For background that leads us to this thread, see [msg=111746]this previous post[/msg]
It seems there are a couple of different schools of thought on this topic. There are those who believe that surveying is a commodity and that the only thing most clients care about is cost. Then there are those who believe in trying to maximize the value of our work so we can charge more for that value. (Please pardon me if that is a bit of over simplification but that is roughly what I see.)
I think both camps are partly right. The key to understanding why both can be right lies in the motivation of the client.
Anyone who has attended one of my pricing classes will tell you that I stress a critical first step with new clients. That first task is to determine the class of the client. Permit me to explain further.
Anyone buying anything falls into one of 4 classes. The classes are separated by two factors. One is who pays, the other is who benefits.
With most things and most of the time, people fall into Class 1. They are paying for the product/service and they gain the benefit from that product or service.
Class 2 people are those who are paying for someone else to benefit.
Class 3 people are those for whom someone else is paying for them to benefit.
Class 4 people those who neither pay or benefit for the product or service.
Too often we surveyors are stuck working with Class 2 clients. If you are working with an agent for the real client (ex. Real Estate Agent, Banker, etc.) then your client is Class 2. One of the things you can count on from Class 2 is they will shop based on price and little else. One of the comments in the previous thread was something to the affect that people are forced into getting a survey without seeing why it is important. Yep, classic Class 2 client.
Class 3 clients want the best of the best and don't really care so much what it costs. After all, someone else is paying so why not get the best. Ever had an attorney for a title company order a survey? Sounds like a Class 3 client to me.
Class 4 clients do not care about cost or quality. All they want is for you to make their job easy. Now before you snort and proclaim that no such thing exists, think carefully. I know at least one person who regularly posts here and at the previous forum who works for Class 4 clients. I will not call him by name right now because I have not discussed this with him. He gets calls from attorneys or para-legals wanting him to "take care of the survey".
What all this means is .... those who contend all clients care about is money are likely dealing with Class 2 clients. If you can figure that out in the first 3 minutes of a conversation (not too difficult) you suddenly have a much better understanding of what motivates the client.
I try to avoid working for Class 2 clients just because they want surveying to be a commodity. Class 1 and 3 clients do not want it to be a commodity. Class 4 don't really care either way, they just want easy.
Using value as a motivator for Class 2 clients will not work. Using value on Class 1 and 3 clients can and will work.
Something to consider.
Larry P
I would say that realtors sound like Class 4, they don't pay nor do they benefit from the survey. It's really the title company and bank that want the survey, the realtor just sees it as another piece of paper they need for a closing and usually hire the surveyor that can get it done fast. But realtors do seem to be pretty cheap, and know and stick with the lowballers, from what I've seen.
Very interesting reading this and the other thread. I will be re-thinking my business plan, up to this point I was planning on targeting class 2 clients.
Some Realtors, class 4, think that by bargaining to keep closing casts low for their customers, they are doing them a favor and will reap the benefits by getting more business. Some think that by developing a relationship with better surveyors they can help their business and their customers. Most, I think are somewhere in between. Market conditions most often determine who we do business with.
It ain't easy, but it's good to think about it.
Larry,
What you say is all well and good, however it fails in the current economic climate, at least in my area. There simply is not enough work to support the number of surveyors and even the best clients are shopping around looking for something for nothing. There is not enough class 1,2,3 & 4 clients to support more than two or three companies at this time let alone the 20 or so still hanging on.
Jim Vianna
> I would say that realtors sound like Class 4, they don't pay nor do they benefit from the survey. It's really the title company and bank that want the survey, the realtor just sees it as another piece of paper they need for a closing and usually hire the surveyor that can get it done fast. But realtors do seem to be pretty cheap, and know and stick with the lowballers, from what I've seen.
Actually, most real estate agents are solidly class 2 clients. Usually a surveyor is contacted after a contract has been signed. At that point, there is almost nothing a surveyor can do that is positive for the real estate agent. If we do careful work we can certainly screw things up for the agent by finding something that kills the deal. Unless the contract is based on $$ per acre with the total to be determined by the survey, little positive (for the agent) can come from a survey.
In many ways, a lowball surveyor is a real estate agents best friend. They are unlikely to do serious research. They often fail to notice or report potential problems. They can be counted on to not do anything to screw up the deal.
Also, I have seen deals fall apart because the cost of the survey made the finances fall apart. Most real estate agents view a survey as just another sometimes necessary evil standing between them and their pay check. Remember, if the surveyor or the termite inspector or anything else kills the deal, the agent does not make anything for all their work. The money may not come directly out of their pocket; but, it can certainly seem that way.
This is part of why I insist on dealing directly with whomever is responsible for paying for the work. Thus, I go from dealing with a class 2 client (the agent) to a class 1 client.
Larry P
> Larry,
> What you say is all well and good, however it fails in the current economic climate, at least in my area. There simply is not enough work to support the number of surveyors and even the best clients are shopping around looking for something for nothing. There is not enough class 1,2,3 & 4 clients to support more than two or three companies at this time let alone the 20 or so still hanging on.
