For most landscape contractors, prices have been stuck for quite a while. But that could start to change this year. Contractors need a well-devised plan of implementation when raising prices. Simply blindsiding customers with a price hike leaves you very vulnerable to getting dumped.
Follow these tips if you want to raise prices in a way that puts your company in a better financial position, not a worse one caused by an exodus of irritated customers.
Identify where your prices need to go. There are two trains of thought with respect to raising prices: 1) phase them in with smaller increments over a period of time, 2) institute one larger price increase in one fell swoop. There are pros and cons to both methods.
Many business experts agree that numerous smaller increases are more likely to aggravate customers. This method creates more uncertainty, and continually reminds customers that they’ll be paying more than they did before.
Conversely, one larger price hike better gives customers something to plan around.
Explain yourself. Regardless of which method you choose, it’s important to communicate with your customers. Most people understand that prices have increased on a lot of items, from fuel and food to insurance and utilities. Explain how this inflation is adversely affecting your business.
Be careful, though. You don’t want to sound like a whiner who is only concerned about making a huge profit. Come at it from the customer’s perspective. For example, a dramatic rise in your cost of doing business is making it harder for you to provide the level of quality and service your customers have come to expect. You want to continue to invest in the best materials, equipment and training available. You want to be able to attract the best employees through good compensation programs.
Be proactive. Don’t wait for a customer to say, “Hey, you’re charging me more than you did last year!” before you spring into action with your explanation. Give customers plenty of notice. Send them a nice letter signed by you, the owner. Better yet, give customers a call—especially your top 20% that typically account for 80% of your revenue.
Come up with options. When talking to customers about your looming price increase, you’ll be able to answer their questions. You’ll also be able to come up with options, if necessary. Let’s face it: It’s still very competitive out there, and some customers will not be OK with paying more for your services, especially if other contractors remain willing to work for a lower price.
One thing you can do is cross-sell other services to come up with packages, from which a customer can earn a certain discount.
Another tactic is to offer a tiered level of pricing. Car washes do this very well. Even some landscape contractors are successfully doing it. Check out Louisiana contractor Tim Twomey’s approach.
Get staff on the same page. Finally, make sure your staff are all on the same page. Nothing is worse than having different members of your team giving customers different stories.