What Do You Purchase That You Don't Know The Price Ahead of Time?
Thursday, June 29, 2017
By Tom Grandy
Quick question - what do you currently purchase that you don't know the price of ahead of time? Did you buy tires without knowing the price? Were you surprised at the price of your ice cream cone when you got to the counter to pay? Have you been to Walmart lately? Did you wait in the checkout line wondering what each item in your basket cost? Of course not! Everything you purchase you know the price before you purchase.
Now for another quick question - What is the only industry that does not tell the customer the price before work is performed? You got it … the trades industry. We tell the customer we will fix this or that and by the way Mrs. Jones you will find out what we charged you when you receive the bill the end of the month! What if the eventual bill is more that Mrs. Jones thought it would be? Now we have an unhappy customer that, by the way, may not call us next time. What if Mrs. Jones was billed is more than she can afford? Now the company has a situation where they may not get paid ... and they lose a customer.
The reason the rest of the world prices all of its goods and services is so the customer can make a value judgment BEFORE they purchase. If the price is acceptable to the customer, they buy the item. If not, it stays on the shelf. Shouldn't we in the trades industry do the same? Shouldn't we take the worry out of shopping by telling the customer the cost of the repair BEFORE they agree to have the work done?
Flat rate pricing is gradually becoming the standard of the trades industry partially because of what I just shared. The customer wants to know what their investment will be before they tell us to do the repair. Decision Analysis performed a customer survey several years ago. They asked customers if they preferred being charged by the time and material method or by flat rate pricing. The answer was 91% preferred flat rate pricing. Are you listening?
There are several advantages to you and your company when using flat rate pricing:
- The customer no longer "sees" your hourly rate - all they see is the price of the job.
- Customer complaints are typically reduced by over 90%.
- Receivables improve because the technician can (and should) collect monies right at the job. There is no calculation to be made. The total price is in black and white in front of the customer.
- The technician is less likely to under bill the customer.
- When you need to raise your hourly rate you simply reprint the manuals. There is no announcement to your customer base and no one knows a change has taken place!
There is another huge advantage to flat rate pricing. It's the perfect system to sell maintenance agreements. The normal repair price is shown and the reduced price for maintenance agreement customers is printed right next to it. The maintenance agreement customer normally receives a 10%, 15% or 20% discount on any additional materials and labor needed throughout the length of the agreement. The customer can see their potential savings on the current repair if they purchase an annual maintenance agreement on the spot.
Isn't it about time you considered moving towards flat rate pricing? After all, your customer wants to know the price before they purchase. Knowing the price ahead of time will cause Mrs. Jones to go about her business rather than watching you while the repair is being performed. Why watch? The price is now firm so she doesn't care if it takes the technician 30 minutes or three hours since her price was quoted before the job was done.