2009... Year of the lowballer?

I had lunch with my brother who owns a pressure washing company the other day and this topic came up. Alot of the folks on the PW Forums are talking about lowering their prices big time to survive. This to me seems like a big mistake. If you lose $$ from the get go, it will be hard to increase it when you have to. Once you lose that money, its very difficult to get it back in a future increase.

My plan for 2009 is really simple. Offer a discount of some sort on the website - a limited savings deal. Offer a discount to scheduled maintenance customers that use us more during the year (3 or more cleanings per year)- We have always done this.

As far as my pricing goes, it will be the same as 2008- No increase. Gas prices are now 1/2 or 1/3 the cost as they were last year in my area.

Whats everyones plan to keep the ball rolling? Just curious.

Steve

I’ve been running into the same problem your brother is experiencing. There are a large number of companies that do the same thing I do in my market. Some of them have salesmen who have never touched a squeegee in their lives, and they have no idea of how to bid. I’ve been undercut 40-50% in some cases. Fortunately, we have a pretty loyal customer base and I’ve been able to hold the line on prices. I do offer off season discounts, do little things for the customer at their request (once I removed a peice of hanging metal flashing for free). But you’re right. Your price is your price. Don’t let your idiot competetors decide how much you make.

I also believe price cuts are not the way to go (unless it was too much in the first place)

The only way to eliminate the threat of “low-ballers” is to advertise a “special” like Steve mentioned. Keep the price elastic.

Low-ballers will only win with the people searching and price shopping. That’s life, not good or bad.

[I]Most[/I] people that receive an offer usually do not call around, they schedule.

I do feel prices will be more of a factor then at any other time in our lifetime, be we can make it.

I try not to go head to head with anyone (tough not to do online). I hate apples to apples…

This book “Pricing with confidence” will give you the mental fortitude, energy, determination and understanding of why what you’re doing will work in th elong run and what a death spiral it is to lower your prices. ALso many strategies to create value in your customers eyes and identifies which customers to walk from and strategies for other types.

My opinion really does just spin off the posts I read before it. I agree, you do have to re-adjust prices during times like these. If you don’t you will see less work and most likely will see less work whether you do or don’t. The difference in my opinion will be that you will keep or gain those that are “on the fence” if you are offering discounts to keep things in perspective.

One of my uncles is very wealthy. Unfortunately he does not live in my area. He lives in a huge home and has monthly window cleaning service. He told me he has changed that to quarterly and asked his regular cleaner to go down 15% on his price until the economy stops beating up his investments or else he will have to pull the service entirely and go with someone else. His cleaner threw a fit and my uncle canned his ass.

If that were me I would have accomodated the rational request and kept moving forward knowing when things come back to thriving again I will have gained this customers respect and loyalty and more importantly - his money!

There is a huge problem with this “Low-Baller” argument. There always has been because the assumption is that you as company A lose an account to company B because he slashed your prices.

Who gives you the right to set the price in the first place—no one and certainly not Company B. Half the time you dont know what company A is charging exactly so what is company B going off of.

Hopefully they are going off what it is they need to make hourly to run things the way THEY want not you. Everyones needs are different. We as a company cant afford to run much less than 65 a billable hour. However, if I was a one man show could I bill at 40, even 25. You bet I could and with this economy making pretty good money in my area. Would that make me a Low-Baller. I think not.

Not many of us were born into this business we left other jobs to come and do this. When we started we didnt look to make 65 an hour we looked to replace our salary. I was living on 50,000 a year so I need to get my business to that to offset what I was making and suporting my family on. Now you go on for 10 years you have adjusted your pricing raised it every year for those 10 and now your making 100,000 a year.

So then you have the audacity to say to the next guy coming in you need to set your prices at mine as not to compete with me. I have set the prices here and if you dont you are a low-baller. Whatever.

Excellent post Mike!

Many of us are still in the numbing phases of all that is happening, is this really for real? Surely we will see a turn around quickly? We just need to keep the ball rolling for a little while until it all gets straightened out? The reality is, we are a nation living on borrowed money, it only makes sense that eventually we will have to pay the price of the debt, which is what we are facing now.

We just need to fix our budget and manage it better? Budgeting means you have money in the first place to manage and budget. It is really difficult and next to impossible to budget, when you have nothing to budget. You are left with, just trying to survive long enough to get through the day. For many, survival is going to get harder and they will do anything necessary to hang on. If that means cutting prices, making deals, offering discounts, added services, what ever it takes, it will be done. Bottom line, we all need to survive, and that includes the competitors.

On the positive note, many of you are worried that if you lower your prices now, it will be harder to bring them back up as things improve. That is a very optimistic attitude! From the posts, many of you are actually gaining more business even during these troubled times, therefore I would not change a thing! What ever strategy one decides upon, simply depends on your own personal experiences and doing what ever is needed to survive and keep the ball rolling in your court. We all need to keep that positive attitude, but at the same time, today is today.

When it gets down to the brass ball basics, window cleaning is a luxury. When faced with the choice between buying groceries for our kids, or living with dirty windows, which would you choose? This is the mind set of many right now, learning how to let go of the luxuries and worry about the needs. I would focus my marketing strategy, be it discounts or not, to be about why this is a needed service.

Just my little commentary
Joie - N. CA

Mike, I think your right all companies of the WCR nation are at different levels, just because they do not charge $65 an hr does not make them lowballers

I will give further example of this. Lets say my target is 65 an hour. Lets say also I am doing a strip mall with nine stores that pay 55 and its taking me about 40 minutes. Lets say you have a store in that complex that you got for 20 bucks and it takes you 20 minutes.

