Volume 9, Issue 1                        January/February 2005

Price Wars (Part II)
Combating the Problem
by Les Shaver

Every year, window film dealers across the country are facing an increasingly tougher market. Competition can sometimes flood a market and bring prices perilously low. Some dealers are facing competition not only from new competition moving into an area, but from installers who go off on their own and start their own tinting businesses.

Rocky Burcham, owner of Solar Control Glass Tinting in San Ramon, Calif., has a tactic he uses to dissuade employees from taking off and starting their own shops: he gives them freedom and lets them operate on their own. Having built up such a wide reach in the Bay area, Burcham has the resources to be able to give employees who wish to set out on their own an office, or as he calls it their own phonebook (none of his other franchises can keep in another’s phonebook). The shops get use of the Solar Control name and Burcham’s logo, but must give him $0.10 for every square foot they install. Burcham also provides training in installation and sales, if necessary.

“A lot of people like the way we operate,” he said. “We do a lot of training in-house.”

When a new tinter opens his doors and starts cutting your price per square foot, there’s often not much you can do. As the old line goes, “money talks.” And, most consumers just want to save money and go with the lowest price, especially when the films are the same. 

“You can tell the customer what he should do, but the homeowner just wants the cheapest price,” Burcham said.
Dan Melkowits, owner of PDQ Window Tinting in Lanoka Harbor, N.J., puts it simpler: “Not everyone can afford a $4,300 tint job on their houses.”

So, that leaves film dealers with a question that, in many cases, will dictate the future of their business: How do we compete against companies that come in and charge half of what we do? The answer isn’t always easy to find and it may not be the same if you are in the Northeast versus California.

One option is to just sit back and wait for the less reputable of the shops to falter. 

“The turnover is tremendous at that level [dealers selling film at very low prices],” said Jim Rasmussen of Nevada Window Tinting in Las Vegas. “There was one guy who moved up here from Florida. He had ads on billboards and radio and said he would take over Vegas. But, the other day two of his installers came over here looking for a job.”
Harvey DeVane, owner of Custom Sun Control in Marietta, Ga., sees much of the same thing. If you go through his local yellow pages and dial up many of the film companies, there won’t be answers he says. 

“Each year, between [the time] when the yellow pages ads are sold and the phone book comes out, many companies go out of business,” he said.

But in attractive markets there will always be someone there to replace these fly-by-night companies that charge extremely low prices. 

“There’s always someone [coming into the market],” Rasmussen said. “It’s always going to be there. The turnover over remains constant.”

The key for film dealers is separating themselves from the pack of low ballers moving in and out of the industry. 
“You need a niche,” Rassmus-sen said. “It’s about setting yourself apart—having something that no one else does makes a big difference.”

But that’s often easier said than done. Many dealers, such as DeVane and Rassmussen, will sell an elite film, which can separate them. 

“We tell customers about the [CPFilms] Formula One program,” Rassmussen said. “We tell them about the exclusivity and the products that are endorsed from the skin cancer foundation.”

Other film dealers have tried this strategy when cut-throat competitors move into their area. 

“You learn to adapt,” Burcham said. “I try to carry different brands. If I go into the place and they’re selling the film (and it’s the brand I normally sell), I’m going to bring in something else. Whatever they’re bringing in, I’m bringing in something different. In the old days, you didn’t do that.”

Burcham added specialty film when a competitor from Los Angeles moved into his backyard. He says this helped him gain back much of the business he lost initially. 

“It helped us differentiate ourselves,” he said. “[The competitor from Los Angeles] doesn’t have that.”

But adding a premium film isn’t a cure all. As the competition stiffened around Melkowits, he also added a premium film to his product line. So far, he’s had mixed results. 

“No one in Central and Southern New Jersey can get [it],” he said. “But not a lot of people want to spend $10 a square foot, when someone else is [offering] metalized or dyed film as the same thing and selling it for $3.50.”

Melkowits says he has the most success selling to people who own some of the area’s ritziest homes on the water. 
“At night, waterfront homeowners don’t want to turn lights on and see themselves in the mirror,” he said. “If they are staying there for ten years, price isn’t even a factor in their head.”

Marketing and selling to these kinds of customers—ones who can spend on higher end film—is the key to differentiating yourself from low ballers. 

“We do a lot of high-end advertising in high-end residential magazines,” Rassmussen said. “On the automotive side, we have a tremendous following. We do high-end auto dealerships and we have a tremendous referral program through them.”

DeVane, who says he charges the highest prices in the Atlanta area, does much of the same thing. 

“We try to market to people who understand the distinction between cost and quality,” he said. “They are looking for value and understand the cheapest price doesn’t mean the best quality.”

Of course, the other option is to lower prices. Dewar’s company lowered its prices by about 10 percent and began to recoup some of the business it lost. 

“It has settled out lately,” he said.

But there are problems with this. If you’re Burcham and have employees living in a high-cost-of-living area, you need every bit of the markup to pay their salaries and benefits. 

“The Bay Area is a pretty expensive place to live,” he said. “You need to charge the customer a good rate so you can make a living and keep your employees.”

Like Burcham, Vincent Ceraulo, owner of Southern Glass Protection Inc., in Sunrise, Fla., must charge higher prices because he’s supporting more than just himself. 

“The cost of operating is ever increasing,” he said. “We are a larger small company. We have 12 to 14 people in installation and sales. I can’t give film away.”

And then there’s just the principle argument. If you’re the best film dealer in an area, should you just lower your prices because everyone else does? 

“In this industry, the cheapest price can be indicative of the quality of products used and the attention to detail of the installer,” DeVane said. “The company that does the best tinting in the town, should get the most money.”
Rassmussen agrees. 

“I never let the market dictate where I will price my stuff,” he said. “My wholesale rates are sometimes twice what people do retail cars for. To get down there and be in the bottom of the barrel with these guys chasing $99 cars is not the way to do it. Don’t be afraid to ask for it. If I’m getting $400 for a car, I feel it should be $800 because of what we put into it. If I’m going to do it, you’re going to pay me because I know I will do it right and I will be here [for years to come].”

A Bad Taste
While it’s possible to differentiate yourself from the fly-by-night companies that offer film at a fraction of their costs, they can still do damage to your company and the industry. One of these companies does a bad film job and suddenly there’s a dissatisfied customer out there telling his family and friends about what a racket the film industry is. 

Melkowits faces this firsthand when one of these fly-by-night companies goes out of business or refuses to do warranty work. The manufacturer of the film will then call him to clean up the other dealer’s mess. 

“If something goes wrong with the film, we have to go back and replace it,” he said. “If you’re charging $3.50 a square foot in an house that’s 80 miles away, are you going to go back if the film bubbles or the crease is peeled back? These companies won’t go back. They made their money and they’re out. These people aren’t doing the window film industry any justice.” 

Ceraulo sees much of the same thing. 

“The problem I have is that a guy can get his hands on a manufacturer’s material, show the warranty and just do a terrible job,” he said. “There’s no slap on the wrist. There’s no one to step in. The bad taste in the consumer’s mouth won’t be changed.”

This shoddy workmanship and the decline in revenue have Melkowits concerned about his future in the business he’s been in for almost a decade. To him, the low ballers are not only destroying his business, but the industry as well. 
“I’ve been doing this for nine years and I love what I do,” Melkowits said. “But it’s been going downhill instead of uphill. I’m worried about the future.” 

Selling the Difference
When film dealers talk about other local shop’s prices, they usually start complaining about how their competitors are “low-balling” them by offering “cutthroat” prices. But scratch just a bit below the surface and another target for their anger usually emerges: the film manufacturers.

The argument: If the manufacturers would quit selling to anyone who wanted to start a shop, there wouldn’t be problems with companies coming in and selling price at a fraction of the going rate. 

“They [the film manufacturers] could turn this industry around,” said Vincent Ceraulo, owner of Southern Glass Protection Inc. in Sunrise, Fla. “I don’t think they discriminate as to who they sell their film to. I see it getting worse.”
But the manufacturers have legal issues with which to contend. Under restraint of trade laws they must sell to anyone wanting film. Most manufacturers do offer exclusive or “by invitation” programs where they can limit the number of dealers participating. These programs give dealers two advantages when competing against their price-driven opponents: they are a tool for differentiation and, in many cases, there is a limit put on who can sell in them.

For example, Madico in Woburn, Mass., has the premium commercial, Sunscape Select® program. 

“The program is by invitation only and all dealers who apply must meet a certain criteria, such as having proper insurance, contractor’s license if required in their state, etc.,” said Paul Panarisi, product manager for Madico. “This criteria benchmark, along with screening, helps us to avoid price war situations. In fact, by hand selecting dealers, it’s almost a non-issue. The dealers who participate in the program generally are not the ones associated with a strictly price-driven mindset or practices. We rarely receive complaints from dealers concerning price wars.”

A number of dealers have also gone to Huber Optik’s ceramic films for differentiation. The company works to satisfy dealers who sign up, says recent applicator Rocky Burcham, owner of Solar Control Glass Tinting in San Ramon, Calif. 
“If you move a lot of product, you’ll be the only one [in your area],” Burcham said. “If they [Huber Optik] need to get another dealer, they’ll talk to us and see who would be good to work hand in hand with us.”

Film Technologies International (FTI) in St. Petersburg, Fla., has exclusive offerings for both flat glass (Elite) and auto glass (Diamond). In both programs dealers who meet a certain purchase amount are hand chosen by the company. FTI agrees upfront not to put a competitor within a certain distance of Elite and Diamond shops. 

CPFilms in Martinsville, Va., also offers a flat glass program (Vista) and auto glass (Formula One). While both programs are by invitation only, Formula One is the only one with exclusive territories. With Vista, the number of dealers varies by market, according to Calvin Hill, owner of G.I.S., a CPFilms distributor in Canton, Ga.

Bekaert Specialty Films in Clearwater, Fla., has the Panorama® designer and safety film program as its top-line program. The company does allow multiple dealers in the market, but it uses a formula to determine how many. “Territories are issued based on population density, median income and climactic cycles,” said Lawrence Constantin, architectural sales manager for the company. “While most major markets have more than 100 dealers installing a variety of brands, it is common to have as few as four Panorama dealers to serve that same geographical marketing territory.”

Territorial Issues
When price-driven film dealerships move into your area, it’s often necessary to revamp your marketing. Since these companies are usually new and charge less, you must make your shop appear different. 

“You have to show greatness,” said Jim Rassmussen, owner of Nevada Window Tinting in Las Vegas.

The best way to communicate this is in your sales pitch when new customers call. Harvey DeVane, owner of Custom Sun Control in Marietta, Ga., usually starts out his sales pitch by asking if customers are familiar with the various kind of window film products available. Then he educates them about the film application process. 

“It’s my obligation to make the customer understand the difference between a $99 tint job and a $300 job,” he said. “If we can’t appeal to that customer’s sense of quality, we aren’t doing our job.”

After this, he invites them to drop by his shop. The tour includes lessons on the brands and films to avoid, what a good film job should look like, how film should perform, his company’s track record and the importance of an experienced installer. 

“We invite them to come by the office and see the work we do,” he said. “When they leave, they will know what a good film job looks like and what questions to ask.”

Rassmussen uses the same strategy. 

“We tell them to come down and look and see what’s going on,” he said. “If you don’t like what you see, then you will still be more educated.”

Rocky Burcham, owner of Solar Control Glass Tinting in San Ramon, Calif., also focuses on experience when he’s talking to a new customer. He will tear out the yellow page ads for each year he has been in business. He takes this to customers and highlights his ad for each year. Then he marks through those of his competitors who have gone out of business. This helps him distinguish himself from lower priced companies that may not stay around very long. 

“You try to sell experience,” he said. “When people are shopping out of the book, they don’t even know window film. So you try to give them some places to look that are in the area and tell them how long you’ve been in business.”

Dan Melkowits owner of P.D.Q.Window Tinting in Lanoka Harbor, N.J., also uses his experience to sell himself, but he does it in a slightly different way. He emphasizes that he will be there to fulfill the customer’s warranty requirements should they need help. A start-up company may not be around to do this (though, in that case, the manufacturer would have to find someone to do that). 

“I expect that, in two years, I’ll still be there,” he said.                                                                                  WF

Les Shaver is a contributing editor for Window Film magazine.

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