat this: First of all, I do everything in my power to only sell products that are not available at heavily discounted prices from authorized resellers (ie Amazon). However, in those instances when a client finds the odd price out there, or it is a product I just have to carry or particularly love (ie URC remotes), I use a few strategies:

1. I reiterate that I am an authorized reseller and that any product purchased through me is fully covered by the manufacturer warranty. The client mentioned above, who bought everything on his own, purchased the Paradigm speakers and the integrator will let him know that he is in no way warranting them, since they weren’t purchased through him.

2. I remind the client that I provided them with a valuable service in researching all of the products and putting together a cohesive package for them. Basically, I try to appeal to their sense of obligation to help nudge them in the direction of overlooking a few points of price differential (especially if prices are close).

3. I offer to “down spec” the product to meet a lower price point.

4. On higher end and more custom products, such as remotes, audiophile receivers, amps, or anything else that requires programming or configuration, I will tell the client that I cannot and will not handle the product unless it was purchased through me, because if there is a problem, glitch or failure, I want to have full control of the value chain and not play the finger pointing game between the vendor who sold the product and myself who installed or programmed it. Essentially, I tell them I’m not responsible for anything that goes wrong with the product during and after the install. This does risk losing the job altogether, but more often than not clients see the value in having the same person responsible for everything.

The 3-Bidder. This is the client who always has three or more companies quote everything and then tries to play them off of each other to get everyone to lower their price and lose their shirt. Here is where I rely on carrying products not widely distributed (Paradigm speakers, Anthem electronics, AudioQuest cables, etc), so the client can’t compare apples to apples.

Additionally, I rely on my reputation, referrals, and testimonials and let them know that they get what they pay for. They can get the job done inexpensively, but if it is done poorly, it will cost them two to four times as much to fix it.

Clients like to think of our business as a commodity–that a speaker is a speaker and install is an install. We all know that is not the case and that we add a huge value to the job. Keeping our wits about us, having a few key strategies, and holding our ground on pricing, makes us all more profitable and keeps us all busier.

Please comment below if you have found any strategies or tactics that work particularly well for you in these or any similar situations.
 
 

Todd Anthony Puma is president of The Source Home Theater Installation in New York City.
 

Tags: Clients , Sales
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10 comment(s) so far...


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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

That was the most comprehensive and intelligent explanation of how to successfully sell yourself and your business I have ever read. Great job.

By Hutch Gott on   4/10/2013 3:30 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

Oh, if only everyone were enlightened enough to follow your(our) philosophies...we'd all breath easier. Agree whole-heartedly!
As a last resort, don't be afraid to tell the client that you simply can't help them. If you think you're hungry now, wait until they get done with you.

By Mike on   4/10/2013 3:32 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

Those are all fantastic strategies! I have another for you. I learned this about 15 years ago from a sales manager I used to work with. He would say, "I will be more than happy to match the price, as long as I can match the service". In other words, the customer is left in no man's land with product - either if it fails, or he can't figure out how to operate it, etc. Then, the customer has to figure out his or her definition of the word "deal", and if this (price) is what is the determining factor. Just another thought...

By Steve on   4/10/2013 3:42 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

I'd like to touch on Steve's comment.

I often times get asked if I will match internet prices and answer with an "Yes, we have competitive prices and can match anyone's pricing as long as we are working with a level playing field". I typically put it something like this. "If you can get someone from the company that is selling these products on the internet to come to your house in the evening, a Saturday afternoon or even Sunday to walk your project with you for a couple hours, spending their personal time doing requirements gathering, documenting your project, educating you on different options and answering all of your questions then yes, I'll match their prices"

There's usually an aha moment there for most people but if there isn't I'll say something like..."Actually, let's take it a step farther. If you have any luck finding a "local" internet company that will do this and provide you with the same level of service that I will after the sale and can install the products then have them put a proposal together for you, come back to your house again to go over it in detail and then thank them for their time and tell them that you would like to think it over and you'll get back to them. Then, email me their proposal with itemized prices and I'm sure that I will be able to match them."

That usually works for most people. Obviously it's not going to for the customers who are just looking for the cheapest prices and not thinking about the importance of working with a professional for the entire process.

It's understood that we'll be price shopped on the internet but as long as we are truly comparing apples to apples then it's a little easier to deal with. We are now only submitting proposals showing total costs with no individual, itemized prices. A lot of client still want itemized pricing and we work with them a couple of different ways. We either take a deposit up front after they give us a budget for the project or after providing a proposal showing total costs for good/better/best price options. Once they choose an option that fits their budget and agree to work with us, we take a small refundable deposit and show them itemized pricing. If they then choose to make changes to the products because they can't justify the cost of a certain line item, it's not a big deal.

By Jeff on   4/10/2013 4:59 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

Excellent article, and it's applicable to so many industries that have been impacted by Internet shopping. In the freelance writing business, we often deal with many of the same issues. I've seen postings that work out to $1 an hour for professional-grade service. With some simple adjustments, these tips will work in those situations as well!

By Joel on   4/11/2013 12:00 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

Just to Echo Steve and Jeff; Good service is invaluable. All AV companies are not created equal and as an integrator, you may not want every install job. Additionally, you never want to lower your margins for a job you are sorry later for accepting. Any salesman can cut the price of a speaker and get the sale but a good salesman sells his unequaled service.

By Bruce Johnson on   4/11/2013 2:21 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

Yes but most customers insist that they value the service and will pay for it: survey/proposal, integration and orientation. But without margins, how do you charge for all the product research for features and compatibility? Most Integrators are Not coming out like bandits with respect to all the research vs. margins.

By Kris on   4/15/2013 7:51 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

Wow! Great article and comments. I am new at this and would like some input. Many times we are called in to fix the mess that some other installers create in their haste to make a buck. We are a small company and we do impeccable wiring and give great support including evenings & weekends. Most of our clients are high end and half of those are retired.

We have a retired client that we recently helped and added a universal remote (URC MX3000) to minimize the confusion. He keeps claiming that the remote isn’t working but every time we check it out it is either operator error or an issue with his cable/internet provider. We even went as far as swapping the remotes when he claimed the hard buttons weren’t working (but later his wife told us he was fat fingering the volume and channel buttons). He called us today wanting a refund on the remote because it “stopped working again”.

Word of mouth has been our best advertisement and we want to keep it up but at the same time we don’t want to lose our shirt over something that really isn’t our fault. I figure we can resell the remote at a discount but the contracted labor on the programming has already been paid out. Any thoughts?

By Dave on   4/17/2013 3:14 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

I have to agree with Jeff, we have started giving a total price for parts and installation. We have had very few people ask me to itemize. I like the comparison of supermarket to restaurant. You would never say to your waiter "how can you charge $30 for a steak, I saw it in the supermarket for $7". Maybe we should charge a "handling" fee if the customer purchases the product themselves on top of the installation fee. I recently had a customer try to haggle with me for a better price, I told him if quality of product, service and support were not important to him, he would be better serviced by another company. He ended up telling me those things were important and gave me the job.

By David Reich on   4/21/2013 8:36 PM
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Re: Maintain Price Margins and Keep the Sale When Clients Go Price Shopping

As we used to say back in the day, "We don't need the practice". Doing jobs for free is not the "practice" anyone needs.

We also used to say there were basically two types of customers. 1) Those that know exactly what they want and 2)Those that have no idea what they want. Knowing how to talk to both is important. You have to know who you are talking to.

By Martin Heyer on   4/25/2013 1:37 PM

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