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See ya, lowballers

Supplement - State of the Industry - Business Management, Industry News

The price wars have largely subsided, and many contractors are feeling comfortable holding prices steady – or even raising them.

Lindsey Getz | October 26, 2011

Last year, the advent of some very serious "price wars" was one of the most talked-about hot topics in the landscape industry.

With competition growing fierce, many found the marketplace completely hostile and almost impossible to compete in.

Landscapers reported last year that contractors from other fields were throwing a mower in the back of their pickup truck and charging rock-bottom prices that they simply couldn't challenge.

But those who held on and survived such rocky waters have come to find that the lowballing of last year has in some ways helped their business this year by regaining former customers or even new ones that weren't happy with poor service. In many areas, competition has slowed and prices have begun to stabilize.

Many of the pickup truck guys have moved on and many homeowners have come to realize the value of hiring a good landscape contractor – even if it costs a little extra.
 

Embracing Value. "The lowballing was at an all-time, worst-case scenario last year, but it's certainly leveled off this year in our region," says Pete Lucadano, president of Luke Brothers Landscape Services in Holiday, Fla. He says the biggest reason is that the lowballers simply aren't around anymore. "They couldn't afford to operate at the absurdly low prices they were putting out there."

Chuck Vogt, president of Metro Lawns in Atlanta, says that for the most part prices are holding steady this year in his area as well. But the guys out there trying to make an extra buck haven't completely dissipated. "On Saturday afternoons at a gas station, you'll often still see a truck with one mower and one man," he says.

In Fort Collins, Colo., Adam Lizotte, owner of Lizotte Landscaping, says that the lowballing is still going on to some degree but the difference is that customers are realizing that you get what you pay for. "I have new clients this year because other landscapers burned them or won't return their phone calls," says Lizotte. "I have never reduced my prices because I felt my prices are right for the services I provide."

Similar scenarios are playing out in Texas, says Stan Johnson, president of Native Land Design. Many of the construction contractors jumping into a maintenance division didn't have the skills needed to be successful at it and that's helped customers see the importance of a quality maintenance service. "I know one particular instance where a large contract was awarded to a company that was new to maintenance and within six months the client got rid of them to hire back their original maintenance company," says Johnson. "Customers are starting to see past the ridiculously low pricing and realize that they also want value."

As a result of this shift in customer thought, Johnson says that the economic climate has had some upsides. He says there have been a lot of great opportunities to get new customers. "We've grown in this recession and that's because while everyone else is cutting back on personnel and service, we've pushed forward," says Johnson. "We've always maintained a low overhead structure and have just continued in that pattern."

It seems clients have realized that age-old adage that you get what you pay for, says Lucadano. "It's now a time period where property values are of peak importance. Last year everyone was in cost reduction mode and throwing everything overboard that they could. They may have ignored their property maintenance in order to save a buck. But now, people are starting to want to get the properties back to a place where they can be profitable and that means quality landscaping."
 

Holding Steady. Many landscapers reported the desire to be able to raise prices this year, but say that other factors beyond just competition are coming into play. In Atlanta, the weather has been a major factor in setting prices, says Vogt. "Because of drought-like conditions here, certain customers see little need for weekly maintenance," he says. "While the lowest price won't necessarily get the contract, people are being more aware of the value they receive for services rendered."

Howard Pitts, CEO and president of S&H Landscape in Alaska says that weather issues far-outweighed competition or recession-related concerns this year. "Our biggest problem is weather and freight costs for shipping fertilizers, fuels and equipment," he says. "But we're trying to keep the costs about the same as previous years as much as possible. A lot of our customers are on fixed incomes."

In Texas, where the effects of the recession weren't quite as hard hitting, prices continue to hold steady this year. "Texas, and especially Houston, has been lucky in that it hasn't been affected in the same way as the rest of the country by the economy," says Bernie Granier, managing member of 2 Guys and a Goat Lawn Service and Irrigation, based in Houston. "There's still building going on and the population of our service area continues to grow."

Native Land Design has also been able to keep prices steady. Besides Texas' friendlier economic climate, Johnson also attributes it to being proactive. Instead of waiting to find out customers went looking for a lower price, he talks to them upfront. "We let them know that if they need help cutting their budget, we can help," he says.

"We tell them we can make some changes that won't have a huge impact on the aesthetics of the property but can reduce their cost. If we can come up with 2.5 percent to give back to the customer simply by reducing the scope, that helps them out and builds some loyalty. They know we're looking to help them on price and that we value the relationship."

Lucadano, whose company experienced growth this year and sees the possibility for raising prices next year, agrees that being willing to work with clients on price helps build long-term relationships. "You have to be willing to do a little bit of give and take," he says. "Customers recognize when you make that extra effort."
 


Going for the Raise.
Many were pleased with maintaining stable prices through some very rough patches. Others, this year, were even able to raise prices. "We made some adjustments to our lawn maintenance prices that resulted in a net price increase but looked like a price drop," Granier says. "We added a lower tier to our pricing for smaller properties and raised our prices for all other services. Irrigation prices have been steady for several years but we're going to be instituting a price increase over the winter."

Granier says that it was some strategic decision making that allowed him to hold prices steady through the recession and start the conversation about raising them.

"We've made a conscious effort to not get into the services where everyone competes only on price," he says. "For example, we only do irrigation maintenance and repairs because the competition for installation work from unlicensed contractors that don't follow the state laws for design and installation practices make it impossible to profitably compete with them unless we lower our work product to their standards.

"By focusing our efforts on getting the work that fewer people are competing for, that also have recurring revenue, plus providing timely and professional service, we've not really felt much pressure from our customers on pricing."

Larry Ryan, president of Ryan Lawn & Tree in Overland Park, Kan., says that he's consistently been able to raise prices, even through the recession. "We raise prices every year," he says. "Last year we only went up 2 percent and we found out later that was a mistake. With the price of fuel, we should've gone up 4 or 5 percent. This year we will go up at least 5 percent with prices."

Successfully raising prices is an issue of confidence, Ryan says. Landscape contractors need to be bold enough to make that decision and convince customers that it's a fair price to pay. "I'm not one bit timid about charging the premium price because I offer a premium service," he says.

"Once you start to get timid and start buying into the line that you have to match these lowballed prices, it's over. Your job is to show them why they need you and your price – not to give into the lower price."
 

Setting the Bar Higher. While price wars got out of control during the worst parts of the recession, dealing with competition that sets the price bar low is something that's always going to be part of this industry.

But Ryan says that the issue for most landscape businesses is their inability to continue to set the bar higher. "The issue is not the lowballers – the real issue is whether we have enough pride in what we do to convince the potential client that they need to use our quality service in lieu of the other guy's cheap service," he says.

"We're not just selling horticulture, we're selling 'outdoor beauty.' When you think of it that way, you have less of a problem stepping up and saying, 'It's going to be $700 to seed your yard, not $300 like the other guy. But when we're done, it's going to look great and you won't have to redo it.' The lowballers out there are doing a poor job that often needs to be done again and quality contractors shouldn't feel pressure to stoop to their level."


 

The author is a frequent contributor to Lawn & Landscape.

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