Jacks of all trades: dealers who successfully serve custom home builders participate in the entire design/build process

Prosales, Jan, 2004 by Rich Binsacca

The Price of Loyalty

To a point. Bohon, for instance, appreciates the pricing he typically gets from Piedmont Lumber, but he also isn't shy about shopping his specs to other dealers to make sure. "I need to compare, regardless of the personal relationships I have with subcontractors and suppliers," says Bohon, who just started a $4.5 million custom spec home.

In fact, he says, his subs and suppliers appreciate the competition. "They want to find out where they are [in the market]," Bohon says. "It keeps them honest."

Gilfillan agrees. "We need to know where we are in the market in terms of pricing to sustain our business," she says. "As long as we're in the ballpark, we're still the choice because of the relationship and history we have."

That said, Bohon understands it is his responsibility to compare prices fairly and to give Piedmont or another loyal sub or supplier the chance to meet a competitor's price. "I'll only show them the [competitive] bid and ask them to justify a higher price if there's a big discrepancy," he says. Otherwise, he says, he'll typically stay with his regular suppliers and subs even if they quote the same specs slightly higher.

Similarly, Giles maintains a 70/30 rule when it comes to shopping and/or swapping suppliers or subs to meet a specification, price, or other condition on his custom homes. "It's never exclusive, but the majority of the time we'll go with our typical supplier," he says. "There's a lot of pressure [on us] to make sure we're getting good pricing in relation to our buying power."

Buying power from a custom builder? Among those building in-home theaters, day spas, and guest pavilions for their well-heeled clients, buying power can be an equally effective stick to negotiate prices as any production builder's purchasing leverage. "When I'm buying a knife to make 3,000 lineal feet of a custom crown molding or specifying a $1,200 tub spout and $15,000 worth of fixtures, my suppliers are getting a lot of business from me," says Bohon.

Other custom builders, however, rely exclusively on their relationships with suppliers--specifically lumber dealers--to ensure competitive pricing. Philip Russell, a custom builder in Pensacola, ordered every framing package from the same supplier for 21 years, the last decade with Hensley as his salesperson. When that yard went out of business, he followed Hensley to Mobile Lumber & Millwork and hasn't strayed since. "Long-term loyalty will get you a better price," says Russell. "I know the pricing's competitive, even with a production builder's, plus I get excellent service and on-time delivery."

For Russell, the risk of switching suppliers to save a few bucks isn't worth it, especially if the chosen dealer knows it's an infrequent order. "You may save 40 cents a sheet on decking, but the supplier may not be motivated to deliver it on time if it's just a one-time thing," he says. "I appreciate knowing who to call and that he'll bend over backwards to help my business."

An Interactive Sale