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Customers to try to negotiate prices
Ken C.
Member Posts: 267
Recently, I was sent on a call for a customer with a leaking water heater. The boss told me to stop at a supply house first to get the heater, even though there was no guarantee the customer wanted us to do the job.
My boss also told me as I left the shop, "Do whatever you can to sell the job, but get at least $675."
So I got a 40-gallon gas water heater, then show up at the customer's house (a 3-family) and see a huge puddle of water around the owner's water heater. I told him it would be $725 to replace it.
The homeowner says, "Can you do any better than that price?" He asked how much the water heater cost, what we charge per hour for labor, etc. I said that we charge a flat rate to replace a water heater.
I said I would have to call my boss to see if he would agree to lower the price. I called my boss, who said install it for $650 (I thought to myself, you said to get at least $675.)
I go back to the homeowner and told him my boss will do it for $650. The homeowner hesitated, then said, "You can do it for $600."
I wasn't sure I heard him correctly, so I said, "You'll do it for $650?"
Sure enough, he had said $600.
So I called my boss again, and he said he'd do it for $600 if the customer paid cash. I relayed that to the customer, who said he would have to pay with a check. I told that to my boss, who I had kept on the phone, and he said, "Just do it, you're already there."
Now, as an employee, I had to follow the boss' instructions, but I can tell you, if I was self-employed, I would have told this customer to go pound sand. I might have given him a small discount ($25) in exchange for not taking the old heater away, but otherwise, my price is take it or leave it.
I hate it when people try to negotiate the price of a plumbing/heating job (and the ones that do this are never poor or hard up, in my experience, just cheap). Plus, they have a lot of gall. I would never think of taking my truck to the dealer for a repair and asking them, "Gee, that price sounds kinda high. Can you do any better than that?" I though $675 was very reasonable for a water heater.
Maybe my pride has a lot to do with why I would refuse to haggle over price. But I think there's another reason it's a bad idea in the plumbing/heating service business. If you do drop your price, it tends to reinforce the customer's opinion that your price was artificially high to begin with (even more so if you lower your price TWICE, like my boss did. I can't believe he did that.)
For those of you who are self-employed or own a company, how do you respond when you quote a prospective customer a price for a repair or install job, and they try to get you to lower that price?
My boss also told me as I left the shop, "Do whatever you can to sell the job, but get at least $675."
So I got a 40-gallon gas water heater, then show up at the customer's house (a 3-family) and see a huge puddle of water around the owner's water heater. I told him it would be $725 to replace it.
The homeowner says, "Can you do any better than that price?" He asked how much the water heater cost, what we charge per hour for labor, etc. I said that we charge a flat rate to replace a water heater.
I said I would have to call my boss to see if he would agree to lower the price. I called my boss, who said install it for $650 (I thought to myself, you said to get at least $675.)
I go back to the homeowner and told him my boss will do it for $650. The homeowner hesitated, then said, "You can do it for $600."
I wasn't sure I heard him correctly, so I said, "You'll do it for $650?"
Sure enough, he had said $600.
So I called my boss again, and he said he'd do it for $600 if the customer paid cash. I relayed that to the customer, who said he would have to pay with a check. I told that to my boss, who I had kept on the phone, and he said, "Just do it, you're already there."
Now, as an employee, I had to follow the boss' instructions, but I can tell you, if I was self-employed, I would have told this customer to go pound sand. I might have given him a small discount ($25) in exchange for not taking the old heater away, but otherwise, my price is take it or leave it.
I hate it when people try to negotiate the price of a plumbing/heating job (and the ones that do this are never poor or hard up, in my experience, just cheap). Plus, they have a lot of gall. I would never think of taking my truck to the dealer for a repair and asking them, "Gee, that price sounds kinda high. Can you do any better than that?" I though $675 was very reasonable for a water heater.
Maybe my pride has a lot to do with why I would refuse to haggle over price. But I think there's another reason it's a bad idea in the plumbing/heating service business. If you do drop your price, it tends to reinforce the customer's opinion that your price was artificially high to begin with (even more so if you lower your price TWICE, like my boss did. I can't believe he did that.)
For those of you who are self-employed or own a company, how do you respond when you quote a prospective customer a price for a repair or install job, and they try to get you to lower that price?