> Jim Vianna
Good to hear from you Jim. Give the wife and kids a hug for me.
I hear what you are saying. Really difficult times can mean having to settle for poor value just because there isn't enough money to get a better value product (service). I just happen to think that trying to increase the value of what we offer people isn't a bad thing. Not every client will be able to afford the better value, but you should be prepared to give them that option instead of making the decision for them.
One of the best examples I ever heard comes from a few years ago. Hamilton Beach made two models of bread makers. One model cost $99. The other model cost $299. Almost nobody bought the $299 model. More than 97% of all sales were the $99 model.
Next Hamilton Beach came out with a 3rd model. It cost $499. As you might guess, they sold very few of the $499 model. But sales of the $299 model jumped to more than 60% of the total sold. Not every client wants the top end product. Few want the el cheapo either. We need to give our clients a range of service options and let them choose instead of us choosing for them.
Larry P
Very good advice Larry, I would add though that in many real estate transactions, the buyer or seller are also motivated by "just get the piece of paper we need for closing" and not worried at all about quality. These clients I avoid as well.
> > >
>.... One of the best examples I ever heard comes from a few years ago. Hamilton Beach made two models of bread makers. One model cost $99. The other model cost $299. Almost nobody bought the $299 model. More than 97% of all sales were the $99 model.
>
> Next Hamilton Beach came out with a 3rd model. It cost $499. As you might guess, they sold very few of the $499 model. But sales of the $299 model jumped to more than 60% of the total sold. Not every client wants the top end product. Few want the el cheapo either. We need to give our clients a range of service options and let them choose instead of us choosing for them.
>
> Larry P
Now, you're comparing sales of widgits to providing a professional service. Sorry, but that dog don't hunt. I'm not discounting, (no pun intended 🙂 ), your point of giving the potential client options as to what kind of service they might really need and going from there. You ask why they need the survey first. You do insist that your client be the person who is actually paying the fee. There are things you can do to insure you have a client who will appreciate the "value" of your service. Still, my standard contract has to include a clause, least I feel it has to, which states I can walk away from the commission if factors arise during the work which I couldn't forsee going into the agreement and a new higher fee will have to be negotiated. I've very seldom had to do that, but it's a prudent option to have. One doesn't have that kind of problem when marketing and selling widgits.
One other point I think you might not be giving enough credence to is the fact the land surveying consumer has been considerably dumbed down from what he/she was, say, 30 years ago. Heck, just one example being how the availability of online GIS/tax maps have cheapened the "value" of land surveys. Sure, you explain/educate til you're blue in the face about the client not actually having a survey and you may or may not convince them of any real "value" of the service you provide to them. This is more than especially true in economic conditions such as the ones now faced by the profession.
I'm proud of you for fighting the good fight, however.
Take care,
Ed
"We need to give our clients a range of service options and let them choose instead of us choosing for them."
>
> Larry P
Well around here that equates to what I fell is substandard surveying.
Does a doctor give a range of treatments for your aggressive cancer with varying levels of success or just tell you the best way he knows of to cure you. Yes, both answers will keep you out of court but I would prefer the second option. Fooling around with anything else is a waste of time and some clients don't really know what they need or how it will benefit them down the road when they sell or build improvements.
I have to deal with this issue on a regular basis in preparing estimates. Many surveyors quote a fee for the survey lower than mine as they don't include setting corners/marking the lines and/or a description based upon the survey. There is not enough of the good clients that already understand this issue to support more than a couple of firms as most prospective clients are being forced to pay for a survey they don't want to begin with and therefore seek the lowest dollar amount.
Of course I break down my estimate by services and educate every perspective client but most consumers available today don't understand/care. We even have one jackleg who writes on his map C.I.R.T.B.S. (capped iron rod to be set) funny after 9 years they still haven't been set.
Jim Vianna
Although I do not agree with
Larry P's 4 classifications, if I were to place the real estate agents in my area into one of the classifications, it would be the class 3. Because:
1. They are professional realtors and actually go step by step through the closing documents - meaning they ask the buyer if they want a survey conducted.
2. If the buyer wants a survey conducted, the realtors around here get it in writing who is to pay for the survey (very, very, rarely is it the realtor).
3. The realtors benefit by closing the deal and getting the commission.
So someone else is paying and the realtor is benefiting.
Contrary to how it appears in other areas of the USA, most of the realtors around here would rather find out about a problem and get it solved than to sell something and have issues crop up at a later time. It is NOT good marketing for their name to be included in a bad deal.
I am very often called in before a realtor in this area will even list a property if they can not confidently show the location of the property. Even in recorded subdivisions, I have been asked to survey a lot just to make sure a realtor is putting their sign on the right lot frontage before they even accept the listing.
I do not see any case where someone requesting a survey does not benefit from the survey. It seems to me that any person involved in the survey request process has a financial interest in the whole deal in varying degrees.
What will a market bear?
Most clients do fall in one of these categories or another. I do not disagree. I would caution anyone that simply applies a linear equation to a cost-value ratio, though.
