Getting The Most Out of Flat Rate
There is more to switching to a new way of pricing than simply handing out a price book and wishing your technicians good luck. Flat rate pricing is one component in a new way of doing business with your customers - a way that increases their satisfaction and your profits. However, if this new way of pricing and serving customers is not implemented effectively, you can't take advantage of all of its benefits over the old time and materials (T&M) pricing.
Although long lead times are not necessary, some planning is helpful when switching to flat rate pricing. The books must be ready, and checked for accuracy. Your telephone procedures will change, so your call takers will need to update their script. When customers ask about pricing, they are told that they will receive a firm price for the job before any work is begun.
You'll want to thoroughly explain how the new pricing method works and why you are adjusting their script. That way, the customer is introduced to your flat rate pricing policy on his first contact with the company. Since he is told he'll save money, his first exposure to it is already positive, no sense placing all the burden of explaining flat rate on the technicians.
One very real concern, though, is addressing the technicians' resistance to changing the way they have been doing things for many years.
No one likes to change the way he has been accomplishing the job - in this case pricing - unless he understands the advantages of the new method. In particular, technicians want to see how it will affect them or how it will make the job easier for them. If no one explains the benefits to the technicians, you can predict less than optimal success in adopting flat rate pricing. So let's tackle that obstacle first.
Advantages For TechniciansLike anyone else, technicians are most likely to accept a change in policy if they see the benefits in the change for themselves. Fortunately there are many advantages in flat rate that make the technicians' jobs easier.
First, they don't feel pressure from the customer to explain the price. No more running out to the truck to generate a combination of labor and materials; no more rough estimates that vary with the value of the customer's house or cars; no more explanations that the customer won't know the final price until the job is finished so the hourly rate can be applied to the total hours of labor for the job. Fast workers or slow workers, it doesn't make any difference; it's the same price, regardless.
Even better, the price can be seen in the price book. The company sets it and everyone pays the same price for the same job. And the customer knows the price before any work is begun because the call taker tells the customer how the system works. Since the price is predictable, the technician knows what he receives for the job, too. He has no incentive to work slower to increase the labor charges.
Overall, the technician's task of pricing the job has been simplified. Much of the pressure from the customer has been removed - there's no second-guessing material costs or comparing prices they saw in a home center. The flat rate manual doesn't breakdown the labor and materials costs, so there's no temptation for customers to criticize either one. Once technicians recognize the advantages in using flat rate pricing, they will be more likely to accept it and actively support it in dealing with customers.
The Right BookTo be fair to both customers and technicians, your company must have an adequate flat rate manual. Simply because you assemble a book with prices in it doesn't mean it will be readily accepted by customers or technicians. If the book is hard to read - nothing more than rows and columns of numbers in small print - the price quoted will seem mysteriously generated to the customer. You don't want the pricing manual to look like a code book or to appear secretive.
Your pricing manual should be attractive, colorful and display the prices in large, easy-to-read type. You want the customer to look in the manual and see the price of the job while the technician looks it up. Encouraging the customer to participate in determining the price for the job, once the job has been diagnosed, builds his trust that he is receiving the proper price. An attractive pricing manual does exactly that.
A good flat rate manual also shows add-on jobs that can be accomplished at the same time as the primary job; that will save the customer money and the inconvenience of an additional service call in the future. By having these jobs displayed on the same page, the customer can see the price for both jobs at one time. It also encourages the technician to mention common add-on jobs, should the customer desire to fix items that may need it in the near future.
Another feature to add is double columns for prices. One column is labeled "standard pricing" and next to it is a column labeled "value pricing." Since the "value pricing" column shows lower prices, customers always ask how they can get those prices. The answer is simple: value pricing is for service agreement customers. The ability to get a reduced price on a service and repair job encourages the customer to purchase a service agreement contract. Technicians report the service agreements practically sell themselves.
You can see that the right pricing manual makes a big difference. The flat rate manual is a tool, part of a procedure just like the service and repair job itself. Instead of reaching for the pricing manual when your technician needs to quote price, he needs to set the tone for the whole company-customer relationship. The technician should first set up what I call an "office" at the customer's home.
Instead of dragging some old, dirty toolbox or bucket of tools into the customer's kitchen, placing it on a table or counter where they eat, the technician should assemble his tools for business. He will take from his professional briefcase a clean, attractive price book, a pen and an invoice to demonstrate that he is there prepared to serve the customer. He has now set the tone for the relationship. He's not some unskilled person in greasy attire, but a professional, fully prepared to solve the customer's problem. One of his tools is a quality flat rate manual, and he should be trained in its use just as he is with his other professional tools of the trade.
It is unrealistic to expect technicians to automatically pick up a flat rate manual and use it to your company's best advantage. In fact, without training and explanations on how to use the pricing manual and how its use makes any technician's job easier it's not likely that your technicians will build customer satisfaction or close the number of service and repair jobs that you would like them to.
Switching to flat rate offers many advantages, but one that we often take for granted is pricing consistency - all customers receive the same price for the same job. This advantage is assured if you train technicians to consistently diagnose repair jobs.
For example, have training sessions where a hypothetical repair job is presented and technicians have to use the practice diagnosis to select the appropriate job and any add-ons from the pricing manual. Criteria that are more subtle - such as age of the home, how long the customer intends to remain there, etc. - are discussed, so technicians can share ideas and guide customers toward the best choice of services and products for their home.
Try some practice situations and role-play with your technicians; you might be surprised to see them arriving at different conclusions about what should be done for the customer. When you see the results, you'll be convinced that training for a consistent approach to service and repair work is necessary.
Practice building skills in using the manual; technicians will learn to offer different levels of fixtures and the selling points for each. These skills pay off in customers' homes every day. Customers are happier because their needs are met and the company builds both goodwill and profits. This training is part of a quality control process, but there is more.
Similar to a fast-food franchise, consistency is one of the keys to quality control. One additional way we assure consistency is the use of written procedures for most jobs.
Called "Installation Guidelines," these procedures spell out exactly which parts get replaced and how to install them. Whether you have technicians with two or 20 years of experience, many of them will choose to perform the same service and repair job in a slightly different way, some may replace valves, some may use the old ones, etc.
To make sure you know what repairs were completed and how they were done, insist that all technicians follow the written guidelines that accompany the manuals. All technicians will do the job the same way, and you'll know exactly what was done and what was skipped. This information is especially important in preventing and dealing with customer callbacks for problems later on.
If you do not require compliance with a standard for repairs, you may have technicians who complete jobs in a way that doesn't match company quality standards - and you might face unhappy customers because of it.
Since there are so many benefits of switching to flat rate, many businesses have made the transition. It is also important, however, to gain the maximum advantage from the change. Using the right book and training your technicians will help you in better serving your customers and in keeping profits growing at the same time.