Price vs. service is a conflict contractors face regardless of the work they do, but for contract sweepers, where equipment costs are huge and margins are especially tight, bidding work too close to the break-even point or bidding work below cost (inadvertently or not) will prevent a company from growing and can push a company precariously into the red.
So, is it ever good business practice to base your bid on price? And if it is, under what circumstances should you do that? What factors do you need to take into account when basing your bid on price? When confronted with a low-bid-gets-the-job prospect how should you handle that customer? How does service fit together with price, and how can you work the two together to both get the bid and satisfy the customer?
One of the first things to recognize is that markets differ, so how each contractor approaches his market needs to account for those differences. Debbie Jacketta, Jacketta Sweeping Service, Salt Lake City, for example, says that roughly 10% of her market is low-bid-only work, but in Memphis, TN, where Carl Barton operates Aardvark Sweeping Service, he estimates half the market is low-bid. But Uri Ben-Yashar, owner of East Coast Parking Lot Maintenance, Pawtuckett, RI, frames the issue differently. ?Everyone is price focused,? he says. ?What you?re really asking is, ?What part of the market would give up quality for price?? because everyone is price sensitive.?
Ben-Yashar estimates 25% of the market East Coast serves would give up quality for price. ?Often that happens because the local store manager makes the decision on who the contractor is and his year-end bonus is tied to the savings on that store. So he?s going to give up quality to put a couple of bucks in his pocket.?
Gabe Vitale, C&L Sweeping Service Corp., Jackson, NJ, says publicly held companies and real estate investment trusts are another customer that is more price oriented than service oriented ?because all they?re concerned about is return to stockholders.? Barton says national accounts are the biggest low-price customers, so Aardvark Sweeping doesn?t even deal with them. ?I?d estimate that fifty percent of customers want service and fifty percent want price,? Barton says. ?We don?t deal with the ones who want price. That?s somebody else?s market.?
So what?s wrong with that? Is it wrong for a property owner or manager to base his sweeping decision on price alone? Is it wrong for a contract sweeper to bid based on price or succumb to the price pressure and reduce his price to get the job? The answer, according to these contract sweepers, is an equivocal ?Yes.?
?Price alone, absolutely not,? Barton says.
?There are exceptions to the rule, but the rule is you should not bid based on price,? Vitale says.
?My general answer is that bidding based on price is never a good strategy,? Ben-Yashar says. ?The reason is that when you sell based on price it implies that you?re not providing service. I can tell you that based on comments I?ve gotten from some of my clients. I had a small competitor who sold based on price. In fact on all his bids he would hand write ?I?ll beat any price? which implied to the customer that he wasn?t concerned with quality.
?And when you?re dealing with sweeping on a shopping center it?s all about quality, about the image of the property, and how the visitors to the property are going to view that shopping center. When you deal with price that doesn?t come across.?
Jacketta, who generates about one-third of her sales from parking lot sweeping, tries to price her services in the middle, not the least or the most expensive. She says that for her other work, particularly construction site cleanup, there isn?t much price pressure to deal with.
?In construction site cleanup they need it done when they need it done,? Jacketta says. ?Every once in a while a contractor will decide we?re too high and he?ll call in another less-expensive contractor, usually with an air machine, but often we?ll get a call later to come and finish the job.?