Is the cheapest price a good deal?
We had a prospective client attempt to negotiate a quote recently stating that we were - "taking food off their table".
So, as a statement we replied by adding 10% to the quote.
They questioned why the quote had increased and said they were not happy about it. We replied saying it was - "taking food off our table to meet your request” and then dropped the price back to our original quote and asked them if it was more acceptable.
The prospect then admitted the original quote was well priced but “they had to ask the question” and then gave authority to proceed. We politely declined and advised that they should seek the services of another provider. It became evident; the nature of the prospect was not in line with the values of our business.
Unfortunately the construction industry has a bit to answer for in this area. Many trades inflate their pricing to accommodate for the times they get screwed over by customers trying to cheat and exploit the very trades supporting them in their project. OR other trades will go in with the cheapest price, or they might even reduce with a discount, but then they’ll sting their customer with variations through the project, in order to make their margin back up.
Let’s just acknowledge the elephant in the room. ALL businesses charge a margin and exist to make a profit after covering overheads & expenses. It ensures they will be around for you to get them back when you want them again.
Unfortunately it's become industry acceptable to play with the figures and equally acceptable and the norm for the prospect to ask for a discount. Of course retail doesn’t help the situation with a “40% off sale” all year round, just to suck people in at their real margin.
There are three things that can happen when a business discounts:
- The business finds a cheaper way to deliver the project which could be through less skilled labour or using inferior materials.
- The business finds variations to the agreed quote and charges a premium dollar on the variations to make up the margin. This is seen with most project home builders on any change to a set design both before and after contract signing.
- The business goes bankrupt.
Value should be the negotiating factor. Are you getting a return on your investment?
Value shows itself in three key areas.
- Reliability to deliver on time
- Ability and capability
- The level of quality in the delivery
A higher level trade will quote the project with an accurate and reasonable budget and deliver at a high level on their promise. Accurate is more around seeing the big picture and knowing about additional costs or better installation methods which are going to be required, but not necessarily asked for and then communicating the reasons clearly to the client.
At Excel Tradeworks, we feel privileged to have strong relationships with some of our clients who trust us to the point that they don’t ask for quotes anymore. They just know we’ll do the right thing by them.
If you want trade professionals who do quality work on a fair budget, the trust must go both ways. We'll offer you honesty, integrity and you trust we'll deliver a quality service at the correct budget.