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folder Surveys and trends

Price transparency makes life more difficult

We are becoming increasingly used to checking prices online prior to making a purchase and the amount of online stores have taken price transparency to the next level. Obviously, this has impacted the fast moving consumer goods market. But to what degree does this also affect the day-to-day business of the mechanical installers? This report from the USP Marketing Consultancy reveals the trends of end-user negotiations as a result of increasing price transparency

Installers have the ability to check prices online and order at online stores in order to get the best prices and thereby increase their margins. However, from previous researches on buying behaviour we know that installers, a very traditional target group in a very traditional market, are still quite loyal to the traditional wholesale.

But this works the other way around as well. When providing a quote, end-users and consumers have the opportunity to check the prices of the products and confront the installers with lower prices found online. 

60% of European mechanical installers need to negotiate prices with end-users

European installers are often confronted with end-users checking the prices of the products listed in the quote online, and this behaviour has been increasing. A whopping two thirds of all European mechanical installers are forced to negotiate prices with their end-users due to online price checking by end-users. This is one of the outcomes of the new Q3 2020 report on decision making in the mechanical installation market from the European Installation Monitor by USP Marketing Consultancy.

Dutch end-users are most likely to check prices online and negotiate prices

In the Netherlands, a staggering 70% of all mechanical installers need to negotiate prices with end users due to them having checked the prices online. This is the highest in all European countries. Now this partly due to the high level of digitalisation of the Dutch society and of course the availability of prices of products to be found online. It might also be a cultural trait inherent to Dutch end-users, as they are more comfortable to discuss and negotiate prices.

Price negotiating is less common in the UK

In the UK, we can note the lowest percentage of mechanical installers that are forced to negotiate prices with end-users due to online price checking. However, the 'lowest' needs to be put in perspective, as close to half of all UK installers are still faced with having to negotiate with end-users.

The share of installers does not paint the full picture

Even though 60% of the European installers indicated that they are faced with price negotiation, this is only in 32% of their projects. Obviously, not all projects will contain products that are to be installed and are worth the price checking effort - it is typically done more when the products involved are more expensive. Furthermore, checking prices online and then trying to negotiate prices is more likely to be stronger in the B2C side of the business then in the B2B side.

What will the future hold?

One thing is for sure, despite the best efforts of the industry, price transparency is here to stay. Furthermore, as web shops become more internationalised, country-specific price strategies will become even more difficult to maintain. Markets with higher prices might become under pressure from web shops operating in countries where the prices are lower. Installers can be sure that this phenomenon is here to stay and that it will increase further. This will put pressure on the price strategy of the entire business value chain, as installers in turn will try to negotiate better prices with the wholesale, who in turn will look towards the manufacturers for better prices.

Of course, the installers do have a position of relative power towards the end-user. In many countries the workload and order book of mechanical installers is still high, despite the corona crisis. Furthermore, the green transition will increase the order book and workload of installers even more. This could lead to a more take-it-or-leave-it attitude. Or prices are lowered, but higher labour costs are charged in order to keep the margins healthy.

If the corona crisis starts to impact the installers more severely, they could be forced to agree on lower prices and perhaps even end-users who buy the products themselves and only want to hire the labour.

The best bet would be to help the installers explain why their prices are higher than the lowest googled price. The added value they bring and why they charge more for this. Prices will inevitably become more transparent and uniform in Europe, but installers could still make a healthy margin on the products they install, if they are able to communicate why they charge more than the rock-bottom internet price.

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