PDA

View Full Version : are the % of customers willing to pay for quality shrinking



huggytree
07-22-2009, 12:11 PM
I have been bidding on alot of new home/remodelers projects lately....my % of getting new contractors has gone down....i am now the highest bidder to most of them....i used to be the middle guy...

one high end new home builder said she didnt care about quality anymore..her customers want the cheapest of everything and thats what shes giving them...i explained a few differences and explained how the low bid means some of their products will fail in 2 years and how it will effect her future reputation.....its hard to say that and come off good...i dont think she liked my lecture, but her low bid was unbelievible and i had no chance with her anyways......i am usually the winner on that size house....so prices have dropped again....

she is a high end builder, but her products are now the same as the large cheap builders...the ones who build junk for nothing...everyone jokes about those houses(not just people in the trades)....if she makes the same product what is the reason someone will seek her out? why not just go to the low guy to start with?...this is what i was explaining to her...she said everyone in construction should be happy to make their wage w/no profit or less....i told her i was having a good year...thats when i felt an attitude change w/ her and the conversation was cut short.

i also just bid a small remodel and lost by alot too....i bid actual hours and actual parts...its hard to lose a $1,000 bid....the competition is usually within $100-150...usually less....sounds like i was REALLY high...i needed the work next week and bid like i needed the work....i keep getting shocked lately...

are we living in a time where every product we buy is going to be complete junk which will need replacing in a couple of years??? dont people realize in the end you pay MORE when you buy junk? since you replace it over and over!

vangogh
07-22-2009, 12:56 PM
If you're noticing a specific change now, it's probably more to do with the current economy than anything else. Many are cutting back on spending and so maybe for a time they're more concerned with the absolute price than the value of quality work.

Some people are always like that. They base everything around price without considering the value that price offers. But I think there are also people who do appreciate quality and understand that sometimes the greater price exists because it offers greater value and the quality you get by paying more is worth it.


dont people realize in the end you pay MORE when you buy junk? since you replace it over and over!

I can't even to tell you how many times I've asked myself that question. Some people don't seem to get it. Some do. I think it often comes down to the specific thing they're buying and how much that thing means to them.

Sometimes though it comes down to what someone can afford. Sometimes you might want the better product of service, but you simply can't afford it. You know you need something, but you only have so much money and you buy what you can afford. I always try to wait longer until I can afford more, but sometimes you don't have a choice. For example if my truck died tomorrow I would have to go out and get something else to drive. My only option might be a used vehicle that I know won't last more than a year or two, but if that's all I can afford at the moment, that's what I may have to buy.

orion_joel
07-23-2009, 01:01 AM
I am pretty much in agreeing with Vangogh here. What you can afford and what you can afford are often two different things. This is often something that is hard to gauge from a quoting point of view.

I think to some degree construction is somewhere that has lost a lot of momentum, in the US i dont really know. But in Australia i know of guys who have gone from winning 60-70% og the bids they put out to maybe 10-15%. more then half of that difference, is not made up because people go for a lower price, but because they dont go ahead because they either cannot afford it or because the market is not there for the project. Whole developments, are getting put off, indefinitely.

I can tell you though there are people that still want quality. However often they are not the people that will shop around on price or provider. Often they are the people that have a company that they just call when something needs doing and don't even question the price. Just another reason why i want away from the Technology industry there are so many large and even medium size companies that will sign a contract with the big service providers that see them paying anything up to $200-$300 per call out to fix even just minor problems. Plus the issue that i think i have previously discussed on companies that have preferred suppliers, like where i work have and they are paying anything up to 10-15% above what they could be for even just a little time shopping around on just 2 or 3 of the higher priced items.

It is not that quality is not what people want they just cannot sometimes afford it.

vangogh
07-23-2009, 02:06 AM
another reason why i want away from the Technology industry there are so many large and even medium size companies that will sign a contract with the big service providers that see them paying anything up to $200-$300 per call out to fix even just minor problems.

Joel you can get those kind of clients too. Generally that kind of customer isn't going to leave you so you get them one at a time and then look back in a few months or a year and you have some great steady clients. Some of my clients are price conscious and need to know how much a project will cost before they agree to let me do the work. Some just tell me what they want and I do the work. They know I'll do a good job and will be fair about the price so there's no need to price shop.

cocoy
07-23-2009, 04:11 PM
In my experience many general contractor's are hiring cheaper subs and these subs are either new to the business or don't have much experience. I've come across subs who had no idea how common HVAC systems should be installed. I've had plumbers install waste lines with not enough slope. Electricians who that can't read schematics and diagrams properly, etc...

I've also come across contractors that don't know how to bid properly. They end up getting the job because of their low price and then loose money because of other costs that they had no idea about, but should have been included in their bid. I know when this happens because they'll suggest a much cheaper alternative.

billbenson
07-23-2009, 04:16 PM
They say as well that the economy will probably permanently change the way people shop. I think people that went through the great depression had the same attitude for life? Even wealthy people are rethinking what they do. I imagine people will buy value (quality) if they have the cash, but they may very well stay frugal even after the recession.

huggytree
07-23-2009, 08:24 PM
I am still working a steady amount in 1 higher end city...it hasnt slowed at all..so people w/ money still spend w/o questioning the labor costs....they say 'come over and fix it'...i always say what my charges are and often it seems like 'why are you telling me this' kind of attitude...its beautiful.

new homes have gone soooo far down hill price wise it may take along time to build the profit back into them...were living in a time where complete junk is going into every new house...doesnt seem to matter the price range...its sad, but will be good for me in 3-5 years when everything starts to break....

If things get better in the next couple of years i dont think people will remember...were soooo self centered....if it lasts 10-15 years then it will permanently effect some. The stockmarket says its getting better....or maybe just a positive blip because of Obama health care defeat...

jrobconsult
07-24-2009, 09:09 AM
When times are good, people and businesses spend more. When times are tough, most tighten their belt. When the economy finally improves, you will gradually see the change.

Yes, some people have no clue about bidding and don't realize winning the bid put them one step closer to being out of business.

huggytree
08-02-2009, 02:06 PM
ive been saying the competitions low bidding will drive them under for over a year now...hasnt happened...

only 1 plumber has gone under and its because his workers all quit and started their own company and took his business from him.

all the low price guys keep going lower and they make it...i dream of the day they all go under...most have been around for a long time, so i assume they know what they are doing....i am just giving up on bidding on new homes...i still bid on new homes, but dont put effort into them...i know roughly where the house will come in...i add a little bid onto that $ and thats my bid....it still looks like a professional bid on paper, but i dont spend 3 hours figuring out every fitting the whole house needs....i spend 1 hour instead of 3...maybe im $150-250 higher than before, but when im consistantly beat by $1,500-$1,800 who cares.

50% of my business used to be new homes, this year its TWO....my gross sales are up 15%, but my profits are up 25%!!!....there never was $ in new homes and by me doing more remodeling im making more money....let the competition fight over $1 profit.

orion_joel
08-03-2009, 07:11 PM
I think that you will find there is almost only one way that the low price guys are still surviving. Because there is still a lot of work there for the low price guys. This is how they manage to keep going. Purely on volume.

How do you think Walmart keep going on the sort of low prices they have. Because they sell a heck of a lot.

How the low price guys probably make it around where you are possibly comes down some extent to working a lot of hours, and maybe they are not as conscientious as you in having the allocating the costs in your hourly rate.

Finally you would be amazed at how many people do not know if they are making a profit or a loss in their business until they actually go to the accountant, at tax time. So while they may have been ahead in January (that is when you do your taxes in the US isnt it?) come next January you may see some drop off if they dont know where they are at.

I think one thing you will find is that unless low price and volume can be maintained it will eventually come undone, it just depends how long it will take for some people, to realize they are cannot afford to go on.

huggytree
08-03-2009, 08:51 PM
if we were talking about a small 1-3 man shop, id say yea...they are probably killing themselves..

but were talking about 20-30 man operations who've been in business for 10-20 years.

are they smart? i dont think so

i will have to sneak into one of their new houses one of these days...im sure ill be shocked at the quality of what i see...they cant spend any time to make sure things look correctly and i already know the quality of materials are $400+ worse than mine.

when the market turns around i wonder how long it will take for prices to rise back on new homes....its just so crazy low right now...ive considered offering a cut rate version of my plumbing to compete.....i would have trouble sleeping at night....ive become obsessed w/ quality the longer im in business....

orion_joel
08-03-2009, 10:30 PM
I think this almost explains it self. You see what i was saying is even more amplified by what you have just described. A 20-30 man operation has by far more scale then you do. Just think about these points.

- The person quoting will be doing that as their sole job, and probably getting paid on commission. Not only this they are probably spending any down time on the phone asking for work.
- I would almost gaurentee, that they do not have a qualified plumber doing every little bit of the job. They would have labour's doing the prep work and the plumber doing just the bits that they need to do.
- When you have to dig a trench you do it yourself, when they need a trench they probably have someone on minimum wage doing it or, hire a machine that will maybe cost money, but take 10% of the time as doing it manually.
- They are more then likely buying at better prices for their equipment, If they have 20-30 guys they know they are going to need a lot of equipment, they will buy in a lot of pipe to keep in stock, for new homes especially spec homes or ones being built before they are sold, the fittings will probably be dictated by the plumber not the build, and they will buy at much better prices.
- Finally once it is up to them to do the plumbing in the new houses they will send a team of guys i would expect, to get in and get it done. Yes the hours may be similar to yours, but the builder will prefer the fact that they may go in and get it all done in a matter of hours or a day, rather then 2 or 3 days (just an assumption here on the time it may take for the work, maybe you can get it done in a day. But if they send a few guys it will be over and done quicker).

These are just a few points but it does really all come back to scale, if they have 20-30 guys then making less profit out of each guy wont be a problem. If you have the scale and the work which is easier making $30 profit on one hours of your labor, or making $10 profit on 20 guys labor, i know which i would prefer.

esprithk
01-10-2010, 01:26 AM
I agree with Vangogh, too.

you have to change with the market.
I run a home renovation company in HK & accept business from China, Macau, HK, and oversea, too.

