Right now I am making appointments to help you plan for 2014.
In this series of blogs I am going to break down our formula for high sustainable profits.
The right People + process + product + pricing + promotion = high sustainable profits.
This week I am going to focus on Pricing.
When I am talking to someone about plumbing marketing or plumbing advertising and mention pricing they automatically think that I am going to suggest they lower their pricing. But the truth is, I have found that most plumbing or HVAC companies would benefit from raising their prices. Most contractors I work with are giving Hilton services at Holiday Inn prices. Discouraged by price complaints they have received in the past, many contractors avoid raising their prices. Part of my job is to help you get over these complaints and move on building a company that is focused on the right type of customers. . . . Because what ends up happening is that you retain 80 percent of your customers but only make a 10 percent net profit. Wouldn’t it be better to retain 75 percent of your customers, but make a 20-22 percent net profit? Let me explain…
Business is all about the exchange of goods and services for money (or other goods and services). This relationship should be mutually beneficial. Your customers should receive a good service or product, and you and your employees should receive the benefit of appropriate compensation. But when you are not hitting that 20-22 percent net profit goal, then you probably are not pricing your services high enough.
One of the ways we determine if you should raise your prices is by doing a consumer study. If your customer retention rate is over 75 percent, and your closing rates with repeat customers is high, then you can probably raise your prices. In three months, after the price increase, we will perform another consumer study to make sure the price increase was effective and without any serious repercussions. If there are issues…we help you make adjustments.
Usually there shouldn’t be any serious repercussions because we help you fine tune the pricing instead of doing an across the board mark up. We help you evaluate the closing rates for specific jobs, and help you decide if you should lower prices on the low closing rate jobs, and raise prices on the highest closing rate jobs. Typically most plumbing, heating, and air contractors get 80 percent of their price complaints from just 20 percent of the work they do. The right approach is to determine which jobs we can safely raise the prices on by looking at each job’s closing rate.
Power Pricing and Profitability Coaching prepares you for our plumbing marketing and HVAC marketing strategy. It help you get the pricing and the numbers right before you get the business coming in from plumbing advertising or HVAC advertising. Getting the numbers straight is an important part of the formula to hit 22 percent net profit.
What is important to know is that while we figure out the right pricing you can rest assured you have an expert in your corner guiding you through the process.
And keep an eye out for our next blog…
At your service,