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Comments
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(Topic should read, \"Customers WHO try to negotiate price\")
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You left out some key facts.
How much did the water heater cost the boss? How long would it take to install? It sounds like your boss is a very astute businessman and shows why he is the boss and you are the employee. He obviously believes it is better to make less money than to lose the job. Telling the customer to pound sand will not give his company a good reputation. By selling the water heater at a lower price he is most likely guaranteed a customer when it is time to replace his heating system. A smart buyer shops around for a high dollar purchase. I know that many women shop around for food and use coupons to save money. Why would someone be "cheap" if they want a better price.0 -
I agree with Ken
Quote the price and stick to it. If you negotiate on this you always have to negotiate every job. Negotiating wastes time and for less money. I'm not Monty Hall.
David0 -
Ken , you are correct...
No matter how you feel you are working for someone else, who in a sense does not want you to waste your time. He felt since you were already 25% done getting there with the materials. The customer had you over the perverbial barrel and Knew it !! Bad thing is now your company will have to charge someone who is NOT a negotiator a higher margin to make up for the WH customer. I deleted most of this post for respect of who's house I am in. Take care!!
Murph'
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Monty Hall
Now that is Funny!!
Murph'
(whats behind door #2)??
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Losing Jobs
There certainly is nothing wrong with losing jobs which you don't make much or any money on. The time you spend working on that job could be spent on a job that will make you money.
Customers like that are why I charge to go out to look at a job....if they are not willing to pay you for your professional opinion, they probably aren't willing to pay you for a professional install.
Been burned too many times by cheap potential clients to play those games. If I am not going to make money on the job, I might as well stay home with my wife and donate time to a good cause, rather than to what should be a paying customer.
Boilerpro0 -
No Sale!
If a customer asks me "Can't you do better than that?", I tell them "No, that is the best price available." If the customer asks again, I then look them straight in the eye and say, " If I were to lower my price now, that would mean I was trying to cheat you with the first price. I am not a cheat, I am a plumbing contractor. Do I install the heater or leave?"0 -
I know this doesnt apply to this type of job but heres my approach.
Say its a new boiler install I'm proposing. Lets say a Buderus system, boiler, logomatic and buderus indirect. If they ask for a better price I say sure, but I remove something or change the product. Maybe omit the Logomatic first. Or no indirect for now. Hopefully I wont have to change boilers but so be it. I refuse to do the work for less than we deserve.
PATRIOT HEATING & COOLING, INC.
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Astute business man?
Ken you are 100% correct, if you keep lowering your price then the clients feels like you were dropping the hammer on them on the first price.Here's some questions what is the breakeven cost, did you already reach your quota for the month, possibly your boss had the christmas spirit.Try a diagnostic fee, this tends to get rid of the price shoppers, if there already on the hook for a couple bucks, they tend to have you do the job.Someone once told me that "Profit is not a Goal,it's a necessity0 -
Lets make a deal ?
My father who was a self employed plumber used to say ...
"I am not Monty Hall , your not wearing a chicken suit and this is not Lets Make A Deal"
But this was also similar when he would supply and install a toilet and never supply a new toilet seat with it .
When asked by the customer "what about a new toilet seat" ?
He would always reply "when you have new windows installed in your home do they come with new curtains" ?There was an error rendering this rich post.
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helpingothers.....
You dad was wise...Robert O'Connor/NJ0 -
hay guys dont take this the wrong way or anything but a few months ago when I was in the market for a complete new heating system and hotwater I wanted buderus.
one guy wanted $150 just to come out and tell me what he thinks I should install.
so what I told him was if you want my business you have to earn it don't just come out here take my money and give a $35,000 quote and make $150 and walk away knowing I cant spend that. so I think charging a diagnostic fee for a bran new heating system was his loss.
