How the Consumer Views the Value of a Water Well
I immediately laughed at his final question regarding the price. I explained to John that when I drilled water wells for my father’s company 15 years ago the price was close to $4,000. We discussed the determining factors on cost, including depth to water, geology, drilling method and well construction. I learned that the area where the well was to be constructed is sand and gravel drift geology with a 30-foot depth to water and 200-foot total depth. To be on the safe side, I asked John to get a couple more quotes for his well and call me back.
A week later he reported back that other estimates were within the same price range, give or take $500. John is building a new 2,800-square-foot home on two acres. The home will have three bathrooms, a lawn sprinkler system and a swimming pool. The water well will need to sustain four to five family members.
The discussion of wholesale versus retail for water well installation has always been a hotly debated topic. As I have traveled the country, I have heard numerous arguments to justify pricing, from the expense of equipment to product installation to improper well construction.
In order to dig deeper into this topic from a consumer’s point of view, let’s eliminate every argument that is out of our control and focus on hard facts. John’s new 2,800-square-foot home built in the Great Lakes states region has an estimated cost of $250,000; the water well, at $4,000, is 1.6 percent of the total home cost.
Percentage of Cost Per Component
If the water well is only 1.6 percent of John’s future home construction budget, what components make up the majority?
Let’s take a look at the broad estimated cost of building a 2,800-square-foot home in the Midwest:
- Outside structure of home: frame, trusses, roof, siding and windows = 25 percent
- Inside structure of home: trim, interior walls, paint, flooring = 25 percent
- Utilities: electric, plumbing & HVAC = 20 percent, which includes the 1.6 percent for the water well
- Site excavation = 10 percent
- Exterior components: driveway, deck, landscaping = 10 percent
- Permits: 4 percent
- Other = 6 percent
100 percent = $250,000
The cost of each component is directly related to material, manpower, labor hours and equipment required to finish the job. Many contractors will come together to build this home. It is fair to say that the drywall contractor will have less overhead and equipment cost than the excavating company. A smart business will calculate overhead and operating costs, then build in a profit margin that will allow the company to maintain a long profitable history. Thinking objectively, what is the real dollar value of a water well?
Water is Life
In regards to life, a human can survive less than 5 minutes without oxygen, a few hours outdoors in extreme temperatures hot/cold, three days without water and a couple weeks without food. Next to oxygen, shelter and water are essential to immediate survival. Therefore, it is fair to say that shelter cannot be adequately provided without potable water. Life has put a priceless value on the necessity of water and water wells. The World Health Organization states, “One person out of five does not have access to safe and affordable drinking water. Each year 3 to 4 million people die of waterborne diseases.”
Water Prices Like It’s 1999!
Earlier I stated that 15 years ago I quoted water wells in west Michigan at or around $4,000. Again, that price was directly related to material, manpower, labor hours, value of equipment and the type of well installation. At that time, 53 percent of the United States regularly consumed bottle water for an annual revenue of $4 billion. In 1999, a drill rig and support equipment required to drill that $4,000 well would have cost $500,000. Fifteen years later the International Bottled Water Association reports that 100 percent of the U.S. population drinks bottled water for an annual revenue of $12 billion. In 2015, the rig and support equipment required to drill John’s new well would be valued at more than $1 million. From a commodity standpoint, bottled water is 700 times more expensive than tap water, yet within reason the same equipment and expertise are required to drill a water well for bottled water or for a 2,800-square foot-home.
The Consumer’s View of Water Wells
From a consumer standpoint, the value of water well or potable water is on a sliding scale. If water comes out of the tap when it is turned on, then that’s all that matters for the customer. The value of the well is low and taken for granted. When the water stops, the value goes up. My friend John is willing to pay $8,000 for a lawn sprinkling system and sod, but is concerned about $4,000 for a new well. The consumer sees two products that are required to create a comfortable and welcoming home. What he doesn’t see is that without a properly installed water well he can never have the luscious green lawn to sprinkle. It is psychological. Once a well is installed, it is out of sight and out of mind. However, a lawn is the first thing everyone will see when arriving at John’s new home. A big green lawn is welcoming and makes the consumer feel comfortable. The limbic part of the brain is what drives these feelings. Sales studies show that consumers often purchase products and spend more money on products that make them feel good. It is more about how they feel and less about what they are purchasing. The rational part of the brain does not motivate or drive purchasing decisions. The groundwater industry has plenty of educational material to help the consumer “feel” the value of potable water. We need to make them feel the importance of water. We want John to take his friends and family out to his water well and show them the quality. Maybe he will pour everyone a glass of water and say, “You know, I wouldn’t have this home without my well.”
From time to time, the water well industry has to be reminded that water and providing water is priceless. The U.S. consumer has proven that bottled water is valued 700 times greater than water from a well. These consumers are willing to purchase flat screen televisions for several thousands of dollars because it makes them feel good. Every time I get to produce water out of the ground on a new well, be it as a driller 15 years ago or a trainer with the U.S. military, I feel great. I feel a sense of accomplishment that I cannot put into words. The same psychology that is driven by the limbic brain causes drilling companies to compromise their worth for providing water. It is not sustainable forever. My friend John took the time to become an educated consumer. In two phone conversations, I was able to guide him into understanding the value of his new water well.
Brock Yordy is product manager and drill trainer for GEFCO, an Astec Industries Company. Contact him at firstname.lastname@example.org.