How a Coffee Roaster Dealt with a Low-Bidder

A large cleaning contractor who had provided cleaning and maintenance services for a large office building experienced an unwelcome surprise. While this client had always been happy with their service for several years, the client sent them a termination notice. When the contractor called and asked why, the building manager indicated they had received a much lower bid and could not pass it by.

If this sounds familiar, join the club. Most cleaning contractors have had this happen to them. But guess what, it happens in all types of industries and for all kinds of businesses. Here’s how a major coffee roaster dealt with a low bidder.

Let’s call this company Heavenly Mountain Coffee, HMC, for short.  HMC had been supplying coffee at $6 per pound to a large restaurant chain for years. This one account generated over $200,000 per year for the roaster.

A competitor walked in the door and said they would sell the chain coffee that tasted just a good for $3 per pound. This would save the restaurant chain more than $60,000 per year. The competitor then went around to other restaurant chains purchasing HMC coffee and instructed their salespeople to say, “if you can’t taste the difference, why pay the difference.”

While it was true that the two different brands of coffee did taste similar, a coffee aficionado could taste the difference and would likely prefer the HMC brand.

HMC took this offense very seriously. They thought if they did not address the situation and address it fast, it could put them out of business. Their first option was to lower their prices to match the competitor. But that would make their profit margin so thin, HMC would likely not survive.

So, the HMC company salespeople went back to the restaurant chain and met with one of their executives. They asked him how many cups of coffee they sell per year. They were told it was more than a million cups at $1.25 each. With HMC coffee, they made a profit of $86 per 100 cups of coffee; with the competitor’s coffee, that would jump to $93 for every 100 cups.

But here’s how the HMC people fought back. They reminded the restaurant it was a high-end chain, that it was delivering a “great dining experience,” and charging quite a bit of money for it.  Then the HMC folks asked, “what if some diners did notice the competitor’s coffee falls short of the meal? What if just one person in ten did?”

Further, they added that since coffee was often the last thing diners tasted before they left the restaurant, the competitor’s coffee quite literally could leave a “bad taste in their mouths.”

If that were to happen, the restaurant executive estimated it could lose more than $125,000 per year. Further, he added, “we wouldn’t just lose the coffee. We could lose the whole dinner check.”

But wait, there’s more. The HMC salespeople suggest that the high-end restaurant chain continue to purchase HMC but raise the price of their coffee to $1.50 per cup. Doing so would increase their profits, offsetting the savings from the low-bid roaster, and what might prove most important, improve the entire restaurant experience for their patrons.

The restaurant chain followed their advice, raised their prices, continues to purchase HMC brand coffee, and has never looked back.

So what does this story tell contract cleaners?

The takeaway is that contractors must prove their value.

The low bidder probably can’t. Likely, they will have to cut corners to meet profit margins; have a revolving door of poorly trained cleaning workers; and hope the customer is happy.

But you have a well-trained staff, have had workers for several years, do not cut corners and put quality first. This will keep the facility cleaner, healthier, and more attractive to prospective tenants. In other words, show them that ultimately, they will profit from hiring your company, just as the HMC folks managed to do.

Ron Segura helps cleaning contractors grow. He has over 45 years of experience in all segments of the professional cleaning industry including ten years as Manager of Janitorial Operations for Walt Disney Pictures and Television. To contact him, call 650-315-8933.