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Category: Pricing

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What a great business we’re in!

Over the past few years, I’ve made my own business a ‘lifestyle’ business. I have no staff (whereas previously I’ve had up to five), work a maximum of three days and take at least four holidays abroad every year. And I don’t ‘phone home’ to check the answerphone every few hours!

All this has been possible by effective marketing. Selling to the ‘right’ customers at the ‘right’ PRICE. And giving them ‘best value’.

So just the other day I thought about booking my first holiday for next year. I checked online to see what sort of price I would have to pay. Then I went into a high street travel agent to see if they could perhaps do a better deal.

The education in ‘pricing’ was invaluable.

There are at least four lessons that easily translate to our business of carpet cleaning.

Here they are:

The lady I spoke to immediately informed me that she was not a sales advisor but in fact was ‘cabin crew’. She was pregnant and so the travel agent was simply making use of her as cheap labour in the shop. After taking note of all my requirements, a total price came up on the computer screen. The very first thing that she did was to immediately say that she could discount the price as it seemed a bit high. As it happens the price was in the region of another quote I had.

LESSON 1. Make sure that everyone involved in selling has some sort of sales training and understands the psychology of the buyer. Otherwise they will react to price exactly as the cabin crew lady did here. And what impression did it give? That I was being overcharged to begin with!

LESSON 2. Don’t capitulate on price. People are buying value NOT price. People don’t buy a Mercedes just to get from A to B. Yet, Mercedes dealers don’t discount to compete with Vauxhall or Ford. There’s always more involved that gives them greater value. I always recommend using a computer program to come up with the costs so that it’s very hard to change the price. Many times my computer has produced a price that I thought the customer would never pay, only to be surprised. Customers can sense if we’re uneasy about our price and will then try to negotiate. I’ve repeatedly found that customers take the view that “the laptop has spoken” when it comes to price and simply accept it as “the price”. Which of course, it is. And of course, if we provide a high quality service target Mercedes customers NOT Ford customers.

LESSON 3. If they want to change the price…you change the package. The price I was originally quoted for was All Inclusive and for a Water Villa over the sea. (Can you guess where I’m going yet?). So…could I drop down to Half Board or have a plain old bungalow by the waters edge instead of over water? If your customers want to change the price, get them to ‘empty the room of all furniture’ for example.

LESSON 4. Don’t discount…add value. Could she have added something to my holiday that costs them very little but has high perceived value to me? For example, how about pre-booked seats on the plane or late check out or something else that costs them very little?

Of course, if your clients are only concerned about price…it may be better to sack them and get clients that will pay more for a quality service. She asked me how much I was expecting to pay. I gave an artificially low price...about a thousand pounds less! (Don’t all buyers do this?) She then tried her best to see how low she could get the price. Instead she should have just ‘sacked’ me.

We mustn't be timid in explaining our prices to prospects. We must be able to confidently justify our charges compared to other cleaners. And do this in a way that our prospects perceive as ‘best value’ for them.

 

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There's a statement that many carpet cleaners dread...

"I've had other quotes and they're much cheaper than you."

I had it myself recently when upon arrival at a job the elderly lady asked me to confirm the price and then said that her son had obtained cheaper quotes. She then told me that he would soon be arriving to question my price.

He arrived just as we were pre-vacuuming and asked us immediately to stop work. Although the lady was a repeat client, her son was very concerned about how much she was spending on having her carpets cleaned (which by the way was only £144). To say he was very agitated is an understatement. He had obtained three other quotes that morning, all of them around half of our price.

Now how would you have handled this? The tendency for many carpet cleaners is to agree on a price reduction immediately. However, what message does this send to the client? Surely that we were overcharging to begin with! And don't forget: business is all about profits and margins. No margin = no profit. It's then only a matter of time before the business folds.

So what can we do when a prospective client questions our prices? The first thing to remember is that people buy value and not price in most cases. That's why the Ritz-Carlton can charge £35 for a fillet steak and why BMW can get people to part with over £30k for a 3-series when a cheap and cheerful Ford would easily get them from A to B. People will pay more for what they perceive to be better value

Of course, if your clients are only concerned about price it may be better to sack them and get clients that will pay more for a quality service.

So what did we do on the job? The lady's son thought she was buying a commodity, that all carpet cleaning is the same. Now that's the last thing we want to be as then price is the only consideration. The only time that people buy on price is when they think that everything else is the same. It's critical that you differentiate your service. And you must be perceived as being different in your prospects mind.

So we calmly explained to him what is different about our service and built up the value in his mind. Once we had done this, he was happy for us to continue. It appears that she had been the victim of some unscrupulous salesmen recently and the son was simply trying to protect his mother.

We mustn't be timid in explaining our prices to prospects. We must be able to confidently justify our charges compared to other cleaners. And do this in a way that prospects can perceive as "better value" for them.

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Here's a reprint of an article I wrote for the National Carpet Cleaners Association magazine in the UK back in 2009. I think you'll find that it still applies!

Earlier this year I was watching a football agent being interviewed on Sky Sports. It was the day after the football transfer window had closed. The reporter asked him “Is the recession affecting football clubs?” His was response was that in general it wasn't. In fact he made the point that more players had been sold for a sum over £10 million than ever before. Determined to report some doom and gloom, she said that smaller clubs must surely be having a bad time. When the answer was again a negative, the reporter concluded with the comments “So at the moment, football is not being affected by the recession but how long it will be before it does…we will have to wait and see!”

This interview was a prime example of the media of today. Report ‘doom and gloom’. And if there isn’t enough, make some up. I’ve found it helpful to remind myself of the real economic situation in this country at the moment. After all, I’ve not really found my business that affected by the “recession”. In fact, two weeks ago, we had our busiest week for well over 12 months. All residential work I might add.

So here are the facts: According to the National Statistic Office the workforce in the UK is about 30 million out of a population of around 60 million. Unemployment is around 6.5% as we’ve now passed the critical two million mark.

Hold on…doesn’t that mean that 93.5% of the workforce are…in employment!

Even if it rises to the dizzy heights of three million as the worst predictions seem to be, doesn’t that mean that 90% or 9 in every 10 people who are able to work are actually in a job. Suddenly it doesn’t seem so bad. Not only that, but the public sector (ie: taxpayer funded jobs) has actually taken on more staff over the last year and given them above average pay rises!

Parallels with the ‘Great Depression’ of the 1930’s doesn’t help either. Paradoxically, life got much better for those who kept their jobs back then. The cost of living fell sharply, so their spending power rose sharply. Some parts of Britain were actually more prosperous at the end of the 1930’s than before.

I now make it a point to tell these facts to as many of my clients as possible. Many seem to think that soon nobody will be in work or have any money. Yet there are many firms doing well. Cadbury’s for example has recently reported a 30% increase in annual sales, up from £430M to £559M. A Daily Mail article in February had the headline ‘Fee Paying Schools Beat The Recession’. Apparently record numbers of parents want to put their children into expensive private schools.  There are many, many more.

Getting through the “Recession” is largely a mindset thing. I have heard of several people who have stopped reading the newspapers over recent months. The effect has been that they have simply stopped worrying about any “downturn”. For us, we have made sure that we target PWM (people with money), explained very clearly why we are the best value for them and have not reduced our prices at all. When things are ‘tight’, people still spend, they are just more careful with whom.

Oh by the way, in a recession, nearly every business cuts its marketing spend. If you increase yours to find high quality, high service seekers who are prepared to pay a premium price for it, your business can not only withstand a recession, it can positively thrive!