It's All About Value, Not Price
Everyone has heard it, but most people don’t get the message or shrug it off. “When all is said and done, it boils down to price,” they say. I’ve heard contractors voice this complaint hundreds of times.
Contractors 2000 has what may be the best refutation of that argument. C-2000 has almost 250 members in the PHC service business who are dedicated to business excellence and making money. Knowing business costs and flat rate pricing are among the organization’s most exalted business credos.
It’s no secret that C-2000 members include some of the highest-priced service firms in the industry. Some of their flat rate prices incorporate labor rates that may be double or triple the industry norm for a given trading area. The average contractor hears what some C-2000 members charge and practically faints. “No way I could ever get away with that in my market,” is the common refrain.
CSA Results: A valuable member service offered by C-2000 is an annual “Customer Satisfaction Audit (CSA),” in which about 85 percent of the member firms participate. Conducted by an independent research firm using scientific survey methodology, the CSA quizzes some 40,000 customers — more than 200 submitted by each participating firm — about the way those companies performed on the job. The refined opinion polling techniques enable the CSA to generate an impressive response rate of around 40 percent. The resulting data base numbers over 15,000 customers.
For comparison purposes, the researchers did a similar survey in 1995 on non-C-2000 companies in the PHC industry at-large. Consumers were asked to rate each firm on a 1-10 numbering system for a host of criteria.
Data developed for C-2000 shows participating firms how they stack up in relation to fellow C-2000 members and to the industry at-large. Our concern here is to compare overall C-2000 results with that of non-C-2000 members.
As you can see from the chart above, C-2000 members in aggregate outperformed the industry at-large by a statistically significant amount in four of the five categories. (Variances of 0.2 or more are considered statistically significant.) Their only shortcoming was an almost imperceptible 0.04 deficit in the area of price.
It isn’t surprising that the notoriously high-priced members of C-2000 leave some customers grumbling about their prices. Take a close look at these results, though. Two aspects stand out.
1. Consumers rate all PHC firms, C-2000 or otherwise, significantly lower in price than in all other areas of customer satisfaction.
2. For practical purposes the C-2000 price ratings are not any worse than those of non-C-2000 members, who generally charge much less for their services.
Lessons: What are we to make of this? I think the following lessons can be drawn —
A. You are deluding yourself if you think the public appreciates the fact that you may be holding down your prices to a level that you think they are comfortable with. There are guys out there billing labor at $35-40 an hour and even less. As far as John Q. Citizen is concerned, even that’s way too much!
B. Charging double or triple the going rate (on a flat rate basis) doesn’t make John Q. Citizen any madder than the going rate. Heck, if you are going to get people mad at you for charging too much, you might as well give them a good reason to be mad!
C. The real issue isn’t price at all, but value. If you deliver outstanding performance, a customer might think your price is high, but will do business with you anyway.
Exceeding Expectations: At the C-2000 meeting in Miami last February, I talked with some of the members who were going over their CSA results. They shared with me some comments on the survey forms, many of which went along the lines of, “Your prices are awfully high, but I have to admit, your people were the most polite and competent I’ve ever seen.”
Low prices, in contrast, tend to correlate with poor service and poor presentation. Any price is too much to pay for service technicians who show up looking grungy and acting surly. Companies that charge too little cannot afford the equipment and training, both technical and customers relations, that it takes to convey an impression of value.
The C-2000 Customer Satisfaction Audit is intended for internal comparisons, not outside distribution. This means they have no incentive to rig the numbers. That, plus the extraordinary database, makes the CSA stand out as perhaps the industry’s most objective measure of how people perceive PHC service firms. The emphasis they place on quality is meaningful to everyone in the industry, not just C-2000 members.
The American Marketing Association defines quality in part as “exceeding customer expectations.” This study confirms that you can achieve that goal even when you exceed their price expectations.