We are a custom integration company in business for approximately 1 year. We have been doing a lot of research on the web pertaining to product pricing. It seems that the pricing of many of the products we offer cannot be adequately controlled and are sold through the internet. There are companies and people out there that are selling the same products that we get at unbelievable pricing -- our cost or just slightly above. Does everyone find this to be common? How do you survive in such an environment? We cannot mark our prices up to the suggested retail price because nobody will want to do business with us -- our price will simply be too high. On the other hand, do we just give the product away at cost and then make our money from installation charges? If so, we need a large volume of installation jobs. Or, I guess we can pursue the type of customer that values technical knowledge and skill and charge them appropriately -- Do customers like that exist? How has everyone else been coping with this? What has been your strategy?

The internet has made life interesting for us all. We have stuck to our guns, and not dropped our shorts. Most customers who are spending a significant amount of money on equipment and installation, do not have the time or the knowledge to do what we do. A lawyer who bills at $250/hr is not being very cost effective if he thinks he can install his home theater system. Whenever they come up with an internet price, I say ok, and who will install it? They usually blink at that point. Our proposals never are a line item, because we sell a complete solution, not a product. Just my own viewpoint. YMMV

This has been visited so many times lately I'm not going to go into my Big long wnded speach again......

Condensed Version....
Dont sell boxes. Sell Yourself. If your good, you'll find that Internet pricing is a non-issue.

If you Make internet pricing an issue.... It will be. I have the exact same attitue as Greg... Go ahead and buy it on the net... But plan on installing it yourself.



You Need to Provide a Service.. Not just a Product

What Impaqt said.

Thanks for the response. It does help.

We have the same philosophy as all have mentioned above. Also, we do not break out our product or installation pricing by line item -- rather, it is a complete solution that we offer that includes design, furnishing and installation (as well as programming and all the other goodies that make things work).

Let me give you an example, we put a quote in for a large job against another 4 competitors. We lost the job because our quote was way too high. The customer said we obviously know what we are doing and have a wealth of knowledge, but he must go with the lower quote because of budget constraints (this was a commercial application). Being new, this discouraged us...we wanted the job! So, we had to rethink our strategy. However, we are again gaining confidence and moving what I think to be is the right direction. I long for the customer who values the skills and knowledge we have and sees the benefit.

I still question our pricing though. Would anyone be willing to share what they charge for installation, design, and programming per hour and what percentage they mark up product to. This will give me an idea of where I stand. I have so far used my company costs to price labor (adding a reasonable profit margin of course) and have used what I have been told industry standard is for product.

List Prices.(Except for Sale Items.... My Custom department is connected to a Substantial retail floor, so if its on sale on the floor, we go to those prices)

For most basic installs We do a Flat Rate for Installation. Fixed cost per Box, Speaker etc...

Custom install is currently at $65hr Programming is at $125Hr Chicagoloand market

I have a question for you. Do you have a retail show room? If so, then why are you selling brands that are commonly available on the net? If not, then herein lies the answer. The reality of this situation is that many custom installers/integrators don't have showroom space and therefore can't qualify to sell alot of brands, many of which have a strict anti-internet policy. Brands like Integra, Yamaha, Paradigm, B&W etc. are nearly impossible to find on the net, but require that they be represented in a showroom environment. Conversly brands like Russound, Denon, Niles, Infinity etc, can be had through channels of distribution that make no such requirement. Consequently, because they are available to anybody who can write a check and fog a mirror, they are subject to being whored out on the net. In the end, it may simply be that the same rules that allow you to procure a product also prevents you from selling it on a profitable basis.

i agree with craig day. we have a showroom which allows us to carry alot of high end products. Almost all of these manufacturers dont allow internet sales. The other good point made is you need to sell your self. In the custom field after awhile everyone can do what everyone else is doing. So what really matters is the person putting it in. I know that if i were to not make any money on the sale of the product, i could live comfortably off my hourly wage. Personally i think the key is to start small. One person does it all. Maybe one family member. Then grow from there (CAREFULLY and SLOWLY). Seems anyone i have work for me that isnt family trys to become a compeditor. Guess thats life.

Selling "protected" lines is a SMALL part of the equation and in my opinion is often over-rated. There is not a line on the face of the earth, from Mark Levinson to Wilson Audio that you cannot find heavily discounted on the Net or otherwise. That's not to say it is not more desirable to sell a protected line than a non-protected line, all other things being equal.

