Are You $100 Better?

What is it that keeps customers from choosing you over Brand B that sits right beside you on the shelf? Or, in our world, in the Google listings? Who gets the call, and why?

One of the most interesting concepts in economics is the price vs. perceived value war raging in consumers’ minds during every purchasing decision. We know there are many factors influencing what brand gets chosen over the other, many of them highly emotional, with surprisingly few depending solely on price point. If you were to poll contractors on why they think their prospects go elsewhere, the most popular answer you'd get is, “They must be cheaper.” But Consumer Reports data shows that's rarely the main deciding factor. And the best example of this is your local grocery store.

Our 2024 economy has brought the cost of living to new heights and even invented new words like “shrink-flation” (when companies put less physical product in packaging while keeping the price the same, hoping to cut costs while also reducing sticker-shock). When consumers are asked where they’d like to see their monthly expenses cut, many say at the grocery store, but then you see an economic paradox play out month after month. More expensive, name-brand products continue to outsell their lower cost, store-brand competition in almost every category. Why? Is there a noticeable difference in taste or quality to justify the price difference? Research says, no.  

Blind taste tests found that 76% of people think the store brands taste just as good or sometimes even BETTER than the higher-priced options. On the whole, the cheaper products contain the same ingredients as well, they just cut costs on things that don't directly benefit the consumer like packaging expenses and marketing. But still, 62% of people claim they never buy the cheaper store brands and continually pay more for name brands. So, what is the main difference here? Good marketing shapes perception, and when all other variables are the same, it's the key factor leading to brand A hitting the cart over brand B.

What can we learn from $4.39 Oreos selling 3 to 1 over the $2.98 Wal-Mart Twist & Shouts? Well, for one, naming is important, and they should have sent that one back to the think tank. But beyond that, it's simply the Oreo name that carries the $1.41 price difference. The marketing behind the name that becomes a “name brand" builds trust, value, and perceived value, worth its weight in gold.

Is your company viewed by your area homeowners as an Oreo or a Twist & Shout? A Dr. Pepper or a Dr. Thunder? Here's how brand positioning makes the difference in millions of dollars in revenue.      

Your Packaging Matters – Consumer Reports asked consumers, “If you're unfamiliar with two products, what makes you chose one over the other?” Eighty-two percent said the determining factor was packaging and presentation. Nabisco, General Mills, Proctor & Gamble, etc., put BILLIONS into research and design of shape, appeal, and functionality of their packaging, while store brands look to cut costs with bland and institutional packaging. Why not just put your Frosted Flakes in a plain brown paper box with “CEREAL" on the front and pass the savings on to the customer? Because, as the research shows, consumers would rather pay more to have it sold to them by a cartoon tiger.

Let's leave the grocery store analogy for a moment. Contractors don't put a product on the shelf wrapped up nicely in a box, but the way you present yourself to your prospects is no less important. Your website, billboards, direct mail, how your CSRs and dispatchers answer the phone, and the condition of your service trucks are all parts of the image you portray. If you're one of those contractors looking to save money by not investing in your brand’s image, you're likely not doing yourself or your customers any favors by pinching pennies.

According to the BBB, a prospect makes a determination on how TRUSTWORTHY a company is within the first 4 seconds of looking at the company’s website. That’s not fair, but it’s happening. You don’t get to personally convince each prospect why they should give you a shot, but that is the job of good marketing. This is hard to swallow for most contractors, but homeowners are judging your professionalism and quality by the only thing they can see – how you package and present yourself.             

Brands Can Price Position – Another amazing discovery in this study was that consumers overwhelmingly confessed to believing items to be of higher quality if they were more expensive or if the brand was more recognizable. A TIMEX and a Rolex both keep time just the same, but one is perceived to be of much higher quality because the brand and price-point build that narrative. The cardinal sin in small business marketing is thinking you must slash prices to compete, when in reality, going to the bottom of the barrel just cheapens the understood value of your services. People are naturally skeptical of a deal that seems “too good to be true" when compared to others that they think have set the benchmark of quality. When you sell based solely on price, you appear cheap, and the customer assumes you’re cutting corners somewhere. Beware the bargain basement. National brands outsell the competition even in the dollar stores.      

You Aren’t $100 More Expensive, You’re $100 BETTER – One thing this study made glaringly obvious is that the quality of actual product being offered on grocery store shelves is largely the same even though the price range was wide. I’m sure you would agree that one of the most offensive things people could say about contractors in your area is, “They’re all the same… so just go with the cheapest option.” While we can assume that all the licensed and qualified options in the area can come fix their issues at least semi-adequately, that’s where the apples-to-apples comparisons should stop and the differentiators begin. If you feel that you offer better service, a better customer experience, and a more trustworthy brand then your customer will gladly pay a premium. But if your potential customer doesn’t see those things readily evident, they’ll just see you as overpriced. This is where good marketing makes all the difference in changing the narrative. Your messaging can convince prospects you aren’t just $X more expensive, you’re $X better. The sad reality is, the best and most experienced contractor in town could be getting no calls or selling his work out for pennies because his messaging is wrong.

Most contractors, like most options in retail, can adequately meet the need a consumer has, but the market shows us people aren’t just looking for adequate. Build your brand through good marketing, package yourself in a way that catches eyes, then justify the price difference to the homeowner, and you’ll be the one flying off the shelves.