On Deck: Race to the Bottom

Avoiding the Race to the Bottom

Using education and value-added selling as a tool with customers to avoid the race to the bottom is imperative

Facility services companies are seeing a mounting need to utilize customer education to avoid disruptive margin compression.  As with all industries, plenty of customers shop around for the most cost-effective service offering; however, the lowest price doesn’t always equate to a great value – especially if it means lower quality work in exchange for the lower price.  Given that it can be quick and easy for customers to compare prices online, it is important to educate customers about the importance of quality service, which is not just about justifying the cost, but about helping customers understand what they’re specifically paying for and improving your overall customer relationship.  It is impossible for the market to solely compete on price alone – if everyone focused only on price, margins would continually shrink for the industry in a lose-lose race to the bottom.  An issue for facility services companies is the customized nature of the service offering and unique job requirements.  Companies need to develop strategies to inform customers about their value proposition and unique solution.  Potential mediums for customer education can include content creation, such as a website blog, videos, social media, and FAQ website section.  However, no one item can replace employee training. 

Investing in sales training and value-added selling is a must, and given that service technicians are the primary sales personnel for many facilities services companies, continual onsite / in-home training is critical.  For example, technicians need to be trained on patiently explaining the benefits of a particular service or product (i.e., while tankless water heaters save energy, consumers will sometimes balk at the higher up-front investment without understanding the total cost of ownership) and they need to make sure they don’t forget the extras (i.e., if you sell the tankless water heater, also evaluate the customer’s home to determine other potential issues, such as vent pipes or shut-off valves).  Facility services companies must not only empower and train technicians for value-added selling, but also provide appropriate incentives as well, which will ultimately result in higher company margins and employee compensation.   

League Park Advisors is an expert in understanding key value drivers for facility services companies and advising them through mergers and acquisitions, recapitalizations, and capital raising transactions.

League Park is a boutique investment bank that professionally and ethically advises clients on strategies aimed to maximize shareholder value.  We assist middle market companies with transactions that generate value through mergers and acquisitions, recapitalizations, capital raising , and outsourced corporate development.

Wayne Twardokus

216.455.9989

wtwardokus@leaguepark.com

June 2020