Hi again everyone!
I must agree with VinceR's statement, most customers do not know a contractor's real costs of doing business and tends to think that they are trying to rip them off through overpricing. How does one overcome this obstacle? By education and perceived value...
As an example, as consultants, we needed a pretty high end telephone system for web seminars and conference calling.. At one point, we needed help making a few adjustments and called the company that sold us the system for some assistance. They sent over a technician who after spending about 20 minutes working on our request gave us a bill for $150.00 and left. I was shocked. Why was this guy charging me what a doctor would for his time?
Then, I actually stopped for a moment and thought. The technician came within 24 hours of my request; therefore they probably had a few on hand. Also, he only took 20 minutes to do his work on a pretty state of the art system, which means he probably has ongoing education. His truck was clean, fairly recent and had nice lettering. He contacted the office with his cell phone to provide another customer with timely service after my call was done. The person I talked to initially was not the owner or the tech, but most likely an office manager or secretary that was getting paid pretty well in view of the quality of the call. All these expenses incurred and a lot more that I fail to mention for my little 20 minute call!
So, I put my unreasonable assumptions aside and gladly paid the bill for a job well done. Unfortunately, most of your customers do not think this way and may not arrive at the same conclusion so easily. So it is up to you to educate them on what it costs to provide the professional services you offer. Now you can't ask them to sit down for a 1/2 hour seminar on your company’s financials. However, you can first make sure that their perceived value is high.
First of all, offer written testimonials from people in their area, "if Bob down the street used them, I am sure they are good!" Make sure your trucks are clean and well maintained and that your techs are also clean, polite and take great care of the customer’s premises. Have your office call before the appointment to confirm that the customer will be ready, which will save you some lost time as well. Take a few minutes to chat with the customer about your company and services, yearly safety inspection agreements and perhaps offer a cursory inspection prior to doing the work. (By the way, all of these costs should form part of your breakeven since they are just as valid as any other marketing effort).
Leave behind a little return survey form and other promotional material so that your customer keeps you in mind and provides you with feedback about your services. Follow-up with a call to make an independent evaluation of the customer’s overall satisfaction. These techniques will not only increased the perceived value of your services but provide you with invaluable information which you can use to better your own company!
Secondly, educate them a little about why your services may cost a little more than the other guys. Odds are, the other shops prices are lower because they are cutting corners around some essential tools you need to provide good service. Perhaps that shop is not properly insured or uses labor that is sub-par. Maybe their turn-around time is slow or their after call service is non-existent. Perhaps they do not offer guaranteed service which makes the customer feel more comfortable about using you in the first place. All this to say, if you are more expensive, find out why. “Spy” on your competition by calling them and getting some information from a customers stand point. This way you will know what you are up against and will be better able to compensate for what the other guy is missing.
You can provide this information verbally or through written materials such as a company pamphlet or even a cost letter. We use an inexpensive piece of software to not only find out what our breakeven is but also break down the costs of any call through an educational letter we send to customers. It actually will show them how much of every expense you incur was dedicated to their specific call. All we do is input the worker hours and materials and the system spits out a letter and a cost breakdown sheet that shows them that $25.12 of their bill went towards office rent, $12.53 went toward your Yellow Page ad, another $15.62 went toward truck insurance, etc. This has worked out great since it helps the customer better understand our true costs and how little off their overall bill is actually profit!
So bottom line, make sure your customer's perceived value of your services is high! Also, insure that they know a little more about how much it costs to provide the peace of mind service that you offer. And finally, give them something more to compare you with than just a price, especially those things that you know the other shops are lacking! It will go a long way to separating you from your competition!
If you have any questions on this, feel free to email me!
Marc Blanchard
