June, 2009

Value vs. Price

Help your remodeler customers provide homeowners with “the same for less," and become their supplier of choice.

By Bob Buck

Last month’s column focused on how an LBM dealer can use its financial department to assist remodeling contractors and homeowners in finding new economic resources. Certainly, for homeowners looking to remodel, getting help from their contractor in establishing credit goes a long way in putting their dreams to reality.

With or without financing, every project has a budget ceiling. Remodelers understand that homeowners invest in a remodeling project by weighing different factors. The most obvious is available money, whether cash or financing—how much can they put towards this project. The second factor is comparing the money spent to the potential for increasing the value of the property without pricing themselves out of the neighborhood. Lastly, homeowners are willing to spend more on parts of the project that address a specific need or fulfill their vision of their dream home.

For a remodeler, the early stage of the project—during development of scope and costs—is the time to discover how these factors play out. The decision making process will be colored by each of these perspectives, and not ruled by one alone. What does rule is the continual battle to balance value with price.

This reminds us of a story from the early ‘80s about a planning meeting between a homeowner, an architect and a remodeler. The architect was questioning the line item costs on the proposal, with the goal of getting the remodeler’s bid price in line with the client’s budget. After batting numbers back and forth with little result, the architect was heard to say to the contractor, “No, no, no, you don’t understand. We don’t want to take anything out, we just want to get the cost of the project down.”

Finding product lines with lower price points allows a contractor to “provide the same for less.” Windows are a good example of how a LBM dealer can specify a product at a lower price point. Most major window manufacturers now carry two, or even three, lines of windows at varying levels of quality or varying design options. For a remodeler who is accustomed to installing a certain brand, it isn’t difficult to confidently sell and warranty another line from that same manufacturer.

While manufacturers in other product categories may not offer such options (think “good, better, best”), lumberyards can and should. A key challenge from the latest building boom was being able to keep up with the increased demands for  newer materials, whether bigger or stronger or faster—and damn the cost. Today’s challenge is to find products that meet more modest needs—and respect the cost. Manufacturers realize this, and are responding by developing products to fit this market. It’s up to the lumberyards to research what’s available, decide what’s worth pushing forward and get it in front of remodelers.

Existing services that you offer are worth mining as potential value to remodelers. Any LBM dealer with an in-house mill shop will have the ability to quickly run a custom moulding that their moulding distributer doesn’t trouble to stock. Not only does this have the potential to be less expensive than sourcing a profile from a distant specialty house, it also can be on the job site faster.

Bottom line: it’s time to find out what new challenges your remodeling contractors are facing, determine what resources you have to remove these obstacles and offer more possibilities for these contractors to close sales. Do that, and you’ll be one step closer to being their supplier of choice.

DAVE KLUN and BOB BUCK have extensive experience in the remodeling industry. Klun is VP of marketing and sales for The Remodelers Choice, a Minneapolis-based LBM dealer focused exclusively on serving remodelers. He can be reached at dave.klun@ theremodelerschoice.com. Buck is co-owner of Buck Brothers Construction, a professional remodeling firm in Minneapolis-St. Paul that focuses on mid- to high-end homes. He can be reached at bob@buck-bros.com.