Sometimes a deal is just too good to be true. It seems like every time I price shop on Amazon and get the cheapest version of something, I end up back-shopping a week later for something better because what showed up was garbage—like that “ballistic glass” screen cover for my iPhone that cracked within a week. And I didn’t even drop it!
Unfortunately in our industry, when clients go for the cheap option, they often don’t get a do-over and they know it. Just this week we were quoting a project and the client said we were 70 percent above the cost of another quote. Fortunately, the client was open to sharing the competitive quote and the other integrator proudly stated on their proposal “we make all of our profit on labor, none on product.” True to their word, everything on their proposal was at dealer cost. Everything—from Sonos, to URC, to Monoprice cables.
I had an open and honest discussion with the client and told them there was no way I could match that kind of pricing and that yes, we do make profit on the product, which is what has allowed us to stay in business for more than 10 years and to offer post-installation service and support. The client “felt for the guy” and wanted to give him business. I told them I understood that emotion and at one point in my career I was that guy—I landed projects too big for myself at the time, and at points wished clients had gone with someone else because I felt in over my head. The projects all ended up working out in the end, and although the solution may not have been what I would do today, they worked and clients were happy. But they could have been even happier and had a more robust and easier-to-use solution.
How is someone going to run a profitable business in this industry without any product profit? Don’t they realize they will have to sell and install two to three times as many projects to make the same profit dollars? I guess that is what Enjoy.com (the brainchild of Ron Johnson, formerly of Apple and JC Penney) is trying to do, just flipped around—they make profit on product but installation is free. But Enjoy is just delivering consumer-grade product (think Sonos, Airport Extremes, iPads, etc.) and providing up to an hour of setup or training, so they can have scale and make it up in volume. A small integrator in New Jersey isn’t likely going to scale to multiple cities across the country to gain the volume to make this model work—plus they would need trucks, tools, employees, back-office systems, and more to support such an organization and charging for labor only likely won’t get them there.
I’m not sure if manufacturers with UPP policies will crack down on dealers using such pricing strategies, but this is exactly what UPP is designed to do—prevent possibly inexperienced or fly-by-night dealers from damaging the entire industry.
Fortunately for us, the client understood the risks in going with an integrator without a strong reputation and questionable profitability, so even though they could have saved significantly by going with another dealer, they chose experience and stability and we won this project.
How do you handle selling against aggressively discounted integrators?