I personally think that the reason this happens isn't only because "they're trying to get your attention."
I think the issue is that janitorial and cleaning services have become commodities - that is to say that there is no real difference between one janitorial service and another. Just like coffee, the "thing" you get tends to be roughly the same regardless of where you get it from (more on this further into my comment however).
This is an issue that's beginning to afflict many service industries - why pay for an accountant when you could just use Turbotax for free? Why pay for a taxi when you can pay nearly nothing for an Uber?
At its core, tech is beginning to undermine the uniqueness of these business models and consumers can rapidly find ratings for anything online. In response, businesses begin a "race-to-the-bottom" and you're in a situation where everyone offers you outrageously low price offers and quality sometimes ends up being mediocre.
The trick is to update your business model. Here's an analogy:
A generic coffee shop can (at max) ask for $3-4 for a cup of coffee. This is because they are offering an experience (being in a cool coffee shop) in addition to a cup of coffee (which really only costs $1-2 max). The premium for being in a cool coffee shop with an interesting environment or high-end materials adds a few dollars to the price of a cup.
Starbucks Reserve (a new concept rolling out across the country) is able to charge $9 or more for a cup of coffee. How? Because the coffee is SECONDARY to actually BEING in the coffee shop. Everything is about the experience or the feeling you get from being there. The high-end coffee may cost $3 a cup instead total - but they get to charge consumers an extra 5 or 6 dollars simply because the experience is so good that it's worth it. I encourage you to visit a Starbucks Reserve if there is one in your area to see what I'm talking about.
They're able to extract more money from every account and the consumer is happy because they get more than just a janitor - they get a janitor AND a store and an account manager and a friendly face.
I love talking about stuff like this so shoot me a message if you'd like to talk more!
We know that everyone's situation is unique, but we r almost never involved in underbidding, our Marketing guru told us to raise our prices and he wasn't the first to make this advice, he said our marketing should be for the Mercedes Benz client not for those shopping for price we have followed that since
the guru who provided this advice is Howard Partridge look him up
Companies underbid because they do not pay their employees with a payroll check. They pay them as sub-contractors so they do not carry workers compensation on class code 9008 that is very expensive. They carry only workers compensation on office staff that is very inexpensive. They can show they carry workers compensation to a customer. It is a game that has been going on for the 32 years that I have been in this industry.
It all comes back to cost accounting. How much does it actually take to do the projects. If you have been in business long enough your numbers will tell you the story. We are so worried about underbidding. How about earning the reputation of the best in the industry for you location.
That is a great question. We do not underbid, our staff works hard to deliver a great customer experience. They definitely earn their wages, we cannot pay them a great wage if we underbid, we are a premium service and we have excellent clients. Staff and Client Happiness.
Most don't have the Overhead as other companies. SO, really they are not companies they are just providing a service which allows their rates to be a lot less than the average company. Most Customers are generally looking for the lowest price while others are looking for the best service. Although rates/prices are a big part of a customers choosing you for their service. The quality of the service will out weigh the price every time if the customer values Quality over Quantity.
In this industry you can be small and work from home. So overhead cost are really a factor here. Plus the perceived skill level is very low. It use to be like that with painters. People would say wow that's a lot of money to just paint! Well then go paint it yourself. Now painting is perceived as just as expensive as plumbing and electrical.
So having the whole package in your work force is key and that is very hard to do these days with the current labor pool. Ask any employer anywhere about the quality of the people they hire and you'll here the same thing.
We have been looking for a female house cleaner for our residential department and can't seem to find anyone who has a phone, a vehicle, with a drivers license and who can actually preform the duties required of this type of labor.
The work is there just not the work force. I'm afraid the future is going to be lacking in a labor force to meet the demand. Or from what I can see.
The biggest reason is most businesses never create a Market Dominating Position. So, the only way to create a better value for their service is to underbid.
To win the job you must create a unique approach to your business that adds greater perceived value to your services. Bundling related services is often a good way to create a value plus feeling with your prospect.
I have seen companies (legal) underbid large contracts and call it a "Loss Leader". They take on the large project because it makes them look good with a big client like that under under their wings, with the hopes of attracting more of the same. In addition, they focus on the "extras"to make them break even. I decided that I would never commit to a contract that I could not break even on.
Join Your Local
Business Network
Connect & get quality referrals
from Small Business Owners
Answers (1-10)
I personally think that the reason this happens isn't only because "they're trying to get your attention."
