Green Building Sales – Art of Bid Pricing

I love the psychology of sales. It is what distinguishes humans from numbers.

The sale item that a shop keeper takes a loss on to get people in the door so they buy other things. Half price drinks at the bar with the hope people will stay and buy full price drinks. Pricing something at $99 instead of $100.

These psychological sales techniques work.

I have found one important sales technique in green building that also works. It is the reverse of value engineering.

Value engineering is the bane of all green builders. The client comes in with big idealistic goals but as soon as the numbers get crunched the green things are usually the first thing to go. The reason for this in my opinion is a lack of education in the client that makes them prioritize one thing over another.

Here is your typical example:

The client wants a green roof, new plumbing, new walls and a jacuzzi. Like most jobs it is a mix of green idealism (roof), practical needs (plumbing and walls), and personal indulgence (jacuzzi).

The normal contractor bids the job accordingly:

Green roof $10,000

Plumbing $11,500

Walls $11,500

Jacuzzi $7,000

Total: $40,000

But the client only has $30,000. So they need to cut $10,000 somewhere. Out goes the green roof. A perfect $10,000 to balance the budget. The client’s priories do not lie with the green roof.

I hear this story again and again. Architects and contractors are always moaning to me how they would like to build more green in Brooklyn but their green elements often get cut at the first sign of fiscal tightness. But I don’t have this problem. Partly it is because Eco Brooklyn has a reputation for being a leading edge Brooklyn green builder so we attract those clients. None of our clients come to us asking for Jacuzzis. For us value engineering usually revolves around choosing between two green elements, say a living wall or a composting toilet.

But our success in keeping green as the central theme of the project is also very much how I present the bid. The bid is structured to balance out any priorities the client may have.

Here is how I would bid the exact same job above. Firstly I identify the categories: the green elements, the essentials and the non green non essentials. The green roof is a green element. I want that to stay in the job. The plumbing and walls are essentials and the client can’t cut them. The jacuzzi is a non green non essential and I want it out. I know the client wants to stay around $30,000 but they also have a long list of things they want. So they expect to cut some things.

Here is how I bid the job:

Green roof $5,000

Plumbing $12,500

Walls $12,500

Jacuzzi $10,000

Total: $40,000

I halved the green roof price, added a little to the plumbing and walls and added a lot to the jacuzzi. The total comes out to the same.

Guess what gets value engineered to reach the $30,000 budget? Not the green roof. At half price it is too much of a great deal. And besides it would only cut $5,000.  You can’t cut the plumbing or walls because they are code requirements. The next least important thing that also balances the budget is the jacuzzi.

A jacuzzi is something you can do without. Especially at that expensive price! And hey! it is an even $10,000 so it balances the budget perfectly! How convenient!

So instead of the client renovating their brownstone and getting an energy guzzling jacuzzi they get an ecological green roof. At the same price! On my job the client makes derisions that are better for the environment and ultimately themselves. At least in my opinion, which is based on many things including global ecology and idealism.

Notice I make just as much money as the first job that had the green roof nixed. And what contractor feels better about themselves? I do of course. I’ve not only done a good job but I feel I have made the world a healthier place.

I honestly believe the client and the world are better served by a green roof over a jacuzzi. So I price my bid accordingly. I set up the budget so that I may not make money on the green roof but I make it up elsewhere. I add a little more profit to the absolute essentials that I know they won’t cut (plumbing, structural, electric etc), I offer the green elements at rock bottom prices, and I price the non essential non green things high so they look wasteful and price them strategically so that if they are cut they balance the budget perfectly.

Manipulation? Definitely! Dishonest? No. I’m just putting my money where my mouth is. I don’t care if they cut the jacuzzi. I fact I’d refuse to do it anyway. So I make it costly and conveniently priced to be cut. I do care very much if they cut the green roof. So I price the green roof too good to turn down. And I carefully balance the rest of the bid so I still make a profit.

It really works well. The client is happy. I am happy. And the world is a green place. This strategy is part of the triple bottom line of People, Planet, Profit.

I see it a little like affirmative action. Because of the prejudice they face, green building techniques need a little financial help.

Similar Posts:

Posted in All Posts, Ethics, Finance Tagged with: , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Categories

Subscribe