[Business Strategy] How Low Can They Go?

Peachtree Pest Control knows how to compete with lowballers in the marketplace. The Norcross, Ga.,-based company wasn’t the lowest bidder in two recent termite proposals for local condo communities, but it won them nonetheless to the tune of close to $90,000 in business, according to President Stephen Arnold.

Lowballers, of course, aren’t new to the marketplace. These companies somehow survive by offering amazingly low prices, seemingly below what it costs to do the work.

Granted, there are times when lower prices from smaller competitors can be warranted. Many times these companies have lower overhead. They may pay far less for such luxuries as workers’ compensation, employee benefits or liability insurance.

Even so, there are other quotes out there that defy explanation. And in a society that’s always in search of a better deal, it can be tough to compete with them.

But, as Arnold and others have learned, there are effective ways to do just that.

SELLING ON QUALITY. One major strategy among companies today is to emphasize quality and professionalism. Donnie Blake, president of Okolona Pest Control (OPC), Louisville, Ky., presents his company as one of the top names in the marketplace. “We do that by giving a laundry list of referrals that we service in the marketplace,” he said. The list includes many of the larger commercial establishments in town, he adds. “We, right from the get-go, try to create that credibility that we can take care of them,” said Blake. He also promotes OPC’s status as a hometown company, with long-standing ties to the community.

Staying cost effective is another of the company’s selling points. “You have to be efficient and be able to give the customer the highest quality service at the most cost effective price,” said Blake. This is especially crucial in Louisville, Blake points out. “If there ever was a town that’s tough, it’s Louisville.” In this city, which offers a lower-than-average cost of living, he explained, residents are always looking for a very good deal.

However, Blake notes, OPC doesn’t fret too much over lowballers stealing its business. He points out those companies may have their niche, but they’re not a force in the marketplace.

“We don’t want to align ourselves with the lower end of the marketplace,” said Blake. “In Louisville you cannot because you can’t do the work for that type of a price point.”

Blake notes that major commercial clients in his market want to know where their proposed service providers are positioned in the industry. Benefits such as adequate liability insurance, which some of the smaller companies may not offer, are important to these accounts. “You’ve got to bring a certain level of accountability to the table before they allow you to do your work,” Blake said.
OPC offers a relatively unique service, based primarily around baiting technologies. “We’re selling an ongoing maintenance, a proactive service,” Blake said. And the company’s QualityPro designation, which OPC earned two years ago through the National Pest Management Association, indicates that the company operates under a number of principles relating to excellence in quality, reliability and professionalism.

Similarly, Brian Van Dam, president of Fulton Company in North Miami Beach, Fla., sells the quality of his company, above all. “Obviously price is a factor,” he says. “It’s our job to make sure that it’s not the only factor.”
Van Dam says the company works hard to create a certain image, using its uniforms and vehicles, then matches that with exceptional service. “We explain what we’re going to do and even have gone so far as to mention the products.” Van Dam also has informed customers that some lowball prices won’t even cover the cost of the products. “It gets them thinking that you get what you pay for,” he says.

Backing that up even further, Van Dam says the company will never move from its stated price. “We charge a fair price for an extremely quality service,” he said. “If you’ve done your job right, you shouldn’t have to move from your price.”

SELLING ON VALUE. Another major strategy when competing with lowballers is promoting value. Peachtree’s Arnold does that by getting customers more involved in the treatment plan. “We show the value of our services and what we intend to do,” Arnold said. That means putting extra time and effort into inspections. In addition, technicians are trained to draw color-coded graphs of structures for their customers. On each graph, a structure’s foundation is depicted in black. Red denotes problem areas, water problems are drawn in blue, and green indicates planting schemes.

“Those things overcome more of the lowball scenarios than anything we could say,” Arnold notes. He says the company’s diagraming technique and inspection quality is what sold the two condominium communities on their service. Arnold explained while companies such as his may have higher operating costs than smaller operations that are able to lowball prices, it doesn’t necessarily put him at a disadvantage. “When you have added expenses you have to find ways to get smarter than the competition and do things differently than the competition to show value.”

