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Category: Pricing

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Why should you as a carpet cleaner strive to be a monopoly?

Well, I wonder if you're like me when it comes to buying petrol. I buy wherever is the cheapest. And why not? Petrol is petrol wherever its sold right? Well it is to me, even if some of my friends say that some brands get more miles per gallon.

However when it comes to my car, I don't drive the cheapest car I can buy.

Why the difference in buying behaviour? It's because I view petrol as a COMMODITY but my car totally differently. The car I drive is only made by one manufacturer. They have a MONOPOLY. If I want their car, I have to pay the price they are asking.

All businesses are somewhere between a commodity and a monopoly. When people think of a monopoly, it conjures up visions of illegal activity or of using power improperly. Yet for a carpet cleaner there are tremendous advantages in trying to be a monopoly.

First, consider the disadvantage of a commodity business. Price is the main factor in buying and the lowest cost cleaner will win. In order to stay competitive, the cleaner has to maintain their profit margin and can only increase profits by reducing costs...  until they are forced to lower their prices because their competitors have reduced their costs too! This is how many carpet cleaners operate and why we have such large turnover in this industry.

But a monopoly is different. It cannot be compared directly to something else so the buyer makes a decision based on value not price. To generate carpet cleaning sales you must offer customers EITHER a meaningful difference OR a great price. In other words be a commodity or a monopoly.

So your mission if you want to stay in business is to create as near as a monopoly as you can. When you have a "dramatic difference" vs all other competitors, you hold a monopoly-like position in the marketplace.

For example, suppose you could wave a magic wand and in five minutes carpets really are looking clean and "like-new". No-one else can do this. Do you really think you would be matching prices? No... you're doing something no-one else can do. You would have a monopoly and can charge accordingly because it has a tremendous advantage to your customer. And they are prepared to pay more for it.

What you don't want is for your prospective customers to think... "It's only carpet cleaning and all carpet cleaning is the same isn't it?" That makes you a commodity which gets sold on price alone.

So how do you create a monopoly? You probably can't wave a magic wand a create "like-new" carpets in five minutes, but there are other things you can create so that you cannot be directly compared to others and therefore hold a monopoly-like position. Perhaps a unique guarantee or maybe even something as simple as advertising that your customers don't need to move any furniture whatsoever. Whatever it is must matter to your customers.

There are real benefits to being a monopoly. Firstly, it creates buzz - gets you talked about because there is now something to say. It also gives you a true story to tell via advertising and can generate free publicity

Above all you can charge higher prices for a unique service... which means higher profit margins.

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Want to know how to increase your profit in your carpet cleaning business IMMEDIATELY?

As soon as next week? It’s simple...

Raise your prices!

Do it today, right now...by at least 10%. Your customers won’t even notice.

I know what you’re thinking... If I raise my prices, I'm going to lose customers. But first, have you considered what is happening if you’re NOT increasing your prices? The answer is that in real terms your prices are going down because of the effects on inflation.

Yet increasing prices is one of the easiest and quickest ways to increase revenues and profit.

So how do you raise your prices? The answer is more to do with YOUR mindset than what your customers will think. If you’re convinced that your customers wont pay more, think again. After all, many, many people buy BMW’s and Mercedes when a simple KIA would get from A to B. (and probably not much slower). When I last looked these cars are considerably more expensive than others! In fact, in every category of ‘something for sale’ there is a budget range, a middle range and a very expensive high quality range.

The best mindset to have is the latter, that of ‘Premium Pricing’ to those who are quality seekers.

I've heard from a few carpet cleaners recently who have told me how they originally set their prices?

Does this sound familiar?...

You phone all your competitors and then price yourself either at the average or just below theirs...then you’ll get all the work!

Simple.

And their minimum charge? Well, I can tell you that its a third of what we charge. Yet they insist that customers will never pay it.

An increase in price might actually make your customers view you differently - in a positive way. Robert Cialdini’s famous book, Influence tells the story of a jewellery store inadvertently pricing some jewellery too high...by mistake!.

The result?

Whereas previously it couldn't sell, now it sold out. The items hadn’t changed...peoples perception of it had.

Price equals quality in their minds.

Before you think...”but my customers will never pay higher prices” here are some facts about dealing with those who are only concerned about PRICE:

  • People who buy on price are slow to pay and expect you to jump through hoops to please them at the same time
  • People who pay low prices are looking for a bargain and almost always want more than what they pay for
  • They'll also be quick to complain and ask for a refund
  • They’ll also tell their friends how they managed to get you to clean their carpets for such a low price., especially if you gave them a discount. Their referrals will now be price shoppers too
  • And of course, you have to make it up in volume, by doing MORE WORK

On the other hand:

  • People who pay premium prices are easier to deal with but they wont accept shoddy work or second-best
  • Price is simply not the most important thing for most people. Quality is
  • Most people equate a cheap price with low quality
  • The price of your service is based on its value to the customer and has nothing at all to do with your competitors prices
  • And of course, with higher prices you make more money for doing LESS WORK

Hmmm... MORE WORK or LESS WORK? Which would YOU rather be doing?

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I’ve recently had a couple of experiences that demonstrate some good marketing lessons. In fact, I think they’re essential for a successful carpet cleaning business to grasp.

The first involves a recent job in a nice area in the next town to where I live. All the homeowners are reasonably ‘high-end’ with large detached houses. I had cleaned the carpets for this lady some years ago. As I entered her living room, I asked how long the carpet had been down. I assumed that she had changed the carpet fairly recently as it looked immaculate. To my astonishment it was the same carpet we had cleaned years earlier. But it’s what she said next that surprised me the most.

“Do you think it will clean?”

Isn’t that interesting? My perception was that it looked as though it didn’t require cleaning. Her perception was that it may be beyond cleaning. I thought to myself “How can I get more clients like her?”

Contrast that with a man I visited for a quotation a few years ago. After telling me on the phone that the carpet was not really dirty or stained, I made a home visit. His living room carpet looked at though it had been left outside all night in the rain! Needless to say it was beyond cleaning. But it was his perception of the state of his carpet that irritated me. And that’s often the case with the bottom end of the market for carpet cleaning.

The lesson: Your target market is very important. You cannot really serve two ends of the market with the same business. It’s much better to focus on high-end clients. They have the money to pay for quality... in fact, demand it. And their carpets are often much easier to clean.

And there’s another benefit: I've recently lost a regular carpet cleaning contract for some commercial premises. I've been cleaning the carpets for over five years. I managed to clean the carpets when a national franchise was unable to get them clean. I cleaned extra areas at no extra charge and came out to remove stains at no charge on occasion.

I was then informed by phone that our contract was ending. The reason? Their office cleaners were now branching into carpet cleaning and they wanted to give them a chance. No negotiation. It was a done deal. This rarely happens with high-end clients. If you do high quality work and look after their best interests, they are just glad they've found you and will use you again and again.

By the way, the lady above paid just under five hundred pounds for work that took just over three hours. The carpets were so easy to clean. She has just written to me saying that she is delighted with our service and will happily refer us to others.

Now,… “How can I get more clients like her?”

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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.

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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.

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In the amped-up war of commerce and 75-cent pizza on 6th 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 30th 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 6th Avenue Pizza. Then a Joey Pepperoni’s Pizza opened nearby offering pizza for $1. So 6th 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 6th Avenue Pizza.

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

The primary owner of 6th 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 6th 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 6th 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 6th 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.

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I wrote recently about my visit to a local travel agent. It was a lesson in how NOT to sell a holiday. You may recall, amongst other things, the advisor assumed I wouldn’t pay the quoted price and so I was immediately offered a discounted price WITHOUT even asking.

If anyone’s been to Egypt, one thing you can say for sure is that although you may be hassled in the shops, they certainly know how to SELL.

I remember going on a Nile cruise a few years ago and amongst the ‘trips’ was a visit to a perfume factory. By the way, there was no choice about this. It was part of our visit to Karnak temple. There I witnessed a masterclass in selling. Again, there are some good lessons for us as carpet cleaners. Now, this was not just an education in perfume…it was a SALES meeting. Here are four lessons I learned.

1. Use Joint Ventures

Firstly, how did we just happen to end up at the perfume factory? Well, no doubt this was a ‘Joint Venture’. The tour guide would have made an arrangement to ‘deliver’ a coach load of prospective customers to the factory door. And no doubt taken a share of the profits. This is an excellent low cost, no-risk way of getting customers for the factory. There’s no expensive advertising, in fact no work at all other than divvying up the profits at the end. Even if the factory paid as much as 50% of the profit – it’s 50% for them that they wouldn’t have had. And a tremendous incentive for the tour guide! A win-win.

Now, who could give YOU access to their customers for a share of the profits (that they wouldn’t have had!). Ask yourself: Who services the same type of customers as you do? Could you give these customers a preferential offer that would induce them to use you for the first time? Even if you paid a high percentage of the sale to the other business, you would have gained a new customer and made a small profit on the first sale. When they use you again or refer you…there’s a much greater profit.

2. Use a Structured Approach

Nothing was left to chance…an initial ‘trust and rapport’ building cup of herbal tea, passing out order forms at the beginning to ‘assume’ the sale and demonstrations of the products were all clearly scripted.

Are your in-home quotes fully scripted? (I like to use the term ‘choreographed’ – like actors on a stage, nothing happens by chance). For example, are you demonstrating how protector works (tissue in a glass?) not just explaining it? Could you even clean a very small area to show just how soiled the carpet is?

3. Use Education Based Marketing

This is often a very under-used method of persuasion. I was thoroughly educated in the process of perfume making. By the time they had finished, I trusted that they knew what they were doing. I also knew about the ‘extravagant’ mark-up by the well known brands.

Do you educate your customers? You know, the ones who think that all carpet cleaning is the same? For example, do you tell them about the importance of vacuuming first because 79% of soil in a carpet is ‘dry’ and will vacuum out. Educate them as to why this and every other part of your process is so important.

4. Packaging

Yes, they offered three packages (4 bottles in a pack vs 6 vs 8 in a ‘fancy’ box), even throwing in a ‘bonus’ on the most expensive package.

Do you have different packages? If not, at least put together a high-priced top quality package and offer both. There are some customers who just want the BEST and are prepared to pay for it.

Many of my fellow travellers left the factory with boxes of perfume. A testament to a highly efficient, structured, educational, choreographed SALES meeting.