Ok, just thinking out loud here but I have been thinking about the concept of "perceived value" pricing which basically is "how much is a customer willing to pay for a service" each customer has a perceived worth of what your service is worth to them, and this price is infinitely variable, for example some one might consider the worth of your service to them to be $100 where as another customer may perceive the value to (to them) to be worth $500 or consider this, what if those numbers were $1,000 and $5,000
what am I trying to say? well you go to and give a quote based on your mathematical formula you have developed, say square feet x $x by is the sun shining = $ your quote and provide them with a price of $500 and this is the same price you provide to all based on your formula. but what if your customer "perceives" your service to be worth a lot more to them? may be they are willing to pay $2,000 for the job to be done but you have only quoted $500 so they say yes go ahead and do the job. you are happy because you are going to get paid $500 but stop and think you may of just cost your self $1,500 because the customer could have been prepared to pay $2,000
Every one is different and every one places a different value on things based on their perceived worth of the service to them.
So what if you did something like this. Ok you do your normal pricing formula and come up with $500 for the job, now in a pinch you may knock 10% of that price if you had to haggle to get the job so basically $450 is your absolute lowest price. There is no highest price as long as the customer is happy with what they get, so, before you open you mouth and say "yep here's your quote, it's going to cost you $500" how about saying "what are you prepared to pay to get this work done?" (after pointing out all the benefits and how fabulous it will all turn out and that by doing this it will change there life) they could turn around and say "I would pay $1,500 for this to be done" bingo! you have just made an extra $1,000 and the customer is happy because he is paying what he "feels" is a fair and reasonable price (win, Win) on the flip side he could say it's only worth $250 to get this job done, then you just say thank you for your time and walk away because the fact is that he would not even pay you absolute minimum price of $450 anyway. or you could say sorry but $500 is my lowest price. the point is there is NO MAXIMUM PRICE!
So what if you had a "NAME YOUR PRICE" marketing program that the customer tells you how much they will pay for the job to be done. if the price is right you do the job, if the price is stupidly low you walk (as before) I believe that you would be surprised how many people would be prepared to pay more then what you would have quoted in the normal way.
How could they not be happy? They named the price!
Great post, Martin. How many times have we all had a customer look at the total price and say "Oh, really? That's all?" That closes the door on what could have been a much higher profit margin. This is definitely something to think about.
A better question would be to ask, what is your budget for this job? Ask it early. A lot of times they won't offer a number, but never walk away if it's too low. Simply explain in detail how you're a professional and what you can offer. You can also bid high if you are busy with lots of work. I used this method just this week. You can tell if a customer is leaning toward doing the job or not, just by asking the right questions and listening to what they have to say. I did work for this one gentlemen twice before. This past week, he called me for more work (not roof cleaning) once again. I was not sure what price to charge. I asked him what his budget was, and of course he said he did not know. I threw out what I call an auctioneer bid. You know, they always start high to see if anybody will bite on that first number. He agreed and we got the job. $ 3700.00 after 6 hours of work, I almost felt bad. Almost. But my point is, I would have done that job for wayyyy less. I felt confident the day of the estimate and decided to shoot high. The worst they can do is say no. This isn't something I use every day, but when you're busy and things are going good, try it. In a former job, I actually went through a week of sales school. I learned a lot during that week.
If I may, the busier you are absolutely determines your price. I know when I'm at my busiest, my competiters are also busy. When I perceive a customer has "sticker shock", I inform them that it's prime time and all roof cleaning/exterior cleaning co.'s are just as busy. Call an HVAC guy during a heat wave and see if you dont pay $650.00 for an hours worth of work. Even if he's merely putting in a few pounds of freon, you will pay. And if you shop around you will see that the market dictates. Another major "buzz" word is people calling and asking for a "free estimate". I know there shopping and comparing quotes. As opposed to the guy that calls and says "I need my roof cleaned". He may be willing to pay more so your service better be on point. When my price is high the customer does a double take, I explain how the job starts long before I get there. The special roof cleaning agent has no shelf life, it's made to order. It's not like I can make bulk supply and store it. It's expensive and is concocted the day of the job. That usually closes the deal.
Now here is something else I have been thinking about. instead of sending out flyers etc. why not give out "GIFT CARDS" you could make them out to be worth say $50* (the conditions being that the job is worth over say$500) so in essence it's a 10% discount card. but if you give someone a gift card (for roof cleaning, power washing, window cleaning or what ever) worth $50 they would feel as if you have just given them $50 and they would be inclined to "claim" their $50 who would not want 50 bucks for free? of course they would have to book a job worth $500 or more to get there 50 bucks for free.
you could also say some thing like "if you can not use this free gift card please give it to someone who could benefit from it"
this would be as good as a referral.
personally I know that if someone gave me a gift card worth $50 I would try to claim my fifty dollars worth of value or give it to some one who could. Idea???????
-- Edited by idontknow on Sunday 11th of July 2010 08:16:28 PM
Another great "get you thinking" post. These are great ideas. It also works if you see a job you don't particularly want to do. Give a high enough bid that if they do take it, it is worth your while. When I take a trailer load of stuff to a flea market to sell it, and someone asks me about an item, I give them a high price. If they put it down and start to walk away, I either shoot them a little lower price, or ask them what it is worth to them. Being a salesman will usually get you a little more for whatever you are offering. I used to feel like I had to sell every item or get every job, but sometimes it is better to wait for the next customer.
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So please explain a little more to me. a friend of a friends call me and she wants her roof cleaned and she ask how much, so obviousely her friend already told her how much she payed, so I ask her, well "how much would it be worth to you" and she says Gee I never really thought of that all I know is my friend Paid 500.00. I think you will have to be an all time sells man to sell her higher than her friend?
