Getting, perhaps, back on the topic of quotes ...

I had an interesting chant with some folks yesterday. While the 'technical' part of the job involved replacing a roof, the story brought up some points regarding quotes.

Just how do we arrive at our pricing? How do we present it to the customer?

Now, I'm accepting the story at face value, only because it underscores these questions. The Story:

Bruce contacted R&R Roofing (Names are not actual names) to replace the roof on his 1960 ranch house. For Bruce, this was an 'insurance' claim, where the insurance company would reimburse him directly. Price quoted was $8000.

About the same time, Mark called R&R for a quote on replacing his roof. Oddly enough, this was also a 1960 ranch house, just a few blocks away from Bruce. Mark, a retired man, was paying this out of his pocket. Quote was $5000.

Then came a holiday weekend. At the family BBQ - Mark happens to be Bruce's father in law - the two discovered they were both looking to replace their roofs. They also noticed, for the first time, that their houses were exactly the same, except that they were mirror images of each other.

As you might guess, they were a bit puzzled at the large difference between the quotes.

Bruce called R&R and protested; R&R offered to cut maybe $200 from a quote that was $3000 higher than what had been given for Mark's roof. Bruce, naturally, found someone else to do the roof for $6000. That's still more than Mark paid, but much closer than the price R&R had given him.

Let's sum it all up. Here are the priced for the SAME roof:
$8000 for Bruce, from R&R
$6000 what Bruce paid someone else
$5000 For Mark, from R&R

Now, that's quite a spread.

Why?

If there were differences in the roof conditions, or the material choices, R&R failed to explain this to Bruce. Even finding a 'math error' in the low bid would have reassured Bruce. As it stands, Bruce is convinced that the only reason for the higher price is that he had told the guy he had insurance.

As for R&R .... just HOW did he arrive at his prices? Did he simply make a guess, or did he have some sort of method? Surrounded by tract homes, and having been in business for quite some time, R&R ought to have a very good idea as to his expenses for replacing a 'standard' roof.

So ... coming full circle ... how do you arrive at your pricing? How do you present it to your customer? What would you say if a customer responded "You quoted my Father in law half of that?"