To save cost, I change all my interior designers to mainland China ( a 5 men team in Dongguan). They can produce the same style of design ideas, but with 5 people, it is very fast to turn out result, and their salary is 1/3 of HK staffs' salaries.

And then, I connect with 6 manufacturers to work as team to supply all kinds of furnitures. (for individual home or large qty export in containers)

Most of the furnitures now is made of MDF, MCF board. (with PVC coated surface)
Some still use plywood + HPL or real wood skin.

anyway, the world is different.
and many of those designer furnitures out there in the retail shop with great designs are also cheap materials....they also last.

bare in mind, if IKEA still attract customers, there is a demand.

how I keep the quality is to use high quality (expensive) hinges.
usually what fail is the hinges and joints.

vangogh
01-10-2010, 12:47 PM
how I keep the quality is to use high quality (expensive) hinges. usually what fail is the hinges and joints.

You're only as a strong as your weakest link so improving the hinges should lift the overall quality of the furniture. Good choice.

Spider
01-10-2010, 02:52 PM
...Most of the furnitures now is made of MDF, MCF board. (with PVC coated surface)
Some still use plywood + HPL or real wood skin...

...how I keep the quality is to use high quality (expensive) hinges.
usually what fail is the hinges and joints.Interesting!

Personally, that's not what I call "maintaining quality." Plywood and fibreboard furniture with plastic or wood veneer surfaces does not ring of "quality furniture" no matter how strong the hinges are.

Have we forgotten what "quality" is?

I'm not saying there isn't a market for cheap furniture - obviously there is, and there is business to be had in supplying it - but let us be honest with ourselves about what is quality and what is not. We must be careful not to get taken in by our own advertising blurb!

I think the quality that Dave referred to in the initial post to this thread was about excellence of workmanship and superiority of materials over cheaper, low-quality alternatives. Mind you, I am a believer in the possibility of maintaining workmanship excellence and superior materials while reducing costs by increasing efficiency.

huggytree
01-10-2010, 03:05 PM
i think it depends on what your market is...if your selling directly against low quality furniture , but advertise better hinges for the same price point i see it as a smart idea on bringing value to a low end product.....if your trying to compete against Amish solid wood furniture then fiberboard wont cut it.

my original post was for quality materials & installation practices...both cost extra...everyone is looking for deals right now..not quality.....

orion_joel
01-10-2010, 07:36 PM
I think one thing you will find quite often that quality comes down to one simple point, the way that people perceive the product/service in relation to the price. In my opinion it is much more difficult to show a higher perceived value in the service, especially to someone that does not work in a trade that requires qualifications.

Another point is the presentation of the product. I used to work in a store that sold furniture. One of our top end office packages Sold at a RRP of $1999. At this price it sold on average 1 or 2 units a month. Ever few months they would offer it on special at $999. On these specials which would last about a week the store would sell around 20+units. The cost price on this pack for the store was under $500 which included the cost of shipping to Australia from China. It was not a small pack either, it was a desk, and return, pedestal 2 draw file cabinet and sideboard. It came as a flat pack product and was finished in polished wood. Obviously people saw value in it at the $2000 price point, and more saw value in it at the $1000 price point.

Everyone sees value in their own way. People that are not exposed to the effort required to learn a trade such as plumbing at not going to appreciated the time that has gone into learning that trade before you show up at their door. Unless you have been lucky enough to land in a good apprenticeship and get paid along the way. Chances are that you are going to have spent a lot of time learning at minimal or no pay. So it really comes down to perception, and if there is one thing that i have learn't, you cannot change someone else's perception.

huggytree
01-10-2010, 08:13 PM
i had a perfect example of someone not willing to pay for quality the other day

Christmas day....basement was flooding...i go over and fix their current sump pump and add a 2nd...i showed them how the original installer gave them a poor quality pump and installed it incorrectly..

1 week later...he calls me needing a new waterheater...i give him my price and assume i have the job (my water heater price is low).....he says he has a lower bid and will think about it...i call him back 3 days later...i find out his lower bid is $20...yes $20 less...he asks me to beat the price...i offer to match (im slow that day)...he says he will think about it again....then i told him that he doesnt know the other installer, but he KNOWS me...i couldnt believe it...i spent extra time showing him all the install flaws which flooded his basement...then he still goes with a cheaper install when he knows im the quality guy....he must have been a satisfied customer since he called me for the water heater quote...he also went with my recommended water/fire restro company...so he trusts me too...i still may get the call for the heater, but im blown away at the fact that he would roll the dice w/ a stranger over $20 difference...

oh yea...i know the plumber who's $20 cheaper...he's the crook type....he's banned from a few supply houses for not paying his bills....

an electrician friend of mine said i should have spent extra time with him and Slllloooowly explained all the high quality things i did on the sump pump and what i do different on waterheaters....he told me to treat people like 2nd graders and walk them through things slowly....he's the successful one im taking alot of advice from lately...i feel its all been good advice