CRASH: Why Building Product Manufacturers Should Not Cut Prices

Posted On: 
Jan 25, 2018
CRASH: Why Building Product Manufacturers Should Not Cut Prices

“Price cutting devalues brands. Cutting prices on industrial products, those items sold by one company to another, cuts profits,” says author Jeffery Fox. Reducing the price may not increase customer demand. Cutting the prices for products can undercut their value proposition. It can also devalue and crash a brand.

Fox argues that instead of reducing the price for a product, manufacturers should create a new lower-priced product to meet that demand. Cutting prices can cut profits. Building product manufacturers should constantly add value but also quantify the value and dollarize what the customer receives.

Lowering the prices can lower the margins. This may hurt small manufacturers. Sometimes customers want everything for nothing. Sometimes the owner/contractor wants lower prices for products. Building product manufacturers constantly battle losing jobs due to cheaper products and alternatives available.

Successful product manufacturers will add value to their products without reducing the costs or profit margins. Adding value to a product might include:

  • Extended product warranties
  • Guaranteed delivery times
  • Money-back guarantee
  • Improved customer service

In earlier previous discussions, we outlined how to get specified by architects. Architects don’t write purchase orders. Instead of arguing with the owner, contractor, architect, janitor, etc., try to improve your relationship with them. The American Institute of Architects (AIA), has identified several reasons why building products get specified. Here is what a current study found-

  • Design professionals use existing and long term relationships with building product manufacturers to select products. Instead of specifying paint made by a manufacturer who opened shop last week in the back of his truck, architects prefer to use time and tested materials. AIA continuing education can provide important resources to establishing this relationship.
  • Conservative Architects Versus Risk-Taking Architects. Risk-takers have a mixed age demographic, typically work for a multidisciplinary firm, and work on LEED projects.
  • New Building Products. The AIA concluded that risk-takers and dynamists who make up nearly sixty percent of the architects are the best decision makers to reach out to. Manufacturers should target risk-takers when trying to get their new product specified. LEED documentation and webinars can help with this endeavor.

Overall, lowering your product’s price may increase sales in the short term but cause headaches later on. Lower prices may affect your industry reputation. Who wants to be known as the “bargain basement” product? Who wants to specify that for their building project? How does your company navigate the marketplace when a competitor drastically lowers prices?

For more information or to discuss the topic of this blog, please contact Brad Blank