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Beat your low price competitor, Chuck.

Shawn Mims
November 16, 2016

You know “one-truck Chuck,” or “white-van Stan” as I’ve heard him called before. He’s the one undercutting you and stealing your customers. It’s because he’s well rounded, and by that I mean he’s cut all the corners clean off. He has no overhead and he only wants to make a little more than his old hourly wage as an employed technician. But Chuck isn’t alone, is he? There’s Stan, Bill, Charlie, and the other new low-price competitors setting up shop every day.

Low price competition for service contractors

You lose deals to Chuck and Stan every day. Prospects tell you “I’ve got a guy” and customers tell you that someone offered them a price they can’t refuse. So, what are you going to do? I suggest you take advice from a Chinese guy that died over two thousand years ago:

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
     – Sun Tzu, The Art of War

OK, I know it’s passe to whip out quotes from The Art of War when you’re talking about business strategy, but bear with me on this one.

Know your Enemy

Chuck and Stan are really easy to understand. Like any of your competitors, they have strengths and weaknesses that you can exploit. Obviously, their biggest competitive advantage is price for the reasons mentioned above, but they also have personal relationships on their side. Their customers have their cell number and can give Stan a call anytime they want.

If you’re trying to grow a high-margin, premium brand, you’ll never compete with these fellas on low labor rate or personal relationships, and you don’t want to. Neither are scalable. And, if you want to beat Chuck, you should tell your customer that your goal is to expend as little skilled labor and customer-facing admin as possible. Tell them that skilled labor is costly for you and difficult to hire. Tell them that modern customer service doesn’t happen over the phone.

Instead, offer customers a technology-enabled plan for predictable outcomes at a predictable price. The goal is to reduce their risk and aggravation by implementing a proactive plan that uses data about their facility and equipment to intelligently target low-cost preventative work that curbs expensive repairs. By planning work as opposed to reacting to it, overall expenses will go down because less on-demand skilled labor is used and fewer parts are required. Throughout the service cycle, information will be pushed to your customers online to reinforce the value you provide and to build trust through visibility and transparency.

Chuck can’t offer that. Chuck shows up when the phone rings if he’s not too busy with another customer. Chuck fixes broken equipment that could have been repaired for much less if the issue was caught earlier. Meanwhile, the customer is aggravated because they have downtime, lost revenue, and unhappy employees or customers of their own. Chuck costs more when you calculate for these risks.

You can explain these risks until you’re blue in the face, but a large portion of prospects and customers will still choose Chuck and Stan over you. That’s OK. Those aren’t the customers that you want so don’t waste your time. Simply leave them with an accurate prediction of their future. Explain the many ways that Chuck will let them down, and when he does, they’ll remember you.


Know yourself (and what makes you better)

Let’s do a quick test. Which of the following are part of your company’s value proposition?

If any of these are in your brand’s value proposition, you have a problem. There’s a lot wrong with this list, but most of all, they aren’t competitive or differentiating. It only took 10 minutes of Googling service contractor websites to find the same values listed on multiple websites. Honestly, all of these values are table stakes for the industry and should be implicitly expected. So what makes you different? Do any of these values sound familiar?

Each of these actually provides tangible value to the customer. More experience means that you are likely to solve problems faster and at a lower cost than your competitors. More coverage area and diversity of service offerings mean that your customers won’t have to manage as many vendors. These are a step in the right direction. How about these values?

These are rarely seen value propositions in our industry because they are difficult to offer without  technology that enables mobility and modern online customer engagement. The vast majority of service contractors are still running on paper, server-based software, or accounting systems that don’t offer functionality for technicians or customers. That means that customer data is limited, inaccessible, and unusable. In other words, the opposite of transparent, accountable, data-driven, and modern. The companies that can offer these values will win the most desirable, high-margin customers.

Beating Chuck and Stan really isn’t that hard. It comes down to a couple easy steps. First, differentiate the value that you offer and understand, without a doubt, that your higher rates are warranted because you will reduce the customer’s risk and aggravation by providing predictable outcomes at a predictable price. Second, if the customer still isn’t convinced, let them go. Predict their future and they’ll come back.

webinar-icon-goldWant to learn more? Watch the recording of our December 7th webinar, “Don’t Sell on Price, Offer a Premium Program” presented by ServiceTrade’s CEO and author of The Digital Wrap, Billy Marshall. Click here to watch the recording.

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