Lowest Price Marketing by NACHI member Bob Kille.

[Nick Gromicko]

Lowest Price Marketing
by NACHI member Bob Kille

There are several factors to be considered when thinking about trying to create sales with a low price marketing strategy, or just lowering the price this one time to close the sale. For the most part these factors remain true whether your just starting out or not.

Some of the counter points I make in this article, like raising prices, may even seem to be counter intuitive, but experience has born out the positive results and kept the gas gauge full.

First of all, I'm going to presume that you have done the math (profit calculator) and determined where your pricing needs to be in order to be profitable at the level you need to maintain your household, marketing, continuing education, insurance, pension plan, etc... and make this risky undertaking worth while.

Since the number of inspections you'll be doing in your first year or two will generally be below the numbers that can support all of the above, closing the sale and getting the most for an inspection is paramount. So is a little cash in the bank.

The premise that any sale is better than no sale in the beginning is just plain wrong. Selling yourself short in the beginning of your home inspection career comes with a lot of baggage, which can be hard to overcome.

· Lowered perceived value
· Spur of the moment pricing model
· No loyalty at the low end
· Limited referral activity
· Wasted marketing
· Liability is higher
· Takes longer to become successful

Secondly, there is no evidence that simply lowering your price will close the sale on the phone at a higher rate than a good, well-executed sales script. To the contrary, well-executed sales scripts and techniques have closing rates in the 80 - 90% range.

It should be noted that 100% is not possible, even if you lowered your pricing at every opportunity to close the sale. I'll bet that if you lowered your rate to $59.95 you would have less than a 50% closing rate. Most people are distrustful of a low price and accepting of a moderate or high price.

If you want a quick way of knowing about where your pricing should be, look to the pricing rates of any of the home inspection franchise companies in your area. Knowing that 8 -- 12% of the gross goes back to the franchise, you should be able to have a price structure just under theirs and still be perceived as in the same league.

You have to wonder whether or not, if you even want, a price shopper for a client. Price shopping is more prevalent at the lower end housing market where the liability is higher and penny-pinching clients try to see what they can get away with when something goes wrong with their new home.
Add to this, just one more fact, price shoppers have no loyalty and as such, all continuing marketing dollars spent on them is wasted. Unless of course, you choose to be the lowest priced home inspector forever.

I could write an entire article on precieved value but, suffice it to say, that your pricing will effect how you are viewed by the realtors and their referral activity towards your company. That's why I suggest charging close to what the major players are charging.

Most realtors, just like most people, would rather do business with companies that have prices in the mid to high side of the marketplace. Pricing tends to reflect value and most realtors will only refer to companies that are at least perceived to offer value.

Discounting your self worth and the worth of your home inspections firm, with all the benefits and backing that you provide is just the opposite of what it takes to survive. You might be able to bumble along and pay your fixed costs but you will never attain the marketing perspective that will break your company away from being a commodity, and achieving the profits that you got into this business for in the first place.

Many inspectors forget that getting the phone to ring and booking the appointment is 80% of what they do. Setting your pricing right, is a key factor in booking appointments now and in the future.

Remember... We are not Home Inspectors! We are marketers who happen to deliver Home Inspection Services! If you can't get your head wrapped around this, you might just as well work for another inspection company and keep your bills paid.

Copyright © 2006 by Bob Kille. To read other home inspection marketing related articles, or to view home inspection software and book publications by Bob Kille, click this link. www.inspectorsuccess.com

[Nick Gromicko]

I love the last line:

Remember... We are not Home Inspectors! We are marketers who happen to deliver Home Inspection Services! If you can't get your head wrapped around this, you might just as well work for another inspection company and keep your bills paid.

[John McKenna]

There are a lot of inspectors in this area (east Texas)
that will inspect for $170 to $220.

Our area has very low land value and cheap wages.

I charge approx 50% - 70% more than these guys.

So I only have to book half the number of inspection to
make the same amount. Less work, same money.

My Clients are people who pay more often and will hire
me again if the need arises. They tell their wealthy
friends more often. Low ball Clients have less money
and have less friends with money.

Wealthy Clients buy bigger houses. I charge more.
Less work, more money.

I get less Clients who do not pay. It almost never
happens since I raised my prices.

