Bidding Against Low-Price Contractors

09/02/2010 By: Brad Rowe

How many times have you spent hours working on a bid only to lose the job because someone undercut your price? Sound familiar? Two factors are the primary causes of low prices: customers who consider price only regardless of quality and contractors who work for little or no profit. To stay competitive many reduce their price. A better solution is to increase your customer's perception of value.

The first problem is that many customers don't think of landscaping services as a service, but as a commodity. For example, a Chevy is a Chevy whether you buy it in Lansing, Detroit, Philadephia, or San Francisco. It's the same everywhere so selling price becomes a critical factor. Unfortunately, many potential purchasers of landscape services think of landscape contractors in the same way. They don't distinguish between quality companies and fly-by-night operations.

To further exacerbate the problem, what contractors are really selling is a promise – a promise to install or maintain a landscape at a certain level of competence. This work does not become a product until the contractor is finished. At this point the customer can evaluate the product just as someone would kick the tires when looking at that Chevy. To avoid being thought of as a commodity you must be proactive and communicate your value compared to someone offering a cheaper price.

A second obstacle is how to deal with contractors who will work for nothing. These are the newcomers who think that being busy is synonymous with being profitable.

A second obstacle is how to deal with contractors who will work for nothing. These are the newcomers who think that being busy is synonymous with being profitable. Maybe they know the technical aspects of hardscapes or plant materials, but they don't know how to run a business. Low-ball bidders are never in business very long, but they are always going to be a pain in your side. They are like dandelions, no matter what you do to kill them off; another crop of low-ball contractors will emerge next year. Low barriers for entry into our industry will ensure this. As soon as one goes away another is there to take their place.

So how do you go about increasing your customer's perception of value in your company and the work you do? First, examine your organization and identify your strengths. What do you do better than your competition? What special skills do your employees bring to the table? What is unique about the services that you provide? Why have customers chosen you? Why have customers not chosen you? What are your weaknesses? Try to answer these questions from the customer's point of view. The answers will give you some insights into the value that your company represents.

Next, you must communicate this value to your potential customers. We are better than ABC landscaping because…. Help your clients become more discerning buyers. Project a professional image. You will be able to get a higher price for your work by creating an image of greater worth. You can sell value by doing the following:

1. Participate in professional associations such as ANLA and PLANET (Professional Landscare Network). Active membership demonstrates your interest in continuing education, desire for personal and professional growth, and commitment to excellence.
2. Become certified. Both state and national organizations such as PLANET offer landscape certification programs. Encourage your employees to become certified and tout the fact that you have x number of employees who are certified in this profession. You wouldn't hire a plumber or electrician who wasn't certified, would you? We need to educate the public that our business takes a certain level of expertise. Distinguish yourself from the average contractor. You are worth more.
3. Project a professional image. Keep your trucks and equipment clean and have a dress code. If you have employees who show up on site puffing cigarettes and have skin adorned with an assortment of tattoos and nose rings, the homeowners are going to deadbolt the doors, barricade the windows, and take the kids up to the second floor for safety. This form of dress may impress your customer's teenage daughter, but who is paying the bill? This is not the professional image you want to project. Of course it's only a stereotype and the employee may be a very competent and reliable worker, but the only thing that matters is the way the employee and your company is perceived.
4. Provide a reasonable wage and benefits package for your employees and provide them with the tools necessary to do the job. These are the people out there representing your company. Don't think in terms of what they are costing you, but in terms of an investment in your company. Well-trained, motivated employees using reliable equipment will be more efficient and can do their job more economically. Most business problems are actually people problems. Hire good people and keep them.
5. Do quality work. Then tell prospects about what you do well and provide references so they can hear it from a third party. There is nothing better than word of mouth advertising.

Your only chance against low-price contractors is to distinguish your company and the quality work you do from the competition. If you lower your price and squander your profit you will soon be joining the ranks of those filing for bankruptcy. Communicate your value.

About the Author

Dr. Brad Rowe received his Ph.D. in Horticultural Science from North Carolina State University and joined the faculty at Michigan State University in 1997. A professor in the Department of Horticulture, Brad teaches courses in plant propagation, landscape construction, landscape contract management, and sustainable landscape practices. His primary research interest is green roof technology. The MSU research group is conducting research on plant selection, stormwater runoff, energy conservation, carbon sequestration, biodiversity, and roof vegetable production.

Reader Comments

Please login or register to leave a comment.

Marc Hudson

Posted: 08.09.2010 15:51:28

Welcome to our first author, Brad Rowe! Great article that is especially relevant considering the current economic climate.

Krocker360

Posted: 13.10.2011 01:16:53

actually it depends on the contract, bid for short contractor and surely its low.

Krocker360

Posted: 28.03.2012 23:27:03

any bids??? I think you already got one.