In a highly saturated market, presenting a competitive point of difference, such as offering consumers the best value for their money, is crucial. While it’s easy to be of the belief that your product is far better than your competitors’, being able to explain to potential customers the reason that they are paying top dollar for your service may prove difficult.
“Don’t just price up a job, chuck your price in the ring and hope for the best. That’s not the right way to do it,” says Small Fish’ Jon Dale.
Dale refers to the common perception that people think, “oh, yeh the same stuff, only cheaper.”
However, Dale argues, “it might be cheaper, but generally speaking (particularly in your industry), if somebody’s considerably cheaper than you, something’s different along the way. They’re going to use cheaper materials and components.”
Often, emphasising the value you offer is in response to another business undercutting you or providing a similar service at a much lower price.
While customers typically look for the cheapest price, according to Dale, it’s obvious that you’re taking short cuts if you charge too little.
“You compromise quality,” he says. “ [The customers] bought cheap and sh*tty cabinets rather than good quality ones, and in the end, the customers are going to pay for that. [Cheaper competitors] cut corners on the job when they’re trying to work to a price.”
While lower prices might be one way to attract business, when you ultimately provide a poor product, customers aren’t likely to return.
Further, “undercutting means lower margins for the electrical contractor…if you’ve got low margins and not much cash around, it’s very easy for you to go under,” Dale continues.
Dale argues the ownership is on you to educate potential customers on what a good product should cost and that they get what they pay for. Not only will the competitor who is undercutting your business skip steps, there’s also the risk that they may go under and not complete the job — it’s your responsibility to point out that small — margin tradies are unreliable and your project is at risk.
This is all part of your marketing and sales strategy – showing the value you offer, the attention to detail in your work and the risk of going with your competitors.
Looking to start your own business? Head to Qualify Me! to see how a tradesman coach like Dale can give you the keys to success.