Your basic problem is you’re dealing with a commoditized product. That makes it very difficult to move the focus from price to anything else.
Then, on top of that, in a market that has been hot for sometime and now in decline, you’re facing the same thing Realtors, builders, contractors, and mortgage folks are facing—lots of new and inexperienced--and some unethical--people who got in the business during the past three or four years to make some quick money who really shouldn’t be in the business. They’ll get flushed out in a relatively short time, but until then, they’ll try to give the stuff away just to keep the doors open a little longer.
This is the reason you would want to examine competitor’s bids if you could. The takeoffs of many are, as you pointed out, inaccurate—either because of inexperience or because they are trying to low-ball the builder, hoping that after they get the bid and they’re in the middle of the project, they can add material and the builder will have no choice but to pay. If you can demonstrate that to the builder via the competitor’s bid, the builder will, after a time or two, really begin to pay attention to you.
Others will get into the project and not be able to deliver on the price or delivery schedule, forcing the builder to come to you to bail them out. Not much you can do about that unless the supplier has a history of it.
You can employ some tactics. None is perfect—and some have really bad consequences:
Get down to your competitor’s pricing: Trying to compete on pricing, even for a short time, has very negative long-term consequences. Once you teach the builder that you’ll give your product away, they’ll expect you to do it from now on.
Find builders you can deal with based on your relationship to them, not price. There are builders in every market that operate that way. It is difficult finding them—and then you have to break their current relationship. Tough to do. However, if you can do it, these builders tend to be pretty loyal.
Find customer service advantages that save the builder money: Using a just in time delivery system where you store the builder’s material on your lot until the last second. Will save the builder money from reduced loss and waste. Negotiating with your suppliers to slight, no-cost upgrades. Some of your suppliers and manufacturers are in much the same boat you’re in and they’re looking for new ways to capture business also. Working with them to offer slight upgrades at no cost can benefit all parties. If you offer financing (other than 30 day or less net), negotiating a few basis point better financing and passing the savings on to your builders.
If you can save them money due to reduced loss and waste, give slight upgrades, and shave a few basis points off financing, you won’t get to a 5 or 10% reduction in pricing, but you’ll be more competitive. Letting the builder know that your added value is not available for bailouts but only on original bids will give them a little more incentive to go with you.
Team up with the top contractors: Teaming up with top contractors for package deals with each shaves a percent or two can also help convert the unconverted. This only works if you team up the best of the best. Good or average won’t do. The combination to top supplier with top contractor is attractive to some builders. The top HVAC, electrical, roofing, landscape and other contractors are having the same issues you’re having. Joining forces to offer top of the line package deals for top of the line homes will sway some builders—especially in a market where they’re finding it tougher to compete. Being able to advertise the quality of the work based on top of the line names will be attractive to some.