Yes there are people who want the low ball price. Some
of those do not know better until they call me. If they
cannot be "sold" on why better is not cheaper, then I move
on to the next one.

There are just as many who are LOOKING for the "better"
and they KNOW it will cost more. They have already
factored that into their choice. They will pay for the
security of the "better" and will avoid the cheapest
because it feels cheap.

When they call they WANT someone to TELL them that
that you are the best, you do charge more and they
are harming themselves if they hire anyone else.

You can take the breath out of a caller and offer to
give them the phone number of the cheapest inspector
and save them all the hassle of searching for him.
Tell them if "you are determined to harm yourself and
hire the cheapest guy for such a huge investment,
then I will help you."

It stuns a person into reality. Many are ready to
place an order after they come to their senses.

Rule #1 when doing business :

"Do not do business with poor people, you will have trouble".

Rule #2

"Tell your Client that you are CMI and your price has value".

[Nick Gromicko]

John, I like your last line even more.

[Brian E. Kelly]

[QUOTE]

Originally Posted by jmckenna1

Rule #1 when doing business :

"Do not do business with poor people, you will have trouble".

Yikes. And what constitutes a "poor person"? Is it physical wealth? Or is it something else??????????????

[John McKenna]

[quote=bkelly2]

Yikes. And what constitutes a "poor person"? Is it physical wealth? Or is it something else??????????????

What it means is "do not do your primary business with people
who have a hard time paying you". You create a ceiling and
cannot get out of the box you put yourself into.

Market to a higher pay grade and you will have more willing
customers who have the money to pay for your services.

I like poor people, I just don't depend on them to support me.

[jmichalski]

[quote=jmckenna1]

Originally Posted by bkelly2

What it means is "do not do your primary business with people
who have a hard time paying you". You create a ceiling and
cannot get out of the box you put yourself into.

Market to a higher pay grade and you will have more willing
customers who have the money to pay for your services.

I like poor people, I just don't depend on them to support me.

Wow, talk about elitism.

Some of the least affluent clients I have ever had have been the most grateful thoughtful, and responsible people I have ever met. They often pay cash on the spot as they understand they have to budget carefully, and do so.

They cannot afford a palace, but have a deep sense of pride and excitement in owning a home, even if it isn't the Taj. A striking difference to some of the ultra wealthy whom I have inspected for who don't even attend the inspection.

In these instances, often the whole family has come to the inspection and I make sure to address all their concerns and give good maintenance advice to help them avoid expensive problems.

They are also among the most religious people I have ever met (often God-blessing me and my family) which, while I am not at all religious, I appreciate. I would think that someone who authors posts with a religious-oriented flavor would appreciate reaching out to help that community as well.

I help everyone, regardless of apparant income level or the price tag of the home, and I have never had a single client skip out on payment. There are a huge number of first time buyers out there - many of them, not so wealthy. It is a large market, and it pays returns because they refer me at a fantastic rate to friends, family, and church members.

[tneumann]

In all my businesses I have done better than average working for the folks that others won't work for.

I prefer a blue collar client to a white collar client any day.....I have been screwed many times by the "rich" client....never by the "poor" client.

[jmichalski]

Incidentally, marketing to these first time buyers and using Referral Rewards marketing has made my business successful. It involves setting a lower price point to attract price shoppers and first time buyers (a large market presence, who have a clearly identified motivation).

These people, in turn, can (and often do) refer friends and relatives increasing the number of inspections I get based on that first job, which I got for having set an aggressive price point.

This is why I feel that the above article can work for some, but that there arre no absolute truisms in price setting. Marketing works for all different manner of pricing strategies.

I also think that each of his bullet pointed premises is incorrect and based on no statistical evidence at all.

Lowered perceived value
· Spur of the moment pricing model
· No loyalty at the low end
· Limited referral activity
· Wasted marketing
· Liability is higher
· Takes longer to become successful

1) Percieved value is based on what you get for the dollar. (The other definition of value - which I thnk is what the author intends - is "something desirable"). If I offer a better service for a lower price, I am the better value - relative worth. What the author means is reduced snob appeal - that is very different.

