The industry has made it
through another year in the wringer. And though some areas report
increases in activity, one sign of this economy has not gone away
— price competition.
In fact, in a recent survey, the Top 50 Builders overwhelmingly
named lowball pricing as the mistake most often made by their
competitors right now.
Still, many of the Top 50 say they’ve had to lower their
prices more than they ever expected. Others are standing firm with
little to no discounting.
Whichever side of the fence they fall on, these builders all say
their pricing decisions are not made in a reactionary way, but
rather are part of a larger strategy.
Here, a handful of Top 50 Builders discuss their approach to
confronting the price wars.
In the game
When the price competition first hit, many Top 50 Builders would
not lower their bids by more than a few percentage points. Now some
say they do.
“Our company is really unfortunate in that we’ve had to
change our tune … because other builders have forced this
issue,” says Tim Murphy, CEO of Presidential Pools & Spas in Gilbert, Ariz.
“It’s unfortunate. It’s not good, it’s not
Some may even price certain pools for little or no profit, albeit
reluctantly. For them, it’s a matter of survival. Builders
like Murphy say they regret the reality of the situation, but that
they have no choice. They’re almost apologetic, and look
forward to a time when they don’t have to go so low.
Others won’t equivocate or apologize. Before the recession,
Michael Giovanone’s company specialized in high-end
vinyl-liner pools. But now there aren’t enough of those jobs
to keep his staff busy, so he’s had to change his approach.
And he believes he’s done the right thing.
“I am in the game,” says Giovanone, owner of Concord
Pools & Spas in Latham, N.Y. “Ninety-nine percent of the
time this year, we’re in the game, and we’re in the
game of a product that we’ve never had before. You do what
you have to do.”
One builder who has been relatively controversial in Florida
credits an aggressive pricing strategy and intensive marketing with
helping his company not only stay afloat but thrive in a brutal
Five years ago, Holland Pools and Spas of Altamonte Springs worked
only with home builders. When the Florida housing market bottomed
out, the firm had to change its strategy fast. Company president
Michael Holland put tens of thousands of dollars into marketing,
and even advertised an $18,000 pool, to the astonishment of local
builders. It was clearly a loss leader, and most customers would
buy a more expensive model anyway, Holland says. But it helped him
gain market share and expand throughout the state. Now, he says,
he’s in a position where he no longer has to price so
Regardless of the builders’ attitudes about pricing, they all
agree on one thing — it isn’t done haphazardly.
“Last year, a lot of people were in a panic stage and
didn’t know what they were pricing,” Giovanone says.
“They sort of priced things until the customer’s head
started going from shaking no to shaking yes, and then they figured
out how to make it work.”
Now it’s different. Pricing is done deliberately and
strategically. It’s not about bringing in a few bucks in a
panic to keep the lights on. Instead, these builders are trying to
increase market share or make specific sales goals.
For one thing, they aren’t pricing every pool at little to no
profit. Margins can span from single-digits to 30 percent,
depending on the job, so they average out to a specified level. If
a particular project is especially difficult, or if the company is
in a better position for the moment, a builder might stand his
ground and insist on a decent profit. If another job is simpler, or
the firm is struggling to meet its dig minimum, the number might be
But the point, builders say, is that it’s not done in a
panic, but in a controlled manner.
Before he decides to offer a deep discount, for instance, Murphy
makes sure he knows exactly what he’s signing up for.
“We’re costing out every job down to the penny to
determine if we want to take these jobs or not,” he
Giovanone found a way to get the best of both worlds. He needed to
compete in the lower-priced market, but felt strongly about
maintaining the price integrity of his core, high-end line. Once
that market picks up, he doesn’t want customers to expect a
premium, custom pool at cookie-cutter prices.
To do this, he created an economy line. Not only does it attract
the budget-conscious crowd, but it gives his company more wiggle
room when it comes to price. Some of these pools, he freely admits,
generate very little profit. But they help his company survive.
“I think it’s clear that most pool dealers right now
would cut their margins to almost a break-even, get-to-tomorrow
point level because, regardless of what your margins are, unless
you get to next year, it really doesn’t matter,”
While some might consider pricing so low to be short-sighted,
Giovanone and Holland insist they have the future in mind.
Winning a bid opens the door to a longer relationship in the
future, Giovanone says. “If I break even on a pool at
$25,000, you’re going to say, ‘Well, there’s no
margin in that,’” he says. “I’ll debate
that. Perhaps [there’s] no current margin, but there’s
a future margin, because for every dollar that someone spends on a
new-pool purchase, in 10 years they will spend 60- to 70 cents in
aftermarket service, product and repair.”
Holland also looks at the opportunities that open up every time a
customer signs on the dotted line.
“If you take a job for 5 percent [profit], and then you give
them the same job that you would give a customer that you’d
get 30 percent on, what’s going to happen? You’re going
to get one or two referrals from that customer,” he says.
“People don’t look at a sale as their future or their
security. They look at it just for that one sale.”
While some builders may say they’re lowering their prices to
gain market share and secure their positions, there is another camp
that simply refuses to offer deep discounts.
“I don’t want to sell 20 pools a month, where 10 of
them will produce bad margins and are going to be more headaches
… that’s not what we want to do,” says Ken
McKenna, president of Tampa Bay Pools in Brandon, Fla. “When
you put more pools in the ground, that’s more service calls,
more warranty. Every time you drive to that job, it’s costing
These builders don’t believe you can make up for deep
discounts by selling more. “You can sell all the volume you
want,” McKenna says. “At some point you have to make
Others have simply had enough of the price wars and don’t
want to play anymore. “The theory we had the last three years
was break even,” says Art Allen, president of A&G
Concrete Pools in Fort Pierce, Fla. “I’m at the point
that if I’m going to go another year of break-even, I’m
going to go home and watch Oprah. I’m not going to do it
anymore. I’m here to make a profit.”
For some of these builders, the concern goes beyond their own
company to that of the industry overall. In the short term,
agreeing to build pools for little to no profit places downward
pressure on all asking prices, they say. This means that over time,
when builders want to make a decent profit, they might find
themselves in an uncomfortable position.
“Customers have expectations and [may] feel they’re
being taken advantage of, when they’re not,” says Debra
Smith, president of Pulliam Pools in Fort Worth, Texas.
The good news is that some builders report not lowering their bids
because they feel they don’t have to at this point.
They’re able to get enough business at the prices they want,
partly because they see consumers focusing less on the bottom line
and more on quality and value.
“You have two extremes,” Smith says. “One, the
people who are going to save a buck and go with someone cheaper,
regardless of the possible consequences. And the others who say,
‘With this economy, I want to make sure I’m going with
a company who’s going to be there afterwards.’ So
we’re benefiting from that end of it.”
Part of this attitude may spring from media coverage of companies
that have gone out of business. Allen believes this has
sufficiently scared many consumers away from the lowest
And if they’ve forgotten about the homeowners left with
unfinished holes in the ground, he will remind them. “I found
out that bad media is actually good for a reputable company,”