"Joe Property" wants to build a himself a new fence. He's checked the lumber yard sale ads and he can purchase the materials for $500. He's ready. Now he's thinking he better put the fence in the 'right' place. In some cases, the cost of a survey could exceed his entire budget for the project. To him, that survey's cost exceeds his perceived value.
"Joe Realtor" finds out that the underwriter won't issue title insurance without a property survey. The property sale can't close without one. The cost of a survey is a small nugget compared to his $9K commish. The value of the same basic survey could appreciate tremendously.
I try to avoid prospective clients that view my work as "guys in a pickup that dig holes for an hour ("Half the holes weren't even on my property!") and set a tripod up and stick some sticks in the ground and drive off". While that may very well be a function of my services, it is not any indication of the value of my work.
One of my employees remarked that he didn't think the Topcons cost THAT much to make. They didn't. Their price wasn't figured on how much they cost to manufacture. Their cost was figured on "how much money can you make with them?"
The value of a survey probably sits somewhere in the middle of what the client is doing with it.
What will a market bear?
> >.... The value of a survey probably sits somewhere in the middle of what the client is doing with it.
In other words, the subjectiveness of perception is a beech, eh?
Let it rip. It is what it is.
Great topic Larry and great ideas that you've put forth. I just wish it all would hold up in times such as these, and in past times, as well as future times.
Of bigger issue that I think got missed is education of the public about what we really do provide. We surveyors know the value of our service, but John Q gets so much seeming valuable information from outside sources (google earth, county GIS, a contractor with a transit, jewelry hunter on the beach with a metal locator, know it all realtors, yadda yadda) that we then become more of a problem ($$$) than the solution (saving $$$).
The phrase "Pay now or pay later" comes to mind.
And we have only ourselves to blame. Being a highly skilled land surveyor does not necessarily make us a successfull businessperson. But I do still love my job, and realize that the market drives us, not vice versa. Case in point.
Great topic! And a Merry Christmas to all!
> Well around here that equates to what I fell is substandard surveying.
>
Now Jim, you know me well enough to know that I never do any survey that does not meet (and usually exceed) the minimum standards required by law. The extras that distinguish one level of service from another has to do with items above and beyond the minimum requirements.
That is what I meant in the earlier thread where I talked about "cool" stuff. A 3-D print of the property is an extra that some people find very cool. A framed copy of the map along with some photos of the property is an extra. Some people want that cool stuff and will pay for it. Some do not.
The interesting thing to note is the affect it has on people when they are given a range of choices for the final product. I know bread makers have little or nothing to do with land surveying. But I also know the psychology of the two situations is far closer that many of us realize.
Something to ponder.
Larry P
What will a market bear?
> One of my employees remarked that he didn't think the Topcons cost THAT much to make. They didn't. Their price wasn't figured on how much they cost to manufacture. Their cost was figured on "how much money can you make with them?"
That makes perfect sense. The manufacturer's price to dealers is based on what the manufacturer wants to make profit wise. The dealer then sells based on what they want profit wise.
To put the equipment price model into the problem I have with some of the 'value adding' based pricing discussion would go like this -
Given that all purchases go through the same dealer and are for identical equipment:
Company A pays $20K for new equipment because the dealer needs to make a sale.
Company B pays $24K for new equipment because there have been enough sales to not worry about if this one is closed or not.
Company C gets in a bind and has to replace a broken down piece of equipment immediately (out of town, big job, w/ a deadline) so they pay $32K for the same equipment.
In each instance, the same paperwork is performed and the same time and effort is involved. Since it is the same dealer, you should expect the same level of support. The only difference is that Company C was in a bind, so the 'value adding' was increased by about $8K.
All of the companies have the option of shopping elsewhere, but I know that I would not be a happy camper if I found that I paid $8K more for the same (service) equipment and effort from the same company.
Now if the 'value adding' is used in the context of charging a higher fee for services because one believes that their survey is a better product (for lack of a better descriptor) and that fee is consistent for all clients and conditions, I see no issue. But that is rarely the way 'value adding' is presented on the boards. It is usually a case of "This guy was in a bind and needed the lot surveyed within two days to close the sale, so I pretended that I had to drop other client's projects to even have a chance of getting to his work and 'value added' his a$$ to the tune of a few grand extra."
To me, it all comes back to a simple concept that applies, whether one is religious or not: Treat others the way you would like to be treated. I would not want to be taken for a ride because I was in a bind. I do not mind at all paying a higher fee for someone I choose to do business with, but that higher fee needs to be based on only the quality of the service I receive - not how much of a bind I'm in for the service.
> Now Jim, you know me well enough to know that I never do any survey that does not meet (and usually exceed) the minimum standards required by law.
Larry,
That's not what I was shooting for and my apoligies for the way it came across. The point I was trying to make was giving a range of prices for services only confuses most clients and allows for the jacklegs to underbid you by preying on the clients lack of understanding.
Jim Vianna
What About Class 5 Clients?
They do not pay, but feel they are negatively impacted by a survey.
This would be all the realtors that see a complete and thorough survey as an impediment or even deal breaker on closing and their fee.
Class 2 and 4 clients can quickly become Class 5.
Paul in PA
