The first is the principal of reciprocity, based on generosity. By sharing your knowledge freely — of ideas, concepts and solid and practical advice — you often reap many times your marketing cost with reward in the form of large and lucrative orders.
The second is the principal of scarcity: If something is too easy and readily available it loses its economic value; if it is hard to achieve and has a high perceived scarcity your clients tend to value it much more than its intrinsic worth.
Unfortunately, if your generosity — or that of your competitors — reduces scarcity to such an extent that there is litte perceived value in it — you can spend a lot of time giving away a lot of stuff and getting absolutely nothing in return.
FOLLOW ADVICE CAREFULLY
I’m a strong advocate of continuing your education, reading all you can to improve yourself and your business. There are many outstanding forums, blogs and websites available to help you and we encourage you to use them. I read many of these same websites, blogs, newsletters and forums. It’s important to find out what other contractors are saying and doing. It’s also important to read the offerings of other companies like ours to get a little different perspective on business.
Howsomever . . . please be careful and analyze what you read and the advice you get. You do not need to fall prey to misguided information, however well intentioned.
My concern is that many are suggesting you need to give things away or lower your price to make the sale. We have talked many times on these subjects, because these are the things that get contractors into financial problems. I want to throw out some things for you to consider.
Some are telling you to offer specials to bring in more business, you need to offer something for FREE to get folks to call or set an appointment. Give the folks all your thoughts and ideas to help them solidify the design of their project, a remodel or new home. You are told to give, give, and give some more. At some point, don’t you need to write some business?
Specials are good, even freebies are good, as long as they happen with a commitment. You need the commitment first. The old saw, “If I can, then will you?” comes into play. If I am going to do something for you, then you are going to do something for me. I will help you with your design, after you sign a design agreement with me. I will offer you a free dishwasher with your new kitchen remodel if the contract for that kitchen is signed by xx/xx/10.
The argument is that today’s customers are different – you must give to get. I believe in giving to get – we send a free, informative newsletter twice a month. We can send it to thousands at one time. But the “gives” that some are suggesting are not inexpensive and can’t be provided to thousands. They will eat your time and your wallet, and devalue what you know and what you can do. Gang, today’s customers are the same customers as always. They will take something for free if they need it, but that doesn’t mean they will buy your services. You need good, sound salesmanship to bring jobs in the door, not giveaways.
Some are telling you that your prices are too high, you need to sharpen your pencils during this economy. Oh really? Are all the other businesses you deal with sharpening their pencils as well? Plumbing and electrical supplies been coming down? Have you looked at the price of the tankless hot water heaters? How about 3 or 4 way switches? I priced 1/2″ x 4′ x 8′ drywall boards recently and almost choked. Why is it that “contractors” are supposed to lower their prices but most other businesses keep right on keeping on?
If your markup was properly set as outlined in Chapter 3 of the Markup and Profit book, where is there to cut? Whatever you cut comes right out of profit first and then from the money you need to pay overhead. If you think this is okay, research Contractor Bankruptcy online and see what you get. There are a lot of stories of contractors filing, and attorneys advertising to help them. I’ll guarantee most of those companies filing for bankruptcy cut their markup thinking the increased sales from the lower prices would carry them through. Right.
Construction is a cost based business, not a market based business. You can’t cut your prices and make up the loss by increased sales. It can’t / won’t / doesn’t work. If you give something away, do it with strings attached. Let potential clients know that you are there to help, but also let them know you can’t work for free.
Turning these concepts into practice, I think you can see how the words “Free estimates” in a section of Yellow Pages advertising where all your competitors have similar-type ads, all offering “Free Estimates” will very likely attract just the type of business you don’t want to receive. (You might of course take some free advice here and reconsider the cost/value of your Yellow Pages advertising in the Internet era. But if it works, don’t stop it!)
Offering full-scale design services without any type of commitment or agreement to pay some money for the design is also obviously dumb, especially if your potential “client” can shop this stuff around to your competition.
Your challenge is to manage your “free” while respecting the principle of scarcity. And here, some really interesting things happen.
A good example is my Construction Marketing Ideas book. You can purchase it from me for $39.95 (or in electronic format for $20.00) or, if you wish, from a variety of online retailers as well as by special order at your local bookstore. Amazon.com usually has the lowest prices and I certainly don’t mind if you purchase from them because they pay to me the standard wholesale price built on costs that require me to neither carry inventory nor pay any fulfillment expenses.
However, some people don’t need to pay for the book at all — they receive it for free. These include current and previous clients who have paid for services from my company and request it, and selected individuals who can help promote the book. (You can also of course read free excerpts at places like Google Books, Amazon and in published articles in The Design and Construction Report.)
But you won’t find the entire book readily available, free, online, and if you approach me out of the blue and ask for a free copy I’ll probably direct you to Amazon.
Think about how you can apply these principles in practice. Obviously, if you can find ways to leverage your time and resources so that the “free” you give costs you little in individual time and effort but has high perceived value because of its apparent scarcity, you are on the right track to be generous. Just be careful to avoid the opposite trap — spending huge amounts of your scarce (and expensive) time giving away free stuff that has little perceived value to your potential clients.
And if you sense that I will fail you in Construction Marketing 101 if you post an advertisement near competitors’ ads which says “Free Estimates” you have just received your one piece of Free Advice from me today.