Author: David

I’ve just started reading for the second or third time Robert Cialdini’s famous book “Influence, Science and Practice”.

He opens by talking about a friend who had an Indian jewellery store.  She was having trouble selling some turquoise jewellery despite it being good quality and there being plenty of customers in the store. She had even moved the jewellery to a prime location in the store.

Finally, before leaving on an out-of –town trip, she left written instructions to her staff to sell it all at “price X ½ “. In other words, “half-price”.

When she returned after a business trip she was therefore not surprised to see that all the items of jewellery had been sold.  She was surprised though, to discover that because the employee had read the ½ as a 2, the entire allotment had been sold at twice the original price!

At first it seems incredible that INCREASING the price actually increased sales.  It seems to run counter to basic economics. However if you look at the psychology behind it, it follows our natural inclination to believe that “you get what you pay for”.  In this case her customers, mostly affluent holiday makers with little knowledge of turquoise, were using a standard principle to guide their buying decision, i.e. “expensive = good quality”.

Thus the holiday makers, who wanted “good quality” jewellery, saw the turquoise pieces as more valuable and desirable when they were twice the price.  The price alone indicated quality, and a dramatic increase in price led to a dramatic increase in sales.

We usually believe that lower prices will mean more sales.  A few years ago, one of my former employees started his own carpet cleaning business. I’ll never forget what a common friend told me when we met – “Now you’ll have to lower your prices”. Yet as far as I know, he’s still cleaning carpets..and we’re still at least double his prices!

Of course, people don’t buy on price alone (usually)…they buy value. Otherwise there would be no Mercedes, BMW’s and Audis on the road. And we’d all be wearing the cheapest clothes. Certainly NOT designer label.

However, getting a Ford or Vauxhall and slapping a premium price on it is not enough. You can put lipstick on a pig…it’s still a pig!

So if you want to get higher prices…give greater value! And that can include PERCEIVED greater value. Provide exceptional customer service, send a newsletter that positions, informs and educates, send thank you cards. Even send gifts occasionally. Ask yourself…  “Do I look like a Mercedes business or just a Vauxhall business”

I have a friend who many years ago had written on his business card: “I have no quibble with those who charge less. They obviously know what their work is worth.”

Indeed if you are not losing at least SOME of your business based on price – you are too cheap!

Better to seek out high-quality seekers, charge a higher price and use the extra profit to deliver exceptional value.

I recently needed a new tyre for my car. As it was only the spare, I decided to save some money and buy a part-worn tyre. After all, I may never use it. I wanted a Michelin preferably as they last longer. They cost around £90 but only £21 for part-worn which would do the job.

Here’s my phone conversation with the local part-worn tyre dealer:

Me: “Have you got a part worn 205/55/16?”

Him: “Oh yeah, loads of them”

Me; “Have you got something decent, like a Michelin?”

Him: “Dunno mate. Can’t really look” (sounding disinterested)

Me: “OK. So is it best that I come up?”

Him: “Yeah” (sounding like he’s busy with something else)

I decide to go to the dealer immediately. I enter the workshop. Plenty of staff ignore me. Finally a man approaches and asks “Are you being seen to?” He tells someone to see to me.

A man approaches with his mobile phone in hand and walks past me. I ask him if it was him he was talking to? Apparently it was.

I ask him if he has a part worn tyre preferably a good make like a Michelin. He asks the boss who says while walking away “Dunno mate… we’ve got loads up there but haven’t had a chance to sort them yet? You need to come back later”

I ask him what he’s got that’s decent? He replies “I think there’s a couple of Goodyears up there.” We walk to the back of the workshop. “There’s one here and here. But these haven’t been tested yet so you can’t have one”

I ask him what he has actually got. He walks through a mound of dirty tyres to find THREE tyres my size. I ask him what they’re like. “Well, you’d be better coming back later” he replies.

With that I walk out.

I return two days later as I was in the area. I walk into the workshop to find the staff all seemingly busy. The same man comes out towards me and…walks right past without even a look. Doesn’t even say “I’ll be with you in a minute.” I decide that I’ve had enough and leave.

Now why can they get away with an attitude and service like this?

Because of the business they are in… the CHEAPEST PRICE COMMODITY business! After all, a Michelin is a Michelin is a Michelin! And they are the cheapest, because they are selling part-worn tyres. If I want one at this price, there’s nowhere else to go. I have to stand in line and accept it.

Now… do you imagine that in our industry customers are treated any differently? There are people who have to tolerate the same kind of service because all they want to spend is £20 cleaning their front room carpet. And have you heard of the ‘half-price’ cleaners actually NOT turning up at all! Usually giving the customer an excuse that their van has broken down, when really they couldn’t get enough jobs in the area to make it viable. That’s what people have to put up with when they want the cheapest price.

But there are plenty of people who will not accept this and will gladly pay for a higher standard of service.