I just spent 18,000 for a new buderus g115 r2109 controller lt160 hotwater tank 2 ton air handler all new duct work and 44 feet of baseboards and a power Venter. and I had a real good company that dose all the cumberin farms stores and town hall and school heating and cooling systems so they are a good company.
so what im saying is he lost $150 plus any money on this job that he could have made.
it's like going to the dealer to buy a new car and the sales guy says hay if you want to see the car and test drive it and you want me to talk to you about it it will cost you $150 are you going to spend a $150 on something you may not even want or may not even able to afford
I don't think so. that sales man if he wants my business he has to earn it and not just take my money
you have to give a little to get a little.
and in business there are losses but that's the cost of doing business.
you win some and you loose some. suck it up and move on
that's my 2 cents
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Evidence
Ken, you tell a sad story that highlights a poor business approach to pricing. You, and your boss are not alone. Unfortunately, water heaters have long been a commodity, but that fact does not defend proper pricing and sales practices. Service sales are costly to generate and should return 30-40% net profit...and I mean NET not gross profit. Have your boss read Ellen Rohr's book, "Where Did the Money Go".
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Negotiating
I'm not so sure he was wise. You owe it to your customer up front to be clear about what's in and what's out. Expectations management is essential. You both want to feel good about the transaction. Personally, I would feel like he deliberately ripped me off if that were to happen to me. There are enough people / customers that would expect a toilet seat that you need to make it crystal clear up front whether or not it is included. Some people don't think to ask for fear that if it already is included you are going to possibly offend the vendor or sound stupid. I don't agree with the curtains and window analogy. The seat would be more like window screens on an opening window and the old one may not fit. Window curtains would be more like a fuzzy seat cover than the seat itself.
I don't believe that there is anything wrong with customers wanting to negotiate prices. It is always the vendor's choice whether or not they want to make deals that way. I doubt anyone here pays list for their vehicles or doesn't ask their bank manager if they can do better on their rates. The key thing is that both parties should agree that it is a good transaction. The customer is getting good value and the vendor is making a good return on their work. For this to work, there should be no surprises.0 -
Actually...
You probably saved him time and money. I don't think that you can compare a heating system to buying a new car. If I phoned a dealership and told them that I would like them to come over and to bring three cars for me to compare they might actually laugh... just before they hung up on me. Heating systems are so tailored that they typically have to do all of the leg work that a homeowner typically hasn't done. They have to survey the entire structure and the heating system and then spec everything out. With computer systems, companies pay huge amounts to consultants just to write up requests for proposals then requests for quotations long before they even get around to buying anything tangible.
Suppose you got 3 quotes costing $150 each. $150 will be taken off the winning quote so in effect you are speding $300 to find the best contractor for an $18,000 heating system. 1.6% Not bad you know... But you didn't and you got a good contractor and a deal you both felt comfortable and you have a system that from the looks of it really sweet, and that's cool too.
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if you cant come and talk to me and prove yourself to me
then I don't want you. if you are a good company you can take the time to spend with me just put it in your cost of doing business.
when I was in sales the biggest time saver question for me I always asked is how much is the budget that you have to work with and then I can tell you what your options are.
and you can do that over the phone if someone said they need to replace there Forced Hot air and there budget is $4000.00 to swap it out then you know you can work with them if they tell you $2000.00 tell them maybe we can get the one you have working for you again
there is nice ways of doing things that don't take up much time the time you should be spending with a customer that cost you allot of money to get on the phone via a yellow page ad
just don't let them run that easy. if you don't want to talk allot about price talk about how good your work is and what good you can do for them and oh wow you should see my photo book of the work I do id love to come out and put in this heating system for you. im very qualified to do this job for you.
if you called me good chances are I can sell you a heating system without talking much about money I can work with
people and if you aked them quick how much do you have in your budget for this
and I can tell someone right off the bat that they can or cant afford what they want. that's what people want in a company someone that gets to the point and is a striate
shooter with them from the beginning.
just always tell them that your the man for this job. and always speak good about your self.
im 27 but man im good with people and if you dont buy a heating system from me then it was my fault im good at getting people excited at what they buy and showing them they are buying something there going to love.
everyone loves to buy a new toy. keep them excited there is allot in it for you and them.
hope you see what I mean
thanks Guys0 -
Bruce,
To answer your questions, the heater cost us $300. Normally, a heater is installed in an hour and a half, but I had to leave the other guy on the job while I took the truck to another call (again, boss' orders). I got tied up on the other job, so my coworker was at the customer's house for three hours.
