Battling Lowballers

Lowballers are like mosquitoes. They buzz low prices in the ears of your customers, and you’d like to swat them away. They can swarm your territory and sting your bottom line – their presence is quite annoying. Pesky lowballing contractors hatch in spring and are a nuisance all summer long.

“But what are you going to do?” asks Doug Austreim, president, Austreim Landscaping in Brookings, S.D. Lowballers are a fact of life in any service industry, in any economy.

“The biggest challenge is the temptation to play their game,” he relates. “Ignoring them is difficult if you are a new, young businessperson who is not yet comfortable with the idea that you are never going to have all of the business available.”

Not every customer is a win for your company; and not every company that undercuts your prices is a lowballer. First, you must define what type of customer is a fit for the services you provide. Then, carefully examine the competition and determine whether the competing company is a lowballer or a low-cost service provider (LCSP). There is a distinct difference.

“Lowballers throw numbers on the street – they get work and lose work,” says Tom Oyler, a green industry business consultant with the Wilson-Oyler Group, Maitland, Fla. “Low-cost service providers have excellent estimating protocols and look for ways to reduce costs for buyers without long-term negative effects to the lawn’s aesthetics.”

In other words, lowballers will eventually lose the business, but LCSPs are lean operations that “buzz” in your customers ears and don’t die off after the season. Their operations are efficient, and their prices reflect that.

“The worst thing is when lowballers learn,” Oyler remarks. “They learn on the job, they become more efficient over time and they evolve into LCSPs.”

The good news: Both lowballers and LCSPs can encourage a comfortable business to re-examine operations and mine for ways to improve production capabilities, Oyler explains. Scheduling, routing, crew size, downtime – these potential time sucks can force a company to pass costs on to customers.

He offers these strategies to ward off competitive invasion: 1) Ask how your company has contributed to the issue; 2) Purge clients who aren’t a fit; 3) Protect pivotal clients by proving your role as a subject matter expert; 4) Constantly reaffirm your value to customers.

If a competitor offers one of your clients a bid that drastically undercuts your price, approach the client with a systematic response. “First analyze the market to determine if you should let the piece of business go,” Oyler says. “And if you want to keep the business, defend it by becoming a trusted adviser.”

Ask the client if you can see the competitive bid. “Find out how you contributed to the problem,” Oyler says. Broach the subject by saying to the customer: “Can I look at the estimate and compare the services to make sure you are making the right decision?” Or, say: “Let me have a shot at figuring out how the other company can do the job for so much less than I can.”

Determine if there are areas where your business is falling short, but know when to walk away. “Understand that you might not be the right operator for that customer,” Oyler says.

Protect your business by showing them the value you provide before they have to ask. If you perform an extra service, such as treating some stray weeds while mowing, tell customers you did this and show them the cost savings. 

“Every time you do something extra for clients, send them a change order,” Oyler suggests. “Don’t charge them, but show them how much those extras cost. Show the value.”

The key in this market is to be relevant, empathetic and to understand customers’ values. Market intelligence is critical, and communication was never more important.

Lawn & Landscape asked three contractors who operate companies in different revenue categories how they deal with lowballers. On the following pages, they share how they maintain margins and protect their businesses.

The author is a freelance writer based in Bay Village, Ohio.