Phillip Cooper, president of Cooper Pest Solutions in Lawrenceville, N.J., believes most people are willing to spend more for pest control if they feel they’ll get more in return. “There are people out there that want to buy on price,” says Cooper, “but not that many. Most people buy on value.”
Cooper is up-front with customers about the company’s pricing relative to competitors. “We are very clear that on a scale of 1 to 10,” says Cooper, “where 10 is the highest, we’ll be about a 7.” He also tells customers, if they are looking for price alone, then they might consider calling someone else.

Otherwise, technicians are trained to find out more about each customer’s needs and concerns, to determine if Cooper is the right company for them. “We’re trying to find out what their buying equation is,” said Cooper. “There’s a million things we bring to the table. What is important to them?” Some of the motivations residential customers may have for choosing a company include convenience, research, scheduling, and the method used, Cooper says.

When it comes to commercial bidding, Cooper’s strategy is to selectively compete with lowballers to win a certain amount of budgeted business at the lowball price. Once the company reaches this percentage, no other lowbid business is pursued.

Cooper admits his competitors may not like his practice of strategically going after a few lowbid jobs, but there are benefits in this for his company. “There is no question it creates anger,” he said. “Could we be viewed as hypocritical? Yeah, I think so. But the bottom line is this problem is not going away,” he said.

While he usually isn’t turning a profit on those select few accounts, he notes, they often provide valuable training opportunities for employees, he says.

SELLING ON DISTINCTION. Another tack many companies have taken is to point out the differences between services offered. Bobby Baine, vice president of sales for Pest Management Systems, Inc. based in Lexington, S.C., recalls one bid situation where a competitor quoted $300 versus his $1,000 bid for a termite job. Baine explained what was included in his company’s service: a treatment according to standards, the use of a premium product, and a lifetime repair bond on the home. As is usually the case, said Baine, the customer went with Pest Management Systems. “Once you explain what the difference is, they’ll start looking at you,” he says.

Similarly, Brian McQuaid, sales manager with American Pest Control in Rockville, Md., believes his company’s service protocol sets them apart.
When customers advise McQuaid about receiving lower bids for their work, he refers to the likely service differences involved, for example the chemicals used, or the warranty offered.

If customers are able to present a written estimate from a competitor, showing exactly the same service offered, American will match the price. But McQuaid says he’s never had to do that. In fact, he notes, he is usually able to show customers exactly why the prices differ. “If there really is an estimate,” he said, “there’s almost no chance that it’s a treatment that’s equal in its comprehensiveness and warranty.”

Furthermore, McQuaid notes, with more customers checking the Internet for information about their pest problem, more are seeing the value in certain methods, treatments or chemicals. “Lowball treatments are usually substandard,” said McQuaid. “Customers can often realize that now.”

Jamie Ogle, president of Lloyd Pest Control in San Diego, also highlights the differences in their service. “We want to, in both the pest and termite side of the business, make sure that we’re comparing apples to apples,” he said. This means discussing with the customer what is included and what sort of support is offered, such as a technical director, staff entomologist, years in business. This is all to make sure that the buyer understands what they’re getting from one company versus another, Ogle explained.

Another selling point Lloyd Pest Control promotes is peace of mind, having been in business for 75 years. “If they don’t have to spend time worrying about it, often that’s better than saving a few dollars per month,” Ogle said.
Further, Ogle notes peace of mind is particularly critical in the complex fumigation business, in which they are involved. “We’ve done a fair number of jobs for property management companies where they’ve seen we can really handle it from A to Z,” Ogle said. “They may have to spend more per homeowner, but the savings in time and headaches can be worth it by working with someone who’s an expert in that type of work,” he said.

Ogle notes the company always tracks prices in the marketplace, however Lloyd doesn’t want to be the cheapest. “We want people to appreciate the value of the service we’re providing,” he said.

The author is a frequent contributor to PCT.