Management / Web Exclusive Features

Ask Steve: What Should I Do When a Competitor Undercuts My Prices?

There's only one sure-fire way to fend off your competition, no matter what prices they charge.

June 6, 2013

Good morning Steve,

Something happened yesterday that just stuck in my craw. I gave an on-site estimate for a three-bedroom house last week and booked the job. I had literally reserved my entire morning for the job and then an hour before I was due to arrive the homeowner called up and said they had already had it done the day before by someone cheaper!

I asked who they used and they gave me the name of one of my competitors. Then the customer shared something very interesting. They said when my competition called up to check on their estimate, the customer said they had decided to go with me since our prices were about the same. So my competitor said if they would go with him he would knock 30% off his bill!

I think what really irritates me, Steve, is that you give a client a fair price and explain your service and what they can expect, then someone else comes along - knowing they have already booked - and gets them just on price.

I find that situation unethical. What do you think?

Ticked off in Tulsa

 

Ouch! I feel your pain, Ticked. Seriously. I didn’t like it either when this stuff happened to me! In fact, it hurt. And I don’t just mean financially. Rejection is never easy to swallow. 

But I would urge you to not blame your customer for making what, in their opinion, is a wise buying decision. Your job is to not only give your prospect a “reason to buy” but also a “reason to pay more!” 

Now I agree it may be a little tougher to forgive your competition! But once again - look inward and make this into a “constructive analytical journey.” Let me share my experience… 

My first tendency was to blame the customer as a dirty, rotten, old price-shopping $#%@*&^! (Or my competitor as a bait and switch monster!) But then I started reflecting and came up with a few introspective thoughts about myself and my business... 

  1. Assuming the prospect was not an evil person, I was the person ultimately to blame since evidently I had not given them a compelling reason to use my services. How did I know this? Because ...
  2. “When there is no other compelling reason to buy, the customer will make their decision based on price.”In other words, I had not differentiated myself from my competition.
  3. The best way to set yourself apart (especially in residential cleaning) is through emotional differentiation. Most companies try to separate themselves through “concrete differentiation” by being the lowest priced cleaner in town. The problem of course is someone can always do it (or at least advertise it) cheaper than you!
  4.  

I could go on and on about differentiation, Ticked, but hopefully your predicament will serve as a wake-up call for all of my readers. I would challenge each person reading this to ask themselves, “What does my prospect perceive about my company that would motivate them to spend more with me than Company XYZ?”

If you can’t give a good answer on the above question, why would you possibly expect your customer (much less an over-the-phone prospect) to stay loyal to you? There must be a compelling reason to buy. Something to think about and homework for all of us to focus on! (And yes, in upcoming “Ask Steve” columns we’ll be working on differentiation!) 

P.S. Let me ask you, Ticked, do you have a “sales outline” to follow when you do “cleaning pre-inspections”? (I hate that word “estimates”!) 

NOTE: For the “sales outline” I used (I don’t like the word “script”) just e-mail me at stoburen@StrategiesForSuccess.com and put the phrase “Cleaning pre-inspection” in the subject line. (I had a closing rate of over 97%!) 

Remember, your job is to leave the home with the customer so firmly convinced that you are their “chosen one” no amount of sleazy discounting by your desperate competitor will budge them!  


NOTE: Steve and ICS want to consult for you! For a personal reply write Steve HERE with your questions, problems, struggles and challenges! Your help is on the way!

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The real moral of this story, don't put all your eggs in one basket!

Peter Hewel
June 6, 2013
It is brutal out there. Let's be very honest, there are TOO MANY carpet cleaners. The residential market is all but dead. I just did a mailing in my area. 1,800 pieces. Age 64+ income of $100,000 to $175,000. Home value of $200,000 plus. The focus was carpet cleaning. It netted about 6 calls and exactly one job for carpet cleaning. People don't have carpet at these income ranges and/or home values. It netted me 8 window cleaning jobs, just by writing window cleaning in a list of 10 point type. Led to two or three upholstery jobs and two area rug jobs. It got me one screen and recoat of hardwood floor after paying a competitor about $250 for a Basic Coating clean and finish job did not yield satisfactory results. For me, residential carpet cleaning is dead. I'm doing much more commercial carpet cleaning. A recent push on area rugs delivered awesome results. Area rugs are my push. I have found grants to refurbish derelict factory space to open a rug plant and hire a $9 per hour laborer. Grants, not loans. I am in the outer suburbs of NYC. I am using my low rent location to pick up and deliver rugs in the wealthier middle and inner suburbs. Lots of gas money, but I save it in labor and rent. I can see rugs being 50% of my business by the end of 2014. It will be my salvation.

Steve Toburen
June 7, 2013
Yes, Peter, I tell every SFS class the hardest money out there is in residential carpet cleaning. I see too many cleaners trapped between savage competition and a declining base of carpets being installed in homes. The great thing as small entrepreneurs is we can quickly change course as you are doing. (I'll be addressing some of these diversifications in upcoming "Ask Steve" columns.) Plus the principles I share in the "Sales Outline" you can request translate perfectly into commercial and hard surface floors. Best wishes and good hunting! Steve

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