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Thursday, May 31, 2007 -- Value, pricing and the Internet economy

This afternoon, I enjoyed a lengthy business planning discussion with Dee Giarratano, president of, an Internet service with "a powerful toolkit that gives everyone in construction - Subcontractors, Suppliers, Service firms, Owners, Architects, and General Contractors everything they need to manage and track the pre-construction and construction process as well as many ancillary activities."

These are bold claims, made even more surprising by's pricing. Some services are free; others are, Dee says, a fraction of the price of competing services. For example, charges $25.00 for a yearly directory listing -- likely to propel the profiled company to first page rankings in the Google search engine. Resources for project management, reprography, employment and job costing are included in the service package.

Fair enough, but how does this business maintain viability? First, and most importantly, costs are rock bottom. The software engine is developed offshore; the business operates from Giarratano's Atlanta home, and marketing is generally conducted through inexpensive emails and search engine optimization.

In our discussions, we explored what needs to be done to grow and expand the businesses. Dee had proposed a service to enhance and improve the coding of our regional websites (which indeed need a fair bit of development work) but I explained to him that I must be careful about any expenses here -- revenue from online sources is at present limited in our business; and scarce resources can -- in the short-term at least -- be better applied to expand our printed newspaper sales. I suggested to Dee that a modest investment in sales resources and effort might yield disproportionately positive results -- as people discovered the value of his service; referral business would quickly enhance and expand the market. However, I don't think he is ready yet to assemble a sales team.

We also discussed one of the strangest paradoxes of pricing. The lowest price service may indeed be of the highest value, but often the marketplace doesn't recognize this fact -- instead, clients think something must be good because it is expensive. This of course creates a huge profit opportunity for an entrepeneur who is able to combine truly low costs with premium pricing. Most businesses don't go that route, of course -- they charge what they think is a reasonable mark-up, rather than look at what the market will bear.

The discussions will continue; Dee and I share a good sense of frugality when it comes to online marketing initiatives; and there are logical synergies between our network of regional construction sites and his service package.

See this previous story about his business:

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