By the way, as an employee, I would NEVER tell a customer to go pound sand.
You stated, "By selling the water heater at a lower price, (our company) is most likely guaranteed a customer when it is time to replace his heating system." I disagree. This type of customer has no loyalty. There is nothing wrong with someone shopping around, but this customer made no attempt to hide the fact he was playing us, by telling us, "you're already here." If anything, the fact we were already there should have worked more in our favor, because if we had left, then he'd have to get on the phone and start calling around.
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You're right Ken
But your boss often eats a lot of s*&^*(*&(* just to keep the men busy. Its a nasty cycle, but being a boss you sometiems have to do that. You also sometimes have to tell them to go pound sand even when you really do need the job. Ain't easy. Mad Dog
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Charging to look at a job
I think having a minimum "trip charge" (or whatever you want to call it) will weed out the "price shoppers" or homeowners who just want to pick your brain before they attempt to do the work themselves. I am going to talk to my boss and see how he feels about charging to go look at jobs.0 -
My Friend Rich Bruno once said..................................
The second you drop your price....then they "knew" you were trying to screw 'em(he uses saltier language than that). I believe he's right too. Look sometimes you work with the folks for cash, but that guy sounded like trouble either way. Mad Dog
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Your old man had obviously been around the block
a few times - that is one of the best replys I've ever heard. Mad Dog
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Sounds like you were the homeowner in that case
Mr Uni-Royal. Do you have trouble keeping the same servicemen coming back to your house? Mad dog
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You expressed my sentiments exactly BoilerPRO
That is why we charge a
trip fee too...weeds out the losers. Its win-win all-around....they don't waste our time and we don't waste theirs. Mad Dog
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Backing you up Ken....youre right
This customer is a lookie loo and a jerk. Mad Dog
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before we get so cocky...
let face the reality we hate
LOWES HOME CENTER sells a 12yr 40 gal WHIRLPOOL (which is actually "american water heater" brand) for $380 +$272 for installation which includes talking away the old one
so we would need to match $652 very quickly - sorry
dont jump on me - just stating the facts - a browsing customer is likey to know0 -
Listen to Paul......
he's putting you guys on the right track. In fact, buy the book for your boss for XMAS of Chanukkah. Mad Dog
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Thats right Grumpy
The best reply I ever heard to that one was: "YEs!!!!!! I can do better......by going down the street to a customer who is willing to pay us what we need to charge...!!!!" IT never fails to drop the jaws to the ground. Mad Dog
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Right!
That is what Al Levi taught me. No problem, but I can't give you this...that...the other thjing....its YOUR choice SIR. " MD
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YOu have decent point
But how do you know the guy didn't get a better job than yours ???????? with a healthier profit margin? You don't! Sounds like you did get a deal( too cheap for all that work)....I just hope they can get to you in the dead of winter, when Cumberland Farms and the School distrcirts have no heat......Mad Dog
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M.D.
It's also called "Diplomacy". The best definition I've ever seen for this term is ...."The ability to tell someone to go to hell....and actually having them look forward to the trip."
We all know, we can't do ANY job for free. The customer that is going to "nickle and dime us" has to understand that we don't work for free. The bull$#*^ excuse that we're already there with an appliance is but a fart in the wind.
It takes money to make money and I know that giving it up for a song ain't going to pay the bills.
Lowering the given price WILL lead a customer to believe that he was being gouged at first, backing down merely proves the point. I've been listening to a sub contractor trashing my company on a job lately, because we charged him APPROPRIATLY for a replacement water heater on a Sunday morning. According to him, we're the most expensive plumbing company in the world, when in FACT, if he had called anyone else, it would have cost him another 200.00.
I will continue to give the price for something like this "up front", and if I get an argument, I'm guessing that I'll be able to sell the heater to someone else.Let the customer shop for the best price. I'm a professional damn it, I don't work at the "barter level" anymore.I have a company and 12 employees to keep working,and can't give a job away because someone thinks it's too much.