This message was edited by QQQ on 12/17/03 21:46.

I am also a new entry into this business, a little over a year into it. I have gotten bids that I didn't think that I would, and gotten piced on the net (including losing a sale on a brand new Pioneer plasma panel that an internet guy, buying from the same distributor as me, sold for $500 over cost) on quotes that I thought I would never be questioned on. The professionialism of the presentation and the customer service is what will get the good (profitable) jobs. I have never advertised, and I have grown from doing friend's jobs, to billing almost $100K in my first year. I have almost $50K in billing lined up in the first five weeks of next year. Word of mouth is what drives this industry. I have learned to price solutions (somewhat by the advice garnered on this forum and others) not components. I still make good margins on components, and get industry norms (10-20% of component price) for my installation labor. The individual attention to the customer, including the 8:00 PM consultations and the last minute changes to components and placements, is what creates your value. That is what gives us the advantage over the commissioned pimple-faced salesperson at Best Buy/Circuit City/Ultimate Electronics. We have the experience with the whole install, including customer orientation, custom cabinetry, planning, pulling wire, and set-up. You have to sell the experience/knowledge.

I know there are a lot of guys in here with loads more experience than I, and I appreciate the fact that they share with us how they operate. This is a growing industry with room for all of us to make a living. I think that the internet will be more and more disruptive to the retail pricing model. We will have to adapt to the changing times and prove that a professional install, not cheap, boxed components, is what will give the customers the positive experience that they desire.

Thanks for letting me rant...

I have done a few "internet installs" and I simply tell customers that I will happily install their "bargains" from tne 'net, BUT my installation price goes up 50% to make up for loss of margin on equipment. I do charge to read manuals for equipment I am not familiar with and I don't read Japanese. And finally they have to sign a contract that I am not resposible for ANY of the equipment they have purchased, HOWEVER, if they buy something that doesn't work they can still buy a working component from me at the original price. They usually start to understand at this point.

Thanks for everyone's input. I appreciate the suggestions I get from professional's with experience in the industry as opposed to the comments I sometimes get from trunkslammers who are only interested in the mighty dollar and an in and out job.

In response to Craig Day's message, we are in the process of buildign a showroom. It is an expensive, and therefore anxiety provoking experience. I guess I am partly upset about all the money I see flying out and a bit worried about how quickly we can recoup the investment. Your comments are helpful and I will use them when making decisions of which products we should be dealers for. Thanks.

Thanks to Impaqt as well for sharing pricing -- an enormous help.

funny thing GB1...the trunk slammers are priamrily the ones who have caused us these problems...so you might as well take their input (with a grain of salt maybe)...I would rather compete with CC and BB ANYDAY than "two guys, some wire and a crimper, inc..."

WHY??

Because BB and Circuit City sell you the box. No Frills, no bells, no whistles and no experience. Here's your TV maam...no it's $150.00 to put it IN the house....

But with trunkslammers....they'll buy AT BB (cause it's often cheaper than distribution) AND they'll install it for like 5% margin....now TAHT'S hard to compete with!

On the showroom thing...I wish you the best of luck, it's a sometimes tricky proposition. We did some EXTENSIVE research in this area and determined that if we built one, we would have to sell it, as it sat (everything identical) FOUR times to pay for it...needless to say, we haven't taken the leap yet!

avdude

If you are in business, you can't sell at near cost and survive. You will lose some business to the price only shoppers. Your clients will be people that understand that expertise is valuable and they are willing and able to pay for it.

Many businesses fail every year because they try to be cheaper than "the guy down the street". Very few go out for charging too much.

We love when the competiotion is the "cheap guy" down the street, if our customer is shopping around and another company is significantly lower then then us then they may ask why and after we explain what we're doing (again), service, and our qualifications we get alot, alot of these jobs. We've been is business about 8 years or so and have steadly grown by word of mouth and hard work only. One reason we don't advertise is i'm afraid of how much work may be out there , 65 to 70 hours a week is only fun for the first 40 or 50 years.

Just my .02, do you absolute best and treat your customers how you want to be treated and don't expect to be a world beater in the first few years. Also people who want a nice system will pay what's fair,,,,,usually.