That’s why you don’t want to be in the price business or the commodity business. As it happens, I was not a prospect for new tyres in this category. I only wanted a part worn tyre for around £20 as a spare. If I wanted the ‘cheapest price commodity’ I had to put up with poor service. But if I wanted the ‘quality and service’ of a new Michelin tyre, I wouldn’t have stood for all of this. And I’m pretty sure that the company would be out of business very quickly.

The lesson for us: The worst thing you could do is to try to compete on price with a business like this. You simply don’t have to. It’s sometimes very difficult for carpet cleaners to realise that there are customers you don’t want.

There are different markets in our industry. Just like Kia, Ford and Mercedes buyers. They have different values, wants and priorities. There are people who want to pay £20 for a room and are prepared to put up with service like the above because they only want to pay £20. But there are also many people who want high quality and are prepared to pay for it. And would not tolerate bad service, no matter how cheap it is.

Target these and you don’t need to worry about half price carpet cleaners.

In the amped-up war of commerce and 75-cent pizza on 6^th Avenue in Midtown, a perilous moment is approaching. Circumstances suggest that ravenous New Yorkers might soon witness 50-cent pizza, 25-cent pizza or yes, free pizza.

So began an article in the New York Times of 30^th March in 2012.

But what has this got to do with carpet cleaners? Well, there’s a very important lesson about pricing here. One that transfers very nicely to our business.

Apparently a price war had developed between competing pizza parlours in New York. A year earlier, pizza was selling for $1.50 a slice at 6^th Avenue Pizza. Then a Joey Pepperoni’s Pizza opened nearby offering pizza for $1. So 6^th Avenue Pizza dropped its price to $1 too.

All was good until October, when a third player entered the drama.

A 2 Bros. Pizza, part of an enlarging New York chain of 11 shops that sell slices for a dollar, opened virtually next door to 6^th Avenue Pizza.

Price stability at a dollar persisted until mid March when both 2 Bros. and 6^th Avenue Pizza began selling pizza for the eye-catching price of 75 cents a slice!

The primary owner of 6^th Avenue Pizza is Ramanlal Patel 68, who also has a few businesses in Atlanta and holds property in India. His nephew, Bravin Patel 45, oversees the establishment. He and his manager, Mohid Kumar 49, were there the other day complaining about 75-cent pizza. They said that 2 Bros. was trying to drive them out of business, that 2 Bros. unprovoked, slashed the price to 75 cents forcing them to follow and that the property in India had to be sold to keep the place going. “We’re angry,” Bravin Patel said. Mr. Kumar said he was contemplating checking with a lawyer to see if there might be a city law that somehow prohibits a business from selling pizza at outlandishly cheap prices.

At the St. Marks Place office of 2 Bros., its owners, the Halali brothers Eli, 29, and Oren, 27, say they had simply matched the price of 6^th Avenue Pizza at 75 cents, and that’s where everything sits. “We don’t sell pizza at 75 cents,” Eli Halali said. “But if they think they’re going to sit next to us and sell at 75 cents, they've got another think coming.”

It appears that 6^th Avenue Pizza lowered their prices first. But why?

“He was taking away our customers,” Mr. Kumar said. “How were we going to pay our rent?”

For his part, Eli Halali made it clear that 75 cents was a temporary price point. He said he could not make money at that level and eventually would return to $1. He said that if 6^th Avenue Pizza went back to $1 he would as well.

If it didn't he said, it had better watch out.

His father, Joshua Halali, who acts as a consultant to 2 Bros. said, “I suggested to my children to go to 50 cents.” Oren Halali said, “We might go to free pizza soon.”

Eli Halali said: “We have enough power to wait them out. They’re not going to make a fool of us.”

Meanwhile, Mr. Patel remains intransigent. “We’re going lower.”

“We may go to 50 cents,” Mr. Kumar said. Of his next-door rival, he said: “I want to hit him. I want to beat him.”

As for Joey Pepperoni’s, Met Zade, one of the owners, said: “I can tell you we’re absolutely not dropping our price. For $1 a slice, you can still make a profit. For $1, an owner can still sit down and eat. At 75 cents, you’d be a mouse on a wheel.”

While the pizza parlours insult one another, the eating public couldn't be happier.

What are the clear lessons for us as carpet cleaners?

Many, many carpet cleaners think that customers are only concerned about price. And that the only way to win business is to be the cheapest. In the long term, the lowest price seldom wins. There’s always someone who will come in cheaper.

Look at some of the comments above:

• “For $1 a slice, you can still make a profit. At 75 cents, you’d be a mouse on a wheel.”
• “I suggested to … go to 50 cents.” “We might go to free pizza soon.”
• “He was taking away our customers.”
• “the property in India had to be sold to keep the place going”

Isn't that the situation with so many carpet cleaners? …slowly going broke but not realizing it. Business is all about margins and profit. No profit = no business!

The solution? Find and keep customers who are not concerned with only the cheapest price! Seek out high-quality seekers, maintain a relationship with them…and charge a premium price for extraordinary service.