When to Offer Roofing Discounts | How Much and the RIGHT Way to Position It

Welcome back to Winning Wednesday. Today, Drake Miller from Mountainside Lights asked a question I hear all the time, how do I offer a discount without sounding desperate? So in this clip, I walk through the real numbers behind discounting, when to do it, how to position it, and how to make the math actually work.

If I want to like offering like the token discount towards the end of your follow up, is there a specific way to do that? Like, say I'm offering like, you know, my average take is like 3,600 to 4 grand and I'm offering like 100 bucks off or whatever the goal is to, you know, revive interest or whatever, or push them just over that little lip of actually signing up. Is there a way to do that without sounding desperate? Is it good to say, like, I have a slot next week or something for my crew or we're booking up or what?

Yeah, it's a bit of a formulaic way. I have a spreadsheet I can kind of show you. So when we're looking at this, we have a $20,000 job. So we're paying 1% into the inside sales. In theory, if they get past the quota for the month, in this case, they're paying $75 per sale. Outside sales gets 8%. Right. So their cost of commissions is 9.3. Their cost per leads around 300 bucks, which means at a 30% close rate, they're getting about 5% cost of customer acquisition or thousand dollars. So their cost to sell that twenty thousand dollar roof is around 28.75. When we consider all the commissions and the marketing, when we were developing kind of a scientific approach to the question that you're asking, we had to say, okay, well, at 20,000, if their cost of goods sold is 60%, their cost to sell the roof is 12,000, which means they usually have 40% gross profit or $8,000. Well after their average deal age in their system is 15.5 days. So. So at 18 days is when they think, okay, this is when we're going to offer the like Hail Mary discount. So if they offer a 10% discount, that discount is now $2,000. So their new price is 18. The cost of goods sold didn't change. So now their new gross profit is 33.3% or $6,000. So the difference is they've lost $2,000. So how could they alter the compensation plan to make it make sense? So they would say, okay, well, after 18 days, inside sales is allowed to offer them 10% off. So, so inside sales would get no percentage commission on that they would get $75 for the deal, outside sales would only get 2%. Now, at $300 cost per lead, if their close rate goes up to, say, 50% by doing that, well, then now their cost of acquiring customer went from five and a half down to 3.3, which is now $600. So their new cost of sales on this deal is, in theory, $1,035. So they're saving 1840, all right, for the difference, because they gave away 2000, but they saved 1,840. They're still losing $160 in this scenario. But in this scenario, they're getting the customer, they're getting the lawn sign, they're getting the referral, they're getting the Google review, they're getting the customer, they're getting the work for the roofers, they're getting the sale for the salespeople, and they're not wasting their marketing dollars. So that's the formulaic way to make a decision like that is to say how long does it usually take for a deal to close? So around that time, either a little less or, or a little longer, you can make an arbitrary decision to say, I want to give away this much in price, and if I can change my total cost of selling that in terms of how much will it increase my close rate and could it bring down my cost of sales? So like, for their case, they're saying, hey, outside sales, you're out there trying to close new deals. You would never have followed up with this person more than two weeks, because historically you never have. We have an inside sales that is pursuing those deals for you. But if it takes longer than 15 and a half days to close a deal, we're going to allow the inside sales the opportunity to sell at the discounted rate. And so then they're going to be allowed to offer up to a 10% discount. In that case, after that 15.5 days, they're getting no percentage on it. And then you're also getting a lower percentage on it. And so our hope is that this is going to bring in roof sales. So you're going to get nothing. But now you're getting something. Does that answer your question?

Yeah. So, like, you want to do it a few days after your average days to close. Like, for me, it's eight, eight days. So I'd want to do this at like 10 days. Would you say it would probably be around there?

Yeah, you do it eight days. And again, you test it, right? You say, what happens if, like, how many Times do you wait eight days and then see that, you know, see that you lose deals. So then maybe it makes a much bigger difference in terms of like, close rate. Like, maybe waiting 10 days makes your close grade go from 30 to 35%, but doing it seven days makes your close rate go from 30% to 50%. Well, then you would wait the seven days because that makes the bigger difference in terms of recouping your lead cost. And then you just have to adjust the compensation around that to say, well, we made something, but everybody gets a lower share, right? Inside sales gets a lower share, outside sales gets a lower share, and the business gets a lower share in terms of the discount. And if there's a way for the customer to also have something come out of it in terms like, oh, we're offering you, like, we have to think, how do we position the discount? So the way that I like to position the discounts, like, hey, I just want to present this by you. We were considering pulling some of our marketing funds and allocating it to your deal just because we really want to do the work on your house. And so we would like to actually make you a showcase home because we don't have any home homes in your area. And we'd like to break into the neighborhood if you could provide us with, you know, two names of somebody in your area that you think would like our service as well. And if you'd be willing for us to film a video of the installation, and if you'd be willing to allow us to put two lawn signs on your property for 30 days, we'll come get them. Then we'd like to offer you the showcase discount of X. Right? And you can determine how far you want to push on that. Like maybe the two referrals is too much, you know, for you to ask, but maybe the lawn signs and the documenting the job thing is okay. Or maybe it's. Would you be willing to record a 60 second video testimonial, just quick thing on your camera that we could record when we're done? Only if we deserve it. But if we, if we've done a good job and we deserve it, would you be willing to do that? Or would you be willing to share the video to your Facebook or to your friends, to this neighborhood group? You find ways, especially when you're small, that's your advantage, right? Is that you have the ability to be more intimate with the customer and to create more intentional dialogue. So as the company gets bigger, you're gonna end up doing things that are more Easily replicated. Right? Things like asking for two names, you know what I mean? Like that's something like, hey, sales guy, if you wanna offer it, do this, but get two names and get the approval for two lawn signs to be put outside their house and make it so that sure that we know that we're gonna send out the marketing guy to do a video. But then when you're smaller and that's harder to execute on, cause you're like, wait, I don't have a marketing guy to go do the video and I don't even have lawn signs or like something like that. And you're not feeling so confident in the ability to ask for the two names. Well then you would go for the more direct thing. Like, hey, I'm just a small business, I'm trying to grow, you know, I have to spend money on marketing to get customers. I would love to just kind of say, I'd like to take some of that marketing budget and apply it to you. The thing that would help me is if you just maybe record a little 60 second. Again, only if we deserve it. But me, like a little 60 second video with me, I'll just be on the camera and I would just ask you, why did you choose to go with our company? And you would give us your answer and we'd be allowed to use that in our social media. Like we did this kind of stuff back in the early days. It's sergeants. And people were so willing to do stuff like that for a little bit of a discount. Because then they're like, okay, well we're helping this business owner now. And there's some entrepreneurial spirit that kind of transmits when you have that dialogue.

Awesome. And how aggressive would you be with the discount? Like, my biggest expense is marketing. So any extra close is basically accretive to revenue.

Yeah, I would be aggressive enough that you would still do it if your overhead was going up. Because it really just depends on what your cost of customer acquisition is right now. But you're probably going to end up in the neighborhood of around 10% because if you start dropping your pants on like 20, 30%, you'll do that today. But the worst form of marketing is word of mouth. I'll let that sink in for a second for people to go, wait, what the hell did he just say? Word of mouth is a great form of advertising, but you don't control what they say, you don't control who they say it to, you don't control when they say it, how often they say it. You can't command them to say it. And so in the case of where you start building the reputation of. Oh, yeah, we just. Just, like, waited a little bit, and then he gave us a deal because he called it the spring or something. We saved, like, 30%. So if that becomes the word of mouth that you are such a low price, next thing you know, you're doing jobs. Like, the neighbors that you end up getting are like, well, Barry up the roof, up the street, his house is a little bigger than mine. And you did it for like, 25% less than this. And it's like, oh, well, we used him for a marketing thing, a showcase home. So if you go too much, it becomes the reason that people bought from you was that you were drastically cheaper. You want to retain some sense of what your brand's value value is. The fact that your overhead is low just means that you're working three jobs, and that's not something that you want to do forever. So you don't want to create a fictitious savings in your business.

That makes sense.

Yeah. Awesome.