In reference to Realtor referrals, I have found that my pricing structure has made little to no impact on this (I get referrals from Realtors with wealthy clients, and less affluent ones). I find that longevity, reliability, and quality of report is what the high-end realtors seek. They have been around longer and are more likely to have a relationship with another inspector that you have to overcome to get referrals. High prices alone is not going to get that done.

2) Spur of the moment pricing? Is he kidding? My prices have been posted on my web site and are known by tons of realtors. No one is ever surprized by the price and I certainly don't make it up on the spot... There is no stastical evidence to support this, and I think the exct opposite would prove true. Those who price aggressively use it as a marketing advantage and advertise it, and stick to it - they would be LESS likely to have spur of the moment pricing.

3) No loyalty at the low end - Again, no statistical evidence to support this. Price shoppers LOVE a bargain and love to share how smart they are for the value they found. This creates GREAT word of mouth presence, and they often will return to the same source for future bargains.

4) Limited referral activity is EXACTLY wrong (and again wholly unsupported by statistical evidence). I market referral rewards to all clients. That makes each inspection I do a potential source of a future inspection. The more happy clients I have (even those who are price shoppers), teh more opportunity I have for referral. The happier they are with the inspection they received at a great price, the more likely they are to refer me. MY tracking indicates no significant difference in the percentage of referrals from clients who bought in less affluent zip codes, than from those who bought in exclusive neighborhoods. However, because the volume of less affluent clients is larger, the raw referral numbers are significantly larger for this clientele base.

5) Wasted marketing? On the contrary - attracting price shoppers, increases the volume of inspections. Using past clients as a referral base is the single best marketing opportunity I have found. Pricing does close deals simply because it cannot be denied that this is the sole motivating factor for some clients. It provides more business, more rapidly...which leads to more referrals...which leads to more business....which leads to even more referrals.....etc.

The author ignres his own premise in teh next to last paragraph "Getting the phone to ring" and converting to inspections is 80% of what we do. Lower price points get the phone to ring more frequently (far more price shoppers than boutique shoppers - ask WalMart and Target), aggressive pricing converts many of these leads to jobs.

I am not advocating that everyone try this approach (in fact, if I am the only one in my market doign this - GREAT!!) I am just pointing out that in my case, there is statistical evidence to suggest that the eact opposite premise of the article has proven true.

[Brian E. Kelly]

[quote=jmckenna1]

Originally Posted by bkelly2

What it means is "do not do your primary business with people
who have a hard time paying you". You create a ceiling and
cannot get out of the box you put yourself into.

Market to a higher pay grade and you will have more willing
customers who have the money to pay for your services.

I like poor people, I just don't depend on them to support me.

I think I got it John, I might have said it a little differently.

I have quite a few cash customers from the lower end of the economic spectrum. The houses these people buy tend to be a little older and some times take a little longer to do, but did I mention they are cash customers.


I am also leery of people who do not want to pay for service. Though it has been my experience ones ability to pay and ones inclination to pay are not directly tied to their income, but more than likely a reflection of their character.
</IMG>

[Dale Duffy]

Originally Posted by jmichalski

Incidentally, marketing to these first time buyers and using Referral Rewards marketing has made my business successful. It involves setting a lower price point to attract price shoppers and first time buyers (a large market presence, who have a clearly identified motivation).

These people, in turn, can (and often do) refer friends and relatives increasing the number of inspections I get based on that first job, which I got for having set an aggressive price point.

This is why I feel that the above article can work for some, but that there arre no absolute truisms in price setting. Marketing works for all different manner of pricing strategies.

I also think that each of his bullet pointed premises is incorrect and based on no statistical evidence at all.



1) Percieved value is based on what you get for the dollar. (The other definition of value - which I thnk is what the author intends - is "something desirable"). If I offer a better service for a lower price, I am the better value - relative worth. What the author means is reduced snob appeal - that is very different.

In reference to Realtor referrals, I have found that my pricing structure has made little to no impact on this (I get referrals from Realtors with wealthy clients, and less affluent ones). I find that longevity, reliability, and quality of report is what the high-end realtors seek. They have been around longer and are more likely to have a relationship with another inspector that you have to overcome to get referrals. High prices alone is not going to get that done.