I think the issue is that janitorial and cleaning services have become commodities - that is to say that there is no real difference between one janitorial service and another. Just like coffee, the "thing" you get tends to be roughly the same regardless of where you get it from (more on this further into my comment however).
This is an issue that's beginning to afflict many service industries - why pay for an accountant when you could just use Turbotax for free? Why pay for a taxi when you can pay nearly nothing for an Uber?
At its core, tech is beginning to undermine the uniqueness of these business models and consumers can rapidly find ratings for anything online. In response, businesses begin a "race-to-the-bottom" and you're in a situation where everyone offers you outrageously low price offers and quality sometimes ends up being mediocre.
The trick is to update your business model. Here's an analogy:
A generic coffee shop can (at max) ask for $3-4 for a cup of coffee. This is because they are offering an experience (being in a cool coffee shop) in addition to a cup of coffee (which really only costs $1-2 max). The premium for being in a cool coffee shop with an interesting environment or high-end materials adds a few dollars to the price of a cup.
Starbucks Reserve (a new concept rolling out across the country) is able to charge $9 or more for a cup of coffee. How? Because the coffee is SECONDARY to actually BEING in the coffee shop. Everything is about the experience or the feeling you get from being there. The high-end coffee may cost $3 a cup instead total - but they get to charge consumers an extra 5 or 6 dollars simply because the experience is so good that it's worth it. I encourage you to visit a Starbucks Reserve if there is one in your area to see what I'm talking about.
Here's an example of a janitorial service that is following a similar idea - you're paying them for an EXPERIENCE first and SERVICE second.
They're able to extract more money from every account and the consumer is happy because they get more than just a janitor - they get a janitor AND a store and an account manager and a friendly face.
I love talking about stuff like this so shoot me a message if you'd like to talk more!
Hope that helps,
Sam
We know that everyone's situation is unique, but we r almost never involved in underbidding, our Marketing guru told us to raise our prices and he wasn't the first to make this advice, he said our marketing should be for the Mercedes Benz client not for those shopping for price we have followed that since
the guru who provided this advice is Howard Partridge look him up
Companies underbid because they do not pay their employees with a payroll check. They pay them as sub-contractors so they do not carry workers compensation on class code 9008 that is very expensive. They carry only workers compensation on office staff that is very inexpensive. They can show they carry workers compensation to a customer. It is a game that has been going on for the 32 years that I have been in this industry.
It all comes back to cost accounting. How much does it actually take to do the projects. If you have been in business long enough your numbers will tell you the story. We are so worried about underbidding. How about earning the reputation of the best in the industry for you location.
That is a great question. We do not underbid, our staff works hard to deliver a great customer experience. They definitely earn their wages, we cannot pay them a great wage if we underbid, we are a premium service and we have excellent clients. Staff and Client Happiness.
Most don't have the Overhead as other companies. SO, really they are not companies they are just providing a service which allows their rates to be a lot less than the average company. Most Customers are generally looking for the lowest price while others are looking for the best service. Although rates/prices are a big part of a customers choosing you for their service. The quality of the service will out weigh the price every time if the customer values Quality over Quantity.
In this industry you can be small and work from home. So overhead cost are really a factor here. Plus the perceived skill level is very low. It use to be like that with painters. People would say wow that's a lot of money to just paint! Well then go paint it yourself. Now painting is perceived as just as expensive as plumbing and electrical.
So having the whole package in your work force is key and that is very hard to do these days with the current labor pool. Ask any employer anywhere about the quality of the people they hire and you'll here the same thing.
We have been looking for a female house cleaner for our residential department and can't seem to find anyone who has a phone, a vehicle, with a drivers license and who can actually preform the duties required of this type of labor.
The work is there just not the work force. I'm afraid the future is going to be lacking in a labor force to meet the demand. Or from what I can see.
Tim Barber
Sequim Property Services
The biggest reason is most businesses never create a Market Dominating Position. So, the only way to create a better value for their service is to underbid.
To win the job you must create a unique approach to your business that adds greater perceived value to your services. Bundling related services is often a good way to create a value plus feeling with your prospect.
they have no idea of their costs.
I have seen companies (legal) underbid large contracts and call it a "Loss Leader". They take on the large project because it makes them look good with a big client like that under under their wings, with the hopes of attracting more of the same. In addition, they focus on the "extras"to make them break even. I decided that I would never commit to a contract that I could not break even on.