Should homeowners who have been referred to a contractor by a friend or relative expect to get a special price, because they are close to a prior, presumably satisfied, customer? Should they ask for the “friends and family” price?
I’ll go ahead and answer my own question:
Homeowners can ask for it, but shouldn’t expect a special deal for being a referral. Contractors are very careful about bidding competitively (within their own market segments) and don’t usually expect to give away their profit margin to new customers, even if referrals.
A far more effective way to get a good price from a contractor is to demonstrate your ability to make decisions and stick to them, pay on time, and be a help rather than a hindrance to getting the project done. Contractors add a (frequently significant) premium to prices for customers whom they believe will be difficult. Keeping yourself out of that group is your most effective way to get the best price.
Each company is different and offers different services and prices to his customers. We personally offer a discounted price for a referrals if they are a family or just a neighbor that saw our job and became interested.
Some contractors do not work for friends or family, that removes the idea of low price. As a contractor, we offer a free design / drawings to thank the client for the job.
Asking for a “price break” is not unreasonable. Likewise, the referral should be focused upon the previous customer’s overall satisfaction—not about the friend getting a better price. It should be remembered, that each bid is based upon many and sometimes unique factors. To ask the contractor to price the work as competitively as he/she can is a good negotiating point.
I always give someone a Special Price, carefully thought out, well documented, allowing for both profit and quality workmanship.
As a consumer the primary reason I would give a referral is because the contractor did exactly what was expected for a decent price. If he went beyond that, more kudos.
If as a contractor you have been referred to someone only because of your prices then you have to continue to do your business that way and give the discounts over and over to new referrals. That tends to undermine the overall quality of your work and you start to get used to working with substandard products or laborers just to get the volume you need.
You get stuck in a holding pattern that makes it hard to get the better paying gigs. The worst part is, whenever these customers call, you are not in a mood to deal with them and your customer service suffers as well.
Customers who are referred because of quality tend to give me a higher net return than those who start at price. In turn, whenever I hear from these customers or their referrals I am eager to deal with them.
I prefer to focus on the getting the job done right and making sure the customer understands every situation is different and no job is going to cost or involve the same materials and labor.
Reasonable customers will accept that and not look for the “rock bottom” prices, but a fair sampling of other contractors and with a good referral you will always be the first choice if your prices are fair.
This is a very good question. I believe that if you have a homeowner that helps your business growth and you do achieve landing a new customer because of the referral, then yes a discount should be rewarded to the homeowner that referred you to the “friends and family”. The “friends and family” are also entitled to a reward if they refer you to another customer that you land. It’s important to remember the objective of obtaining and maintaining a growing customer base.