Your prospect left a message explaining that he and his wife want you to build their addition but had received several bids lower than yours. He said they thought you could make all of their dreams possible by lowering your price to match the other bids and placing them in your schedule as soon as possible. Your hopes for a better year in 2004 are somewhat diminished.
Remember these three rules in such situations:
Rule 1: Never lower the price without changing the specifications to reflect that your prospects "earn a discount."
Rule 2: When prospects ask you to match a lower price, you have the right to analyze the competing proposal. Don't dwell on a direct price comparison, though. Your position is that your services are beyond comparison. You'll use this information only as a last resort.
Rule 3: Owning the higher-priced proposal gives you the choice to maneuver your price downward.
You return the call and arrange to meet. Negotiations should be handled only in person, with all decision-makers present. Around the kitchen table, you first rebuild the trust and rapport you had gained, talking about common interests and the personal details you had learned.
Then you encourage the prospects to recount what happened since you delivered your proposal. When there is a pause in the story, look at the speaker and raise an eyebrow, the international signal for "tell me more." Note the price you are expected to match, determine the difference between it and your price, and mentally subtract 20% of the difference. If there were to be an adjustment, this discount likely would make your bid acceptably close to the other bid.
When they finish their story, it's your turn. Regarding the request to lower your price to match what could be a competitor's mistake, I like to reply, "Sure, I could lower the price. What would you like me to substitute, make smaller or eliminate?"
Some customers ask for a lower price only as a test. They want to know if the price is really firm, and my reply leaves little room for doubt. The prospect usually comes back with: "We love your design, and the specifications are perfect. We want the project just as you presented it."
You reply: "The specifications and design reflect the price. We can change the price only if we change the proposal (see Rule 1). Let's go through the proposal item by item."
A savvy remodeler focuses on items on which money can be saved by substituting lower-priced products or materials without having a major effect on the outcome. Calculate these savings in your head or on paper while discussing the proposed changes with the clients. Confirm the prospects' agreement on each item without mentioning specific numbers yet.
You also might look over the specs and plans accompanying the competitor's proposal with the "acceptable" price (see Rule 2). If you spot glaring differences, make a mental note for future reference.
Now calculate whether you can afford to cut your price without diminishing your ability to earn a desirable margin (see Rule 3). Combine this with the earlier amount at which you arrived by revising the specs and explain to the prospects that by making the desired changes, you could adjust the price downward by X dollars. Avoid itemizing the savings for any particular item. Now the decision is in the prospects' hands, take it or leave it.
If the prospects say your revised price doesn't match the competitor's, mention any differences between the two sets of specs. Be prepared to explain why you do not jeopardize any project's integrity by cutting certain corners. Your prospects likely will value your integrity and might sign your revised proposal. If not, decline the project.
Mike Gorman has written a sales training manual for remodelers, teaches seminars and coaches individual contractors. E-mail him at email@example.com, call 800/218-5149 or visit his Web site at www.techknowledgeonline.net.