Price vs. quality: selections reflect client-driven values

Custom Home, July-August, 2005 by Al Trellis

Scenario: Barry was getting frustrated with his new clients, Jim and Elizabeth Welch. Even though Barry prides himself on building a quality home, it seems like everything he suggested for their new custom home wasn't good enough. When Barry proposed a painted stock three-piece crown, they wanted a stained oak custom five-piece crown. He recommended a Viking 48-inch stainless steel range: they thought a Gaggenau double oven with a 48-inch separate cooktop would be better. He suggested granite countertops, they wanted Dupont Zodiaq quartz surfacing. Barry picked Moen faucets, but they chose Grohe. Because these were relatively affluent buyers, and because Barry believes in giving his customers what they want, he priced out all their requests and then was amazed when the Welches complained that the cost of the house now exceeded their budget.

"But that's what they cost," Barry said. "You could have saved $5,000 by going with the Viking instead of the Gaggenau, but I priced it according to what you said you wanted."

"What about the moldings?" Jim asked. "They cost three times what you estimated for the painted trim."

"That's because you wanted clear oak, not finger-jointed pine. And the labor is twice as expensive for stained trim over painted."

"We want the best," Jim stated. "What's wrong with that'?"

"Nothing," Barry replied. "As long as you don't mind paying what it costs."

"I don't mind paying for quality," Jim retorted. "But this is highway robbery."

"What kind of car do you drive'?" Barry asked.

"I drive a Lexus. My wife drives a BMW," Jim replied. "But what does that have to do with anything?"

"Why don't you drive a Rolls-Royce?" "$150,000 is more than I want to pay for an automobile. It just isn't worth it."

"Exactly," Barry told him. "While the Rolls-Royce is an excellent car, the Lexus represents a better value to you. That's what I was trying to do with your house. I was trying to give you Lexus-quality appliances and materials while keeping your costs within your budget. But because this is your house, and I wanted you to be happy in it, I priced out all the options you requested, even though I knew they might not be the best value. I'd be happy putting them in for you, but I'm not sure you'd be happy paying for them."

"I guess Elizabeth and I need to have a talk," Jim admitted ruefully, "and decide what's really important to us."

Solution: This is a problem every custom builder faces sooner or later. No matter how wealthy their clients may be, they will eventually face a conflict between price and perceived quality. Even with an unlimited budget, people will do their darnedest to find a way to exceed it.

When that happens, the builder is caught in the middle. If the buyer goes ahead and pays the extra costs, they resent the cost overruns. If they decide not to go ahead, they subconsciously blame the builder for denying them their dreams.

The selections a buyer makes can have a huge impact on the final cost. In each category of materials there is a hierarchy of price and quality from lowest cost to highest cost. For example, at the lower end of cooking appliances you might find a simple electric range with a single oven. Above that you would find sealed burners and a convection oven, then stainless steel ranges, then professional-grade dual-fuel ranges, then high-end separate components. Different brands also have different perceived values. While each has a different cost associated with them, at some point there seems to be a choice that offers the best value, that is, the best perceived quality for the price.

Just as in the auto industry, there are some choices that are high status at a reasonable cost (Lexus), and others that are high status at an outrageous cost (Rolls-Royce).

The only way around the price/quality dilemma is to reframe the conflict in terms of values, so that the buyers understand that their choices are a reflection of their own values, not something imposed on them by the builder. That's why the car they drive can be a powerful psychological shorthand for the values they embody. Of course, if they drive a Rolls-Royce, maybe they won't care what their options and upgrades cost. But I wouldn't count on it.

Al Trellis, a co-founder of Home Builders Network, has more than 25 years of experience as a custom builder, speaker, and consultant. He can be reached at altrellis@hbnnet.com.