Strategies for ensuring that you’re not browbeaten into charging less than you’re worth
Rich Green recounts a project he once worked on, a project that was killed by discounts.
“The client was a designer, and asked everyone involved in working on their home to cut the price: the general contractor, the electrician, the integrator – me – all the trades,” says Green. “And the project was a disaster.”
The problem was mainly one of psychology. “If you’re working on a discounted project, that project gets pushed to the bottom of your priority list. As soon as a customer comes along who’s paying full price, that’s the home that will demand your attention,” notes Green.
The designer’s house took two years to complete, and no one was happy with the result – not client, not tradespeople.
Green – longtime CEDIA volunteer and owner of the high-end integration firm Rich Green Design – has put together several webinars and presentations on the subject, the most recent with an assist from TruMedia
’s Amanda Wildman, who’s also a CEDIA Board Member. The pair run through two role-play scenarios in this latest iteration: In both, Green plays the part of Disgruntled Potential Customer demanding a discount. Wildman plays an integrator. In the first scene, she’s off-balance and underconfident. By the time a price is (almost) negotiated, Green has taken Wildman’s proposal and shopped it elsewhere. In the second scene, however, after the pair illustrate the improvements that Wildman needs to make, she stands her ground. She makes constant eye contact and defends the price of her work from a position of skill and later support.
At the end of the webinar, one attendee comments: “I’ve been in business for 29 years, and I wish I’d known about this exercise before now. Absolutely brilliant.”
Of course, the key to defending your cost and holding fast is knowing exactly what you’re selling – and the psychology of that integrator/customer relationship.
Your Margins Lie in Labor
“Most of what your business is about now is your labor. Your installation excellence. Your knowledge,” says Green, so ensure that the customer understands the expertise you bring to a job. “If they don’t understand your value, it’s their last resort—price is the only thing they understand,” Green explains.
There are tricks to getting straight to the notion of knowledge-as-value-proposition. “First,” says Green, “if TVs are part of the project, make sure they’re competitively priced. It’s the first thing a customer will check.” If a comparable display can be found much cheaper online, that customer will be questioning the rest of the proposal.
To back up the rest of that aforementioned proposal, Green has actually mapped his processes from top to bottom. “I sat down during some downtime between projects and mapped out each step we go through in the average project,” says Green. By thoughtfully considering every task and sub-task his firm considers over the course of a job, Green’s list topped out at no less than 700 items.
“When a client begins to demand discounts on the job, I bring out the list, and – without any snark – ask the client which of the 700-plus items on that list they’d like to cut out,” he explains. “The answer’s always none,” says Green, and if there’s still an issue, he has the ability to dig for other options.
“Perhaps that audiophile amp gets something of a downgrade – whatever it is I need to do to make it work, I’m not carving into the areas that ensure that I get paid properly.” And like any good contractor, Green builds in contingency plans. “I make sure I price a job with enough of a cushion that I’m not driving the customer crazy with change orders.”
Interested in more on the subject? The entire webinar’s here: