Years ago, Amazing Siding gave its 80 salespeople the freedom to lowball their pricing to entice customers to sign. Recently, however, this 14-branch contractor, headquartered in Houston, hasn't let reps stray far from the price sheets on their laptop computers. “Never more than 5%,” says Bob Birner, vice president and general manager.
“We look at it this way,” Birner says. “It's like our salesperson is in a grocery store pushing a cart, and the client is putting products in the cart. They arrive at the checkout, and the customer pays what's on the register.” There's no question about the price of the products. “What we do now [at Amazing Siding] is fairer to everyone because it helps us maintain a pricing structure. It's not just one customer getting a great deal and another getting his head torn off.”
All Over the Board “Fairness” is a relative concept, though, as variable pricing remains the rule rather than the exception in most markets. “We've seen 40% differences in [competitors'] quotes from one job to another,” says David Normandin, executive vice president of New Pro, a window replacement “ company in Woburn, Mass. Gary Williams, sales manager for Cal-Tec Construction, in Fresno, Calif., says he's seen competing reps quote anywhere from $4,850 to $11,200 on a job his company priced at $10,000.
Some contractors say they'll reject a contract when the margin is too low, no matter what a rep promised. At the same time, many have built in controls designed to prevent reps from gouging customers. “What we've done,” Birner explains, “is take the salesperson out of the equation.”
Tie Discounts to Commission Cal-Tec uses a “10%, 12%, 7%” commission system. For windows, the contractor calculates its pricing on a “united inch” formula (width plus height). If the salesperson sells at that price, the commission is 10%. The commission goes up to 12% if he or she sells the job for a bit more, “although they have an incentive not to gouge any customer,” Williams says. If competition gets tough, a salesperson can drop his price, but only to the level that reduces his commission to no less than 7%.
Some contractors, like New Pro and Randolph, N.J.–based Morris Windows & Siding, feel that severe discounting would undermine the quality image they've created for the products they install. “When you're selling quality, should price really matter?” asks Morris' president, Gerald Damora, whose company specializes in seamless siding and Schuco windows. “We're not salespeople; we're educators.”
But within the price parameters their companies establish, salespeople will often accept lower commissions to secure a contract that might lead to a higher year-end bonus.
“I have no problem with that, because it gets New Pro what it wants, too,” says Normandin.