It Won't Work In My Small Town, Part 2
Last month, we began a chronicle of David and Maureen Francis, owners of David Francis Plumbing, as they made the switch to upfront pricing in their small, tightly knit community. At almost the same time they adopted upfront pricing, they were greeted with a water heater price war in their local newspaper. By sticking to their vision of premium service for a fair price, they not only won the “price war” but ended up gaining new customers from their “budget-priced” competitor.
Even as they conquered the price challenger, a new foe came over the horizon. Here's David's e-mail explaining a weather problem to this Southerner:
“January 29, 2002
“We have just come out of the warmest 59 days in recorded history (NY Times). The snowfall is WAYYYYYY below normal. … The winter workload for P&H contractors is based in part on a given amount of winter-related sales. The winter brings a seasonal windfall for many outside the P&H field. The normal income for snowplow operators both private and civil, fuel oil repairs and delivery of the oil, snowmobile sales and service, hotels who cater to snowmobile riders, sporting good sales for skiers - this is a short list, but all will see less expendable income. Which, as you know, hurts the 'I-do-not-need-it-but-I-want-it' market. … A natural disaster would bring aid to those affected. This downturn will bring nothing to those who will need it. Some will survive, others will fold.”
Since switching to flat rate pricing, David is by far the highest-priced plumber in town. His commitment to service prevailed over a bargain-basement competitor, but can David's vision of providing better service instead of low prices survive the economic doldrums of this small town as it suffers through a weather-induced economic slump? There are fewer dollars floating around and many businesses, not just plumbers, are grabbing for each one of them.
Here's how it plays out for David and crew:
“We are still in the black and the work load is holding its own. Heating repair sales are down, plumbing and replacement heating sales are up. Our aggressive marketing keeps bringing in new customers. We have put a hold on a few areas of expansion. I do not know if I explained it well enough, but picture a service area losing a large portion of its income. It does happen and it does trickle down to us.”
Clues To SuccessWith belt-tightening going on throughout the region, you might think that budget-priced shops like the “budget water heater shop” would win market share. Instead, the Francis' are holding their own. Aren't people interested in the lowest price? Surely, in a small town, people will clue each other in about who has the best prices, right? Here's an important clue from David's e-mail: “Our aggressive marketing keeps bringing in new customers.” In a time of fiscal doldrums, David and Maureen are attracting new customers by continuing to tell people about themselves. But “aggressive marketing” costs money. Ever wonder where the marketing dollars come from? That's part of their business plan and part of their pricing. Rather than play the low-price game, suffering with the rest of the area as it struggled through economic doldrums, David and Maureen cranked up the marketing machine and kept busy.
There's no magic to their marketing strategy. Instead of just waiting for people to find them in the phone book, they simply took their message to customers through the local newspaper and direct-mailed postcards. It takes more effort to reach out to customers directly but by doing so, the Francis enterprise was able to stay above water even during a regional economic setback.
There's another valuable clue hidden in David's e-mail message above. Did you catch it? “We have put a hold on a few areas of expansion.” David's plan is to leverage his customer service expertise by offering additional services. While the “budget operators” struggle just to get the work done while keeping suppliers off their backs, David is investing profit dollars into growth. When slumps come along, such as the warm weather slowdown, he can reduce his expansion efforts yet still get by nicely on the reduced call flow. His profitable pricing is helping him achieve a big vision in a small town.
As mentioned earlier in this series, David Francis' vision is to be the best. His “take-it-to-the-customer” marketing strategy works hand-in-hand with his company vision. He has little control over who finds him in the phone book, but with his direct approach, he can reach out to specific neighborhoods or demographics. Yes, it matters even in a small town. Why tell a tenant how good you are when they're not even qualified to call you?
Don't underestimate the power of reputation either. Earlier, we saw how David's reputation trumped price, even in a small town. Fast-forward to this past winter. Unlike the winter of 2002, this year they had an abundance of snow. Heavy rains and snowmelt early this spring led to flooding - the worst in nearly 40 years. David, Maureen and son Adam are citizens of the community, so their first response was to help in whatever way they could. Because they've been successful over the past few years - and because David is a true plumbing professional - they had a supply of sump pumps in stock, so they hit the streets, setting up pumps in as many homes as they could. They also had enough good will “in the bank” with suppliers that they were able to get additional pumps and piping specially delivered from about 50 miles away.
The Francis clan earned “hero status” (but David won't admit it) from every homeowner they served under these conditions. That was even before David explained that he was waiving his fees for the emergency work. David even persuaded the city to waive permit fees for flood damage repairs. They were giving back to their community in a way they never could in the days before waking up to the fact that they needed to charge more for their services.
Their community support won't go unanswered. The flood left plenty of plumbing/heating needs in its wake. David Francis Plumbing will certainly get its share, especially since it was cited in the hometown news as having been a source of help.
People in this small town do indeed talk with each other. They talk about who gives the best service and the most value for their investment. At about three times the “going rate,” David Francis Plumbing actually offers the lowest price for the level of service it offers. In fact, it's starting to sound like the company has the “low-price” market cornered.
Good reputations are built by people with a vision for customer service, a vision for a better tomorrow and a plan to get there. Price is just the cost of admission. How about you? Would you rather offer the lowest price or the best value?