I will absolutely try and steal that account from you for whatever. Low-Baller? No I am trying to make my 65 an hour in that one stop. So would I go to 15 to try and take that account. You bet I will. You can call me what you want. Thats not low balling that is stategizing.

I only have one issue w/ this Mike. In another post on Quadrant pricing you talk about “what the market will bear”. So if guys are charging half what I am they are hurting the market whether they think so or not. Wal-Mart is the prime example. They have dominated the market by being the ultimate lowballer. Has their strategy helped the economy? Depends on who you ask. The workers that can’t afford insurance, the states that have to provide health care because of that, the small businesses that have folded or are on the brink, etc…
So the lowballer is basically doing windows for beer money. I ran into a few roofing contractors in my day that were like that and it affected the way people thought of all roofing contractors. It lowered the image of that group and lowballers (those that charge less than what the market will bear) are hurting the image of the group. Just my opinion.

I didn’t went through the whole thread but I will later, just read this last night and it makes very good points. I’ve done this without knowing it, and is good to realize that I wasn’t wrong.

http://www.startupnation.com/articles/9295/1/pricing-strategy.htm

Considering that Wal-Mart is about one of the only merchandisers that actually showed profit last year … then perhaps lowballers will be the ones to come out ahead during hard economic crunches. Who shops at Wal-Mart anyway? Considering the profit margins, it appears that … people do, consumers. Where is the best place to shop and spend your money? As a consumer, if I had the money not to concern myself with saving a little here and there, I would prefer shopping at a small specialty store where I know I am going to get the best product with full and great customer service. But when you are pinching those pennies, stretching that dollar to last … you are more than willing to give up the best, settle for less, because sometimes less is more.

I remember the days of small family owned bakeries, deli’s, meat and fish markets, the small corner drug store, the florists, even the small Mom and Pop shops. In the county in which I live, no such of any of these exist, they are all located in one large super market chain store. Were those better days, I do believe so, however, saving a buck and consolidation seems to be where the buck stops.

Joie - N. CA

For me it is not about “how low will I go”, it is about what the market will pay in these specific economic times that for which we have not seen before.

Right now my prices are staying where they are. My first spring ads will tell me exactly what I need to do. I could care less what my competitors are doing, unless they figured out how to market themselves better…

I have read all of the responses to this thread and ALL have good points. When I first started the thread, I originally thought about the fear factor that all of us, as window cleaners, are experiencing. I have seen alot of the beer money window cleaners fall by the wayside over the last year or so because you cant clean $6.00 stops when it cost $5.00 to get there.Using up a gallon of $4.00 a gallon gas. Pocketing the money without uncle sam knowing about it just wont fly. Alot of them just shriveled up and went away.

I think that a good amount of my customers will cut back. I have a tough time believing they will go away altogether. I have made major adjustments in 2008 which gave me the bast sales year since I first started in 1990.

  1. I cut back on employees- Its was a struggle in Spring bigtime. Worked alot on the weekends. My crews made great money- so did the company.

  2. Hired someone to get my quotes out the door fast. Customers committed to us within a day or two from getting their quotation.

  3. Every July and August have been steady (But kind of flat) months in every year since I have been in business. 2008 was extremely different- quotes that were ran in June carried us through July and so on- Once again, got the quotes out FAST. Customers committed to us. July and August were awesome.

4). Im not the lowest company in my area. Im not the most expensive company either. I am constantly driving quality work down my guys throat and will continue to do so forever. Quality-Fair pricing = customer retention in my book.

These are some of the things that I did last year that I felt were great business practices. At the time, I was just into “survival mode” and didnt realize until the middle of the season last year that I made the right choices.

As for using the “Lowballer” term, sorry to offend (If I did) anyone on here. We all have a set price we need to bring in to keep the doors open. Its that way in every business. We all have to accept that.

Steve

I used Wal-Mart as an example because although they may make a profit they have no ethics. They will make a profit at the expense of anyone necessary. Not the kind of company I want to emulate.

On the Walmart topic- you have to acknowledge that they sell products. We sell services. Walmart buys cheap goods from China, then typically resells the product cheaper than everyone else in the USA because they have buying power. They also have more of the market share because of one stop shopping and a ton of locations.

Window cleaning is one of the few businesses out there that has low overhead involved. At least we have that on our side:D.

Steve

I see where you are coming from. I am not an advocate of being at half a guys price. I do think you need to do some market research and try and get an idea of pricing. However, your competitor didnt call you and ask you your price nor will they or should they. Also this is not personal Tony I think your a great guy but if Joe Shmow can operate a profitable business for half what you charge more power to him. We then in turn should look and see are we fat somewhere how is this guy doing that. Maybe he isnt and thinks he is not to worry he wont be around long. I get beat all the time by one man operators. They are not low balling me I am much bigger and cant afford to operate at their margins. So be it I make it back when a big deal comes along and I need full blown insurance and that guy cant come thru with it.

I understand Mike. Part of the reason I don’t do commercial anymore is the lowballer that comes along and bids $5 on a job I’ve priced at $12. They have no insurance and do crap work. I’d rather do residential where the lowballers fear to tread (at least in my area).
That being said I’ve been the new guy that needs a few jobs to get started and have bid a few dollars lower on some jobs (unknown by me - I never asked what the previous wcer was doing the job for). Once I know the pricing in an area I try to get that when bidding because doing otherwise is leaving money on the table.

I will be charging more this year than last. Reason being is I think I can.