Last month I discussed one of the toughest decisions anyone in the service and repair business has to make: When is it time to raise prices? I suggested we were aiming at the wrong target, which is the "going rate," or competition's prices. The only reasonable conclusion was to increase your average hourly rate, if only by $10 an hour. However, we must remember why the increase is reasonable and needed; it is because only trained technicians who are delivering top-notch service allow us to stay ahead of the competition.
Training takes money and some time. It's an investment in our company and our company's most important asset, the technicians. We get the resources for that training from our customers. In return, we deliver the best service they can find. And they are willing to pay for it. We all know our customers remember the quality of the job long after the amount they paid.
This month, I want to continue the discussion about pricing. Most of us admit we can use more revenue but are reluctant to generate it from a price increase. So, how can we aim at the right target, which is raising our prices instead of following the competition. Fortunately, the industry now has accumulated decades' worth of data on pricing.
The AnswerI am going to give you the simple answer up front: flat rate pricing. If you want to boost profits and have happy customers, there's no better way. I'll prove it to you and then address all the concerns you may have about it.
First, I want to ask two questions of you - at least some of you. What are you waiting for? What is the delay? I still see service companies around the country that have not switched to flat rate. I always am surprised when I see the owners. I am just as surprised at their reasons for not switching. They are leaving money on their customers' kitchen tables.
There have been stories about prosecutors and local governmental agencies pursuing businesses for ripping off consumers with their methods, their pricing and their misrepresentations. No doubt, some of the stories are true. However, rip-offs have nothing to do with flat rate pricing. You can cheat people with any method of pricing or numerous other service techniques, including selling parts and services that are not needed or charging for parts that were not replaced.
As long as there are service companies, or any companies for that matter, there will be some small percentage of people who will take advantage of others and engage in unfair, even illegal, practices. It is illogical to draw a connection between a business's unethical actions and its method of pricing. We have to maintain the highest ethical standards for our trade and profession, despite the efforts of a few operators to tarnish it. So don't let a few unscrupulous people dissuade you from adopting the type of pricing that informs the customer up-front about the exact price of the job.
Also, I still hear from service and repair business owners who say their area is so unique that any pricing different from the age-old time and materials (T&M) pricing will confuse their customers. Small towns, they often tell me, are different. In one respect, they are different; people tend to trust each other more than in a large metropolitan area. This makes small towns the ideal place to use flat rate, because the only difference in the customers' eyes is that they are told before the work is begun what the job will cost. That approach always has built trust since most of the uncertainties of the job - how long it will take at an hourly rate - are removed. The risk of a slow worker or malingering technician is no longer the customer's worry. Now it's the service company's concern.
Small town or big, flat rate pricing has been well received. Subscribers to our flat rate manuals are all over the United States. The size of the town will not be a factor in your success with flat rate. Not switching to flat rate from T&M, however, might be a factor in your success - a negative one.
When I hear service and repair company owners offer an excuse like their technicians won't like flat rate or won't want to change the way they do things, I remind them that frequently it is the technicians who thank me for bringing flat rate pricing to their company. With T&M pricing, customers jump on them with questions such as "Why is it taking so long?" or "How come I have to pay for the delay while this special part is being delivered or the technician is on the telephone?" When hourly rates and hours spent determine the cost of the job, customers can be tough on technicians.
With flat rate pricing, the customer and the flat rate technician see the price for the job in the pricing book before any work begins. That makes customers comfortable. It makes the technician's job easier, too - no more explanations, apologies or customer pressure.
Better yet, technicians typically earn more when a flat rate pricing system is used. Use an incentive pay system that rewards techs for selling more jobs, which encourages them to look for legitimate opportunities for more business. (It's also cheaper for the customer to have an add-on job completed on the same call.) They sell more jobs, earn more money and get fewer objections from customers. Flat rate is a winner for technicians.
Let The Book Do The WorkThe type of pricing manual you use is as important as switching to flat rate. If the price book is the right one, the technician's job is even easier.
For example, if the pricing manual clearly shows the job and the price, the customer can follow along with the technician to determine the price. If the book has several columns of small print with undecipherable numbers and codes, the technician will be lucky to read and understand the prices, let alone have the customer follow along.
Encourage customers to look up the price with the technician, and train techs to be open and honest with customers. The reason I encourage this practice is to build customers' confidence that the price they're paying is the same as what all customers pay for the same job. It's not made up or adjusted for them because of the technician's assessment of their ability to pay more than other customers.
An attractive, colorful book invites the customer to look at it. And, it is easier to read. We want the customer to read it, understand it É and keep reading.
There are other advantages to having a well-designed pricing manual. If you want to sell more service agreements, the manual can help. In our pricing books, we specify a standard rate and a value rate. Only service agreement customers get the value rate, which is about 15 percent to 20 percent less than the standard rate. Naturally, a customer will ask how to get the value rate. When the technician explains the service agreement program we offer, the customer can't resist; they want the lower rate for the job, so they buy a service agreement.
Since common add-on jobs also are shown with each task, the customer and technician will be prompted to see if the customer can save money by having the additional work completed on the current call.
Even if the flat rate manual is the best available, that doesn't mean you shouldn't train your technicians on how flat rate works. It is unrealistic to expect them to intuitively understand all the advantages of flat rate without some explanation and examples.
Just like technical training, your technicians need to be prepared to represent your company in the best way possible. You can switch them from the complaint department to your top sales team - just switch to flat rate pricing.