So please explain a little more to me. a friend of a friends call me and she wants her roof cleaned and she ask how much, so obviousely her friend already told her how much she payed, so I ask her, well "how much would it be worth to you" and she says Gee I never really thought of that all I know is my friend Paid 500.00. I think you will have to be an all time sells man to sell her higher than her friend?
and honestly what would you think if a service contractor came to your house and said " whats it worth to You " ? I personally would think this dude is shady? I would expect to pay what ever my neighbor paid or anyone else?
-- Edited by Walk on Monday 12th of July 2010 09:14:33 AM
A very wise man once asked me what business I was in, I proceeded to explain to him about what I did and what my business was all about, after a while, while I was still talking he interrupted and asked again "what business are you in" I stopped and thought for a while then started to explain what my business was all about "again" He abruptly said STOP, NO. then he said you are in the same business as EVERY BUSINESS IS IN, AND THAT MY FRIEND IS THE BUSINESS OF MAKING MONEY! what you do to make that money is nothing but a tool that you use, it is the same as a builders hammer, a electricians screw driver of a cooks pot, what you do to make money with in your business is just a tool you use that allows your business to make money. I am, you are, we are in the money making business, as small business owners we do what we do to make money that allows us to live our lives. think about that. WE ALL QUOTE THE LOWEST PRICE! when we quote a job the biggest question we keep asking ourselves is "how much will they pay" and our fear of rejection forces us to quote the lowest price, the fact is the client could have been willing to pay much, much more then what we quoted but our own fears and self doubts stopped us from asking for more money. you will never get top dollar if you don't ask for it.
I have heard of a story where a window cleaner did a glass restoration job and made $3,500 for half an hours work and the customer was ecstatic about the work done and the price paid and in fact referred him to other people he knew. WHY WAS THE CLIENT SO HAPPY? because the replacement cost of that glass was around $35,000 the cleaner only charged 10% of the replacement cost and in fact saved the customer $31,500 (PRECEIVED VALUE)
Overall, it sounds unethical and is a slippery slope. The no maximum is what I don't like.
what I should have said is the maximum price is what the customer is happy to pay in relation to the value it has to him/her. I am not promoting ripping people off, in fact it is quite the opposite, I am a very ethical person, I would never rip any one off my conscious will not allow this, but I will maximise my earning potential and match my customers expectations, if those expectations means that they will pay more then the person next door then so be it, you have to remember that no customer will ever pay a price that they are not willing to pay! the only time you are ripping people off is when they are forced to pay more then they wanted to pay.
If you needed a new kidney to survive what price would you pay? If you had no use for a new kidney, how much is a kidney worth to you?
One of the first rules of business is "find out what the customer wants and needs" then sell them that!
So please explain a little more to me. a friend of a friends call me and she wants her roof cleaned and she ask how much, so obviously her friend already told her how much she payed, so I ask her, well "how much would it be worth to you" and she says Gee I never really thought of that all I know is my friend Paid 500.00. I think you will have to be an all time sells man to sell her higher than her friend?
Walk may be the trick is that if you had used this method on the first customer then you would also be making a nice profit on the second customer?????
Please do not get me wrong about all of this, it is just another sales method that is used by millions of businesses around the world (perceived value selling) if you are happy always quoting the lowest price then please don't let me stop you, but if you think that it would be nice to maybe have some more money in your pocket then here's an idea you could try, I'm just thinking out loud here guy's it is not one of the ten commandments.
Aside from factoring time, materials, travel, and all other overhead, how much do we add for novelty? Cleaning roofs is fairly simple and straight forward when its done as much as we do. But there is novelty to it. It's like a magic trick. When I was a kid I would go to this flea market where this guy would do these stupid little magic tricks that amazed me and I could only wonder how it was done until I purchased it. He got me every time. 99% of the cost of the trick was for the novelty of it. Most of the time I was buying a little piece of string with 2 step directions on a card the size of a matchbook, virtually no material. I like to feel roof cleaning is related. Would customers pay your price if they new the actual simplicity of it? Maybe or maybe not. The value of the magic trick goes way down if the secret is revealed before the purchase.
Aside from factoring time, materials, travel, and all other overhead, how much do we add for novelty? Cleaning roofs is fairly simple and straight forward when its done as much as we do. But there is novelty to it. It's like a magic trick. When I was a kid I would go to this flea market where this guy would do these stupid little magic tricks that amazed me and I could only wonder how it was done until I purchased it. He got me every time. 99% of the cost of the trick was for the novelty of it. Most of the time I was buying a little piece of string with 2 step directions on a card the size of a matchbook, virtually no material. I like to feel roof cleaning is related. Would customers pay your price if they new the actual simplicity of it? Maybe or maybe not. The value of the magic trick goes way down if the secret is revealed before the purchase.
No Chit ! Thats why I hate videos showing the actual roof cleaning process
my friend if that's the only other value you can see in what you do then I wish you the best and good luck.
for me, I see so many other high value virtues in the things I sell, in the case of roof cleaning lets start with PRIDE, the home owner is proud of their property, the property that they have worked and struggled for all there lives to get, the home where he spends time with his wife and family, the place when all other places seem dark and dangerous that this place (his home) is his one safe and secure place to come to, his sanctuary, Financial. by cleaning his roof he is investing in his financial future by A. prolonging the life of his roof, B. by maintaining the value of the biggest asset he will most likely ever own. your turn now.....
do you feel that what you do is simplistic and "not worth while?" dose a baker just bake bread? or dose he provide food to many? if you do not see value in what you do then, well, what can I say.