Sorry Roosterboy, I gotta stick to my guns on this. It,s business. Chris0 -
We see those \"bargain\" water heater installations
every week, Kal. We always!!!!!! yes ALWAYS find atleast 2 of the following: Gas leaKS, flue pipe that was never changed or checked, they never change to 4" which is code on all gas water heaters here - even 40s..Blocked connection to chimney, backpitched flue pipes, water heater at the curb for the homeowner to get a ticket from the local munipality for leaving it on the street for non-pickup days, no expansion tank , relief valves not piped out...not even a 6" nipple!!!! Go low and pay the price!!!! It syour choice, Kal!!!!! Mad Dog
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True JCA
Diplomacy is a good practice, but occassionally someone needs to be told in no uncertain terms...that they are an a--. Mad Og
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my point isnt about \"rightness\" - of course we do a better job..
but the price is already out there in the customer's head - and even if you sell it, the number is still in the customer's head, and even if it's a weekend and the customer is stuck, they will pay, but they will still feel taken advantage of, even though they have no right to feel that way - just a sucky reality check - like i said dont jump on me - i am in the same boat - there are 7 big box stores in a 10 mi radius by me - and my customers are always window shopping there - because thier flyers are raining on my customers - i wonder if this is only in the tri-state area - or are others suffering from the same effect?0 -
price
If a certain- or is it cretin- insurance company had to bring a truck load of tools, parts, supplies, books and carpet protecting booties into to their basement (in all kinds of nasty weather) - I think they would charge for the trip. Then, when we get to the basement, we have to discover what kind of system they have. Then we are expected to know every detail about every system ever created AND have the part on the truck.
YOU provide the insurance co. with all the info they need. From their nice comfy chair, they punch a few buttons and give you a quote. There is no way we can tell what is wrong with your equipment over the phone- unless you pay big money for remote diagnostics to be installed. That trip charge gets a pro in your basement and a few hundred years of experience, just a direct connect away.
Doing service or WH replacements, we use a trip charge to cover some of the time lost on the tire kickers. We dont cut prices. We have CASH and BILLED pricing-a few points cheaper for cash.
Doing a complete system replacement- we do give free bids.
P.S. Try getting the same guy twice from Lowes- they don't stay around for very long...must be some reason.
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Our First Price Is Always Our Only Price!
A lot of time and money goes into our jobs and estimates. It has taken many years to learn how to actually make money in this business. Especially when you have multiply trucks, employees, workman comp., disability insurance, car insurance, tools, payroll, need I go on!
I don't care how much that water heater costs us because that is our smallest cost in the entire job anyway.
That Homeowner is cheap and I am sure not loyal anyway!
Jamie
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well maybe I was off topic but I guess what I was trying to say is that there is to many hacks out there just look at the wall of shame pictures on the hvactalk website.
I may have paid allot for my heating system but im happy with it and I could have gotten a better price but I understand why my price was high I did get allot but the cost of insurance for you guys and having employees and advertising and taxes it's tough to pay a mortgage and car payment feed your kids send them to school
so I say if you can make a good profit installing heating and cooling stuff that other people cant do I say make as much as you can.
what I thought the guy did to me was a stupid business move and he lost money for it all he had to do is ask me what my budget was and im sure that if he worked hard at selling him self he could have made allot more then $150 on my job all he had to do is ask. and try and work with me
show me some job photos work in my budget
and try and sell extras my company did not do that and I thought was not smart but I asked him for extras
after.
I had him install all new duct work new baseboards and now a humidifier. plus I told him I will sign a maintenance agreement with him every year to keep my system running
so im happy and so is he
thanks0 -
Commodity Pricing
Turn the widget into a commodity and the lowest price will stick long in the consumer's mind. What you're seeing is happening nationwide.
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We could weed out some
By asking them to bring that water heater by, and we will have a look at it when we get a free moment!! Like when your car dies and you need to use it, set it out back till we catch up then we can have a looksee!!
Murph'
ever wait for an appointment, then get it for free?
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the only way
I do better is for me. You do not like the 1st price fine the 2nd one will be considerly higher. The customer gets the point or we go are seperate ways. J.Lockard0 -
oh
I understand your point Ted and yeah we could get down to a load of cordwood heating a 5 gallon bucket full of water.
Had a customer the other day they own 2 car dealerships, and could not see the value in adding a low water cutoff to the system. From what I could determine the last system failed for lack of water. Oh well its thier money. J.Lockard0
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