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Why we're losing craftsmanship in a 'Market for Lemons' and a prescription for change.

I have no problem selling our product to an informed consumer. None. One of my first questions over the phone is “Have you researched my company?” I ask this because I can not sell to a person who is uninformed about the product that I’m selling. In economic terms I’m wanting to reduce ‘information asymmetry.” Information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. I strive to level the playing field on this website so that everyone is on the same page. If you call my company and I am just a number in your pocket, I will never be able to sell to you. If you want us to do work, and you don’t care about how your project is built, it will be hard for you to see value in our product.

I’ve thought for years about why it’s so difficult to sell our services for reasonable wages in this market. Finally, I have an explanation, which I’m going to elaborate on today. The quality of tile work and a craftsman’s ability to make a living has suffered. A term originated by Nobel prize winning economist George Akerlof , “The market for Lemons” describes the source of our adversity very well.

The “market for lemons” according to Wikipedia:

“Examines how the quality of goods traded in a market can degrade in the presence of information asymmetry between buyers and sellers, leaving only "lemons" behind. In American slang, a lemon is a car that is found to be defective only after it has been bought.

 Low prices drive away sellers of high-quality goods, leaving only lemons behind.”

Click here to read Akerlof’s paper.

This paper was written in the 1970’s and the used car market has improved and solutions have been devised, but it still rings true in many ways in relation to tile installation.

When you buy a used car ultimately you have no idea what is going on under the hood. A car can look great, but it could be a ticking time bomb. Used car dealers go through all sorts of contortions to build confidence in their buyers that they’re buying a reliable car. A buyer is ultimately unable to tell which car is quality and which one is not.

Tile installation is the same way. When you’re buying a shower, you have no idea what is going on under the tile. Tile may look great, but how your shower or bathroom was put together is the most important part and frankly, most homeowners have no idea about the inner workings of their bathroom remodel.

Unfortunately, used cars and tile work have received awful reputations for quality because of this information asymmetry. Buyers simply don’t know what they’re buying. They can’t tell the difference between a lemon and a peach. This leads to prices getting driven down. Everyone assumes they’re buying lemons. Lemons become the norm. I often look at tile work that people are perfectly happy with, and I think of all the improvements we could make to it. “Why didn’t they do this like this…Oh, that’s not right….” But because of an over all degradation of the trade, consumers don’t know the difference between great tile work and average.

So, what happens to the guys like us, that are selling ‘peaches’? Guys that over build things and build with quality and precision. 1. We get driven out of the business because we can’t make a living at it. 2. The quality guys adjust how they do things and build things lower quality in order to meet the market’s price point.

Gresham’s law describes tile very well. “The bad drives out the good.” The ‘race to the bottom’ makes it impossible for craftsmen to prosper.

Some say the solution to this problem is government intervention. More laws. The insurance business is an example where the information asymmetry goes in the buyer’s direction. Insurance companies don’t know what is going on with people; their health, their lifestyle, etc. So, there are laws to account for the buyers’ dishonesty.

Electricians and plumbers are licensed, that helps them regulate their market. They are required to have up to date training, but it’s not a magic bullet. This will never happen in tile.

My solution is an informed consumer. The consumer needs to demand they be able to ‘look under the hood.’ When you’re buying tile ask to see the CARFAX. The internet is solving the information asymmetry. A good tile re modeler is going to have content online for people to verify what they’re getting. My website, my blog, has three years of documentation to verify that we are indeed, selling ‘peaches’. Credentials and reviews also help push the point home.

My problem is how do you make people curious? How do you convince people that all tile work is not the same? How can I convince people to pay more to get something that will last?

I push people to spend a lot of time online before they buy a bathroom. Your number one tool during a bathroom remodel is your computer and an internet connection.

In tile, like in the used car business, there are ‘peaches’ and there are ‘lemons’. Find the company that is selling peaches. Those peaches will be priced much higher than the lemons. The only way you’ll know that you’re getting a peach is by depending on the construction companies’ content marketing and reputation.

Builders have an incredible incentive to cheapen their products and incredible amounts of opportunity to reduce quality by cutting corners in areas that you don’t see.

Just like the CARFAX report has revolutionized used cars, content marketing is revolutionizing remodeling.

Two John Ruskin quotes to ponder:

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