Thursday
If You Raise Prices, Do You Lose Clients?
Everything is costing you more. Fuel prices, supplies, materials, labor. To stay in business, many are going to have to raise prices. How do you do that without losing business? There are ways to do it so you don't lose existing and potential clients.First, you must accept that if your pricing changes, you're going to lose some business. In tough economic times, many simply don't have the money to pay more. Those customers will need to be replaced and may come back in better days.
Next, you need to provide ample warning to your existing clients. Calling or sending out a newsletter, email, or flyer to let them know is a great way to keep them in the loop. Consider that you could use this as an opportunity. Since pricing will be going up, you could give them time to "get in" at the old price to save them money. At worst, it keeps your business name in their minds.
Also, you might consider baby steps. Instead of a massive one-time price increase, perhaps you could raise prices in small increments over time. 3 or 4 "nudges" in costs could be better than one big push.
Finally, you should explain the reasoning for the price bump. You don't have to open your books to them, but let them know that material costs, labor, and oil increases are killing your margins. Let them know you're not being greedy, you're being practical.
As with everything, try to do some research. If you're not offering one-of-a-kind products and unique services, you're not going to be able to raise prices higher than your competition. Price yourself too high and you'll go under.
Labels: Contractor Pricing
Wednesday
Contractors - Do You Offer Discounts?
Every day, my porch is littered with flyers from remodeling companies and other service pros. Most of them try to entice me with a major discount to get me to try their services. I'll see $500 off on a new roof or $1000 off a kitchen remodel. I might even see a Call This Week and Get $50 Off Our Plumbing Service!The big problem with discounts like this is that it sets up an expectation. An expectation of continually low prices. A coupon or discount might work occasionally to get clients to try out your company. But the issue starts when they come back to you for more work or refer you to friends and family.
Those discounts could mean clients will always expect to get good deals from you which can really hurt those margins. If prices go back up or the next job doesn't include a deal, they could go elsewhere and use someone else's coupon.
Another side effect of offering a dollar discount helps perpetuate the problem. The Journal of Marketing did a side-by-side study of offering $100 off versus offering 20 percent off and found that the percentage discount lowered clients' expectations of future discounts. Both types worked to get people to purchase, but the percentage discount was less easily remembered.
In other words, you give a 10% discount off the total bill, instead of lopping off $1000, the client will not return to your company expecting better prices than your competitor.
Equally interesting was that the more odd the percentage, the less it worked. A 34% or a 22% discount was less effective than a 20% discount. You want to make potential clients work to figure out the amount off, but not make it impossible to do in their heads.
The lesson is - if you offer discounts, go with a percentage instead of a dollar amount and get a better return when clients come back and offer referrals.
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Do You Break Down Your Prices?
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Labels: Contractor Advice, Contractor Pricing, Small Business Advice
Friday
Do You Break Down Your Prices?
Your company offers a service and along with that service is the price you charge for your knowledge, labor and materials. Most times, the service you offer is considered very expensive by anyone's standards. Many remodeling and construction companies fear that sticker shock on an all-inclusive total price will scare many away. So, they break down the costs into partitioned or smaller amounts.
Did you know that breaking down your costs into smaller amounts may not be the best business method for your company? Studies have shown that when clients are given a total price, even if it's high, it allows them to focus on the overall benefit of the service. Paying $40,000 for a kitchen remodel, for example, will allow them to focus on family gatherings, making meals with ease, and the luxury of new appliances and cabinets. When the price is broken down to include the costs of the counters, the floor, the labor, and the delivery charges they may want to remove parts of the project. If you're thinking it helps to present the partitioned prices to soften the blow, it could backfire on you. When prices are broken down it forces the client to look into what they're getting for the money.
Partitioned pricing helps when you want to get clients used to a secondary benefit that they ordinarily take for granted. For example, if you can show a client you'll install a product and only charge them a small delivery fee - because you manufacture the product and don't need to order from another company. You're showing a benefit over your competitor who charges a huge delivery and handling fee.
For a large project, to help with sticker shock, consider giving them the price per square foot along with the total price and continue to point out the main benefit of their project.
Contractors: Don't forget to bookmark our Contractor Update for more helpful business tips, construction news, website updates, and information on how to help you expand your business. Our goal is to help you succeed.
New to the blog? Did you know you can register for free on our main site to see if we have any remodeling, repair, or construction jobs in your area?
Did you know that breaking down your costs into smaller amounts may not be the best business method for your company? Studies have shown that when clients are given a total price, even if it's high, it allows them to focus on the overall benefit of the service. Paying $40,000 for a kitchen remodel, for example, will allow them to focus on family gatherings, making meals with ease, and the luxury of new appliances and cabinets. When the price is broken down to include the costs of the counters, the floor, the labor, and the delivery charges they may want to remove parts of the project. If you're thinking it helps to present the partitioned prices to soften the blow, it could backfire on you. When prices are broken down it forces the client to look into what they're getting for the money.
Partitioned pricing helps when you want to get clients used to a secondary benefit that they ordinarily take for granted. For example, if you can show a client you'll install a product and only charge them a small delivery fee - because you manufacture the product and don't need to order from another company. You're showing a benefit over your competitor who charges a huge delivery and handling fee.
For a large project, to help with sticker shock, consider giving them the price per square foot along with the total price and continue to point out the main benefit of their project.
Contractors: Don't forget to bookmark our Contractor Update for more helpful business tips, construction news, website updates, and information on how to help you expand your business. Our goal is to help you succeed.
New to the blog? Did you know you can register for free on our main site to see if we have any remodeling, repair, or construction jobs in your area?
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Labels: Construction Industry, Contractor Advice, Contractor Pricing, Small Business Advice
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