Originally posted by @J Scott:
Originally posted by :
Why should a business desire a high volume of lower-paying work? Do you guarantee this high volume? How can you? And wouldn't the referrals you give him also expect a discount?
Doesn't giving lots of discounted work devalue his brand... causing his regular pricing to seem extravagant and capricious?
This is a problem that's been addressed by thousands of businesses before I ever mentioned it. My grocery store gives me discounts for my loyalty. My coffee shop does. My title company does. My ice cream shop does. Amazon.com does. Car manufacturers do. I get volume discounts at Costco. Likewise when I order business cards in larger quantity. In fact, I own another business that does manufacturing, and with only one exception, every component and part I purchase is cheaper the more I buy. I can't even begin to name all the stores that offer "Buy 1 Get 1 Free" incentives. Almost all major brands will sell at a discount to volume buyers.
You're acting as if discounts for more business and loyalty is the exception, but it's closer to the rule. Are all these businesses devaluing their brand? Does the fact that they put things on sale make their regular pricing seem extravagant and capricious?
If many of the largest companies in the world offer loyalty and volume discounts, why should contractors be any different? What makes contractors special?
Thank you for telling me what Amazon and Costco do. I contend that they recoup those discounts in other ways, e.g. shipping fees, etc. No business can consistently operate at a true loss as a business model and expect to survive. They use loss-leaders and other gimmicks to make you think you are saving when in fact, you are not.
I also note that you did not answer all of my questions:
"Why should a business desire a high volume of lower-paying work? Do you guarantee this high volume? How can you? And wouldn't the referrals you give him also expect a discount?"
@Barbara Goodman is exactly right: You want to make more money by paying your contractors less. You wrote that they have made "hundreds of thousands" working for you but that simply means they probably could have made "millions" working without you for the same billable hours at full rate. But as you pointed out: many contractors are not business savvy.
You wrote:
"Here's the problem -- most business owners who aren't business savvy don't think much about "customer acquisition costs" and "churn costs." Most business owners would be very surprised what it costs to get a new customer and what is lost when you lose a good existing customer. If they truly understood those costs, they'd be much more likely to want long-term relationships with customers...and would likely be willing to pay for those relationships with lower prices."
It's interesting that you see loyalty as a one way street. I should value your loyalty by taking a loss but you shouldn't value my loyalty (reliability, competence, etc) by paying me my normal rate.
What is the cost to the consumer for hiring unreliable, incompetent or dishonest contractors? You value premium, reliable service yet seem unwilling to pay for it. Who needs whom more? After all: there are many more consumers than reliable contractors.
