When a customer approaches with questions about pricing, too many dealers respond with a simple cost of the product and then let the customer sort out how that fits into their budget. I think a lot of dealers are letting customers get away by not educating them as to why a product costs what it does.
Here’s an idea: When a customer asks about the price of lumber for decking, ask them what grade lumber they are looking for. Chances are, no one at any other store has asked them that question. Then, educate your customer about why price should not be the first question they ask.
As a lumber dealer and decking retailer, contractors often come to me and the first thing out of their mouth is “how much does that board cost?” They don’t ask the appropriate questions about the quality of the board. The quality of the product you’re selling makes a big difference in how much that product actually costs a customer over time.
If a customer comes in to The Deck Store with a price question, we immediately work to change their line of thinking. In educating our customer about the quality of our products and the superiority of the service we provide, we sway them from thinking that price is the main attribute in deciding where to purchase their building products. For example, for treated deck lumber, we carry only No. 1 Southern Yellow Pine that’s chemically treated. We have it stained brown and then it is kiln dried after it has been treated (called KDAT). I’m next door to a Home Depot and there’s a Menards across the street from me, so I get customers in who ask for the price of a deck board and compare it to what the big box stores carry. Of course ours is more expensive. Our job is to explain why.
The big box stores probably carry No. 2 grade lumber. They may have Ponderosa Pine or Southern Yellow on a good day, but usually they don’t even know it if they have it. If they do carry it, the lumber certainly isn’t kiln dried and therefore will be applied wet and will dry up later, leaving an unhappy customer with an uneven deck. We educate our customers up front on the difference between our products and the big boxes and soon they see that by spending a bit more, they get quality products and service that will save them a lot of money in the long run.
Here’s another example I learned from Scott Sedam at last year’s LBM Strategies Conference: Sedam told the story of two lumber dealers. One sells plywood for $9.90 a sheet and dumps them off at the jobsite on the wet ground. The bottom four sheets are full of mud and are ruined. The second dealer sells a better product, but for $10.50 a sheet. He delivers it wrapped and protected and sets in a dry area near the house so the builders don’t have to carry it. Do the math on that. The second, more expensive product is actually the least expensive choice in the long run because the builder didn’t lose those four sheets to mud, didn’t lose time trying to go back and forth replacing them, and didn’t have his contractors carrying stuff an extra 200 feet for every sheet.
If you can educate your customers of the value and service you provide that stretches far beyond price, then you can easily justify the higher cost and in turn enjoy higher margins on your products.
Rather than dropping your price to be more in line with a competitor, increase your margins by increasing your product quality and your service and educating your customers. Builders will pay extra for materials if they understand why you’re charging that price and they understand the quality and service that comes along with the price. If a contractor is looking strictly for the lowest price, he may not be your best customer. We have seen time and again that a customer who realizes the value of our service and the quality of our materials becomes one of our best customers.