Building Materials Pricing Optimization
Building Materials Pricing Optimization. In residential or commercial building material sales, there are three basic methods of pricing. This is different for architects, builders, contractors,… In this article, we talk about the three types of building material pricing for builders, and they are:
1. The Switch
This entails converting a client to your equivalent product. Often, it is not always about pricing, although it is very important. However, trying to sell a building material to a client on price alone may not justify the hassle and cost for the customer – especially when they have to switch suppliers.
It isn’t about quality either. Your offering may be a tad better than that of your competitor, but this may not mean anything to the customer.
Before you can set a price that will make a customer purchase your good or service, you need to understand the customer’s current situation. This is critical if you want to make a sale.
You need to know the company’s product your customer is using. Who is in charge of supplying and installations. Reasons they like their current supplier and the product, the problems they are having, pain points etc. Even when a customer is happy, there’s always something they would like to change.
Tailor your pricing to fit your customer’s situation perfectly. Ensure it addresses some of their needs. Make them see reason why choosing your offering is the best option.
Your pricing should reflect the benefits of conducting business with you. The focus shouldn’t be solely placed on your building products.
2. The Upgrade
Upgrading entails convincing a client to improve to a more expensive or better product. Selling an upgrade is no mean feat as it’s harder than convincing a customer to switch from your competitor.
This a common mistake most builders make, and it can cost them a lot in the long run. They feel they can persuade a customer to make an upgrade by telling them they’ll save more and make more profit.
If you’re a builder, big-box buyer or contractor, you need to understand that all clients have a price ceiling. However, only a few customers will try to go beyond it. As a builder, you have to balance the volume of sales with cost control just to increase profit. In most cases, you don’t get much profit if you depend on selling a product that’s upgraded.
For you to get the right pricing that can sell, you need to show your client the benefits the upgrade will give them. Understanding your client’s primary motivation is key. Next, show them how the upgrade you’re offering will help them grow.
For builders, this is the profit margin. Adding the upgrade cost to your price may not work for the reason that you have to stay ahead of the competition with other builders. If you choose to upgrade, it’ll affect your profit margin except you cut costs somewhere else.
The way to go is to convince them to make trade-offs. The important thing here is to try and figure out the situation of your client and how an upgrade will benefit them.
3. The New Product
This entails introducing the client to an innovative product. When we say new, we mean something your customer has not seen before. When a product is new, potential customers are few. Try to identify your potential client and focus all sales efforts on them.
Be careful not to go for customers that are risk-averse as this can be very detrimental. The moment you’ve gotten a market for your product at a great price, it’ll be very easy to sell.
Try as much as possible to explain your product, reasons to use and what it does to your customers. If possible, relate this product to things the customer is familiar with, so the customer understands it. When they do, the price will be justified, and it’ll be easy to make the sale.
Building Materials Pricing Optimization