July 7, 2010 | It is possible to make your customers and yourself happier by charging more. I’m not talking about charging more for the same thing you already do or more than what other contractors charge for the same thing. I’m encouraging you to incorporate as a standard a consistent line of products that are in the mid to higher end range that offer true long term performance. I’m suggesting a way to lower your warranty cost by 80% or more, extending your customer referral base and being able to show prospects a deck project that’s 3-5 years old that looks better than your competitions 1 year old deck. I’m talking about a way to increase your annual dollar production and profit with the same number of employees or subs that you currently have. I’m talking about selling value, performance, and delivering work you can feel good about.
Don’t Sell Something That You Don’t Believe In Yourself
My company is based on the concept and philosophy of providing true extensions of the home, providing true performing decking options, and low maintenance projects. One important aspect includes not offering the “traditional pressure treated wood deck” which for decades has been the accepted option by both customers and deck builders especially in the south and east. We offer pvc, cap stock and hardwood decking only. Pressure treated decking is not even an option.
My decision was based on the commitment to no longer sell anything I didn’t believe in. I was tired wondering how satisfied my past customers really were once the newness of the wood deck project wore off. I also didn’t like the idea of allowing referrals to cease as they often do when pressure treated wood decks weather and began to react to the elements. I’m fine with not getting jobs that customers are purchasing based on cost and versus value and I’m convinced that there’s a needed change in direction from a product usage standpoint.
I believe that there’re enough quality oriented prospects in our markets to support this approach. If these products are offered at a reasonable price and the low maintenance aspects are communicated, increased sales volume can be achieved. This approach also allows you to get away from a steady flow of warranty work and therefore reducing the initial profit margins attained when a project was originally completed by incurring cost to perform repairs later.
The Reality Of Adopting The Concept
There’s no doubt that in some markets depending on demographics and market demand that not every contractor could operate in this niche exclusively. There’s also the business model of providing good, better, and best to capture as much market share as possible. It’s just not the model I operate from. I can tell you from experience that this premium product approach can be implemented successfully in the larger metro market areas and to varying degrees in mid sized and smaller markets.
The effort involves converting as many of your customers as possible to the higher end product options. Although I’m talking mainly about decks the same principal applies with any remodeling company.
When a standard deck is converted to an alternative or hardwood deck, the material cost increases but the labor stays the same with the exception of the hardwoods or hidden fasteners. You or your crews could build a pressure treated or alternative deck in virtually the same amount of time and with the same amount of labor cost. If the labor is more it’s built into the sales price, but generally this allows you to gain dollar production volume and an increased profit because you’re hitting a margin off an increased number compared to the wood deck. It also means that you’ve saved potential warranty dollars in the long run due to less chances of a call back. Again, this is based on hitting the same margin that you would with a wood deck but because the sales price of an alternative is higher; you’re working off a higher number.
It’s always possible that warranty could occur with pvc, cap stock, or hardwoods, but if you’re selective with products you offer and install properly it should be virtually non existent. When you combine the warranty savings with the real benefit of achieving gross and net margins of the increased sales number created by converting sales to premium options, you begin to see the monetary benefit. There are many variables and combinations that can come into play. All of them are good and provide a company with benefits.
This approach has been the saving grace for me in this down market and I believe its elevated me in terms of customer perception. By operating in this niche it’s kept me out of the crowded battle where decisions are only based on cost versus quality, value, and service. My warranty work is almost non existent, my referral source is strong, and in 20 years in the business I’ve never felt as good about what I’m doing as I do now.
Written by Bobby Parks of Peachtree Decks and Porches, LLC.
Posted courtesy of DeckExpo.