2) Spur of the moment pricing? Is he kidding? My prices have been posted on my web site and are known by tons of realtors. No one is ever surprized by the price and I certainly don't make it up on the spot... There is no stastical evidence to support this, and I think the exct opposite would prove true. Those who price aggressively use it as a marketing advantage and advertise it, and stick to it - they would be LESS likely to have spur of the moment pricing.

3) No loyalty at the low end - Again, no statistical evidence to support this. Price shoppers LOVE a bargain and love to share how smart they are for the value they found. This creates GREAT word of mouth presence, and they often will return to the same source for future bargains.

4) Limited referral activity is EXACTLY wrong (and again wholly unsupported by statistical evidence). I market referral rewards to all clients. That makes each inspection I do a potential source of a future inspection. The more happy clients I have (even those who are price shoppers), teh more opportunity I have for referral. The happier they are with the inspection they received at a great price, the more likely they are to refer me. MY tracking indicates no significant difference in the percentage of referrals from clients who bought in less affluent zip codes, than from those who bought in exclusive neighborhoods. However, because the volume of less affluent clients is larger, the raw referral numbers are significantly larger for this clientele base.

5) Wasted marketing? On the contrary - attracting price shoppers, increases the volume of inspections. Using past clients as a referral base is the single best marketing opportunity I have found. Pricing does close deals simply because it cannot be denied that this is the sole motivating factor for some clients. It provides more business, more rapidly...which leads to more referrals...which leads to more business....which leads to even more referrals.....etc.

The author ignres his own premise in teh next to last paragraph "Getting the phone to ring" and converting to inspections is 80% of what we do. Lower price points get the phone to ring more frequently (far more price shoppers than boutique shoppers - ask WalMart and Target), aggressive pricing converts many of these leads to jobs.

I am not advocating that everyone try this approach (in fact, if I am the only one in my market doign this - GREAT!!) I am just pointing out that in my case, there is statistical evidence to suggest that the eact opposite premise of the article has proven true.

Joe,

I like your views on the subject....!...... .....very nice.

[jmichalski]

Just offering a different perspective!!

As you know - there is certainly more than one way to be very successful in this business!

[James H. Bushart]

Originally Posted by dduffy

Joe,

I like your views on the subject....!...... .....very nice.

I prefer Mr. Kille's. Thanks for sharing it with us, Nick.

Kille hits it right on the head. Consumers are smart and can discern much about a service provider from his marketing plan. Show me a provider who consistently cuts his own prices with coupons, referral fees, kickbacks, monthly specials, etc. and calls it "marketing" and what you really have is a provider who is simply advertising a higher price in hope that someone will pay it, but will take what he can get. Desperation does not sell and, as Kille points out, an inspector who starts in this mode will have a difficult time in the future when he finally thinks he is worth more and tries to increase his fees (or reduce his discounts).

Prices are set by what you feel your product is worth. When it is consistently lower than your competitors, the message is clear - but not what was unintended.

Your advice is sound, Nick. Thanks, again, and keep hammering the message home.

[ROBERT W. NEWLAND, JR.]

Originally Posted by tneumann

In all my businesses I have done better than average working for the folks that others won't work for.

I prefer a blue collar client to a white collar client any day.....I have been screwed many times by the "rich" client....never by the "poor" client.

I agree Tony.

[Dale Duffy]

Originally Posted by jbushart

I prefer Mr. Kille's. Thanks for sharing it with us, Nick.

Kille hits it right on the head.

I think (like Joe stated) Mr Kille is missing a very huge market. There are just as many people who want to just know what is wrong with the home than their are folks who want a report written to any org's or states SOP. By putting the clients expectations in a signed agreement, one can increase company revenue by a long shot.

If one read Russel Ray's posts regarding this known fact one can easily realize the portion of the market which is basically untapped. Sitting and trying to charge as much as, or more than competitors is folklore, if anyone believes this, they will be the first to fail in business.

Inspectors who sit around waiting for just standard home inspections have a much better chance to fail than a person who offers many, many kinds and types of inspections for different type clients.

The inspection companies who are diverse, offer many types, and kinds of inspections will be the ones who prosper, and become wealthy, not just making a good living.

And I would rather work for a person who has limited resources and tries to spend them wisely than work for a wealthy person who is generally the one trying to get discounts any day of the week.....