Pricing Principles You Should Know
Hello. This is Jim DuBois from WindowWashingWealth.com. Most window cleaning business owners operate in the dark when it comes to pricing our services. They guess and ballpark what they should be charging. When it comes to research, most don’t do it. But if they do, that usually means taking a look at what the competition is asking and then try to slightly undercut them. Cost analysis? That’s usually a panic move that results in reduced prices regardless, which leads to smaller profit margins and jeopardizing the future of their company in the long run, especially when they begin hiring.
It’s time to shed some light on the mysterious and elusive topic of pricing. Here are a few things you should know:
- Yes, it’s true – people buy at different levels. That’s just one reason why General Motors sells Chevrolets, Buicks, and Cadillacs.
- You can find a Wal-Mart customer in every category. But you can also find a Nordstrom’s customer in every category, also.
- You can choose to spend the night at a Motel 6, or check in at The Ritz.
- Looking to buy a men’s suit? You can get one off the rack at Sears. Or you can get fitted for one at Neiman-Marcus.
The lesson to be learned here is that as a window cleaning business owner, you can pick which clientele you want to work with:
- lower middle class
- middle class
- upper middle class
- the affluent
- or the super affluent
You can decide to cater to a “price is king” crowd. But that can be dangerous because there’s always going to be someone who can undercut you. Or you can choose to work with customers who rank price low when it comes to doing business.
Competing on price can be hazardous to the future of your window cleaning business.
If you aren’t the cheapest, it makes no sense to be “one of the cheapest”. Because those who shop price only are all going to go to the cheapest. Which leaves you out in the cold. Make sense?
If you are in the service business as we all are, you must reinvent yourself. Find something besides price to be competitive. Maybe your service is second to none. Or your estimate turn-around time can’t be matched by the competition. Find something besides price that you can use to leverage your business.
For example: There’s a pizza take-out and delivery shop that decided to go gourmet. It’s located in a small city where they compete with dozens of other pizzerias. And their prices are higher than all of them. They don’t offer special deals, discounts, or two-for-ones. And they don’t do Groupon or Valpak. They doubled their sales and profits last year. Here’s the key word that differentiates them from all the other pizzerias in town: gourmet.
This is where branding, professionalism, and outside perception becomes important in your business. In past articles, I have talked about Unique Selling Propositions and Articulated Sales Arguments. This all applies if you want to price position yourself.
Don’t worry about so called “industry norms”
Most business owners take a look at what their competitors are charging. They make note of the high price, the low price, and end up setting their prices somewhere in the middle. As unscientific as it may sound, this is the way most window cleaners establish their prices.
Most selling occurs in a vacuum. If your selling process doesn’t, you need to change your marketing approach so that it does occur in a vacuum before an actual sale happens. In other words, the money is in selling to the affluent for most of us focused on residential. You don’t want to sell in a competitive environment, you want to sell in a vacuum.
Also, test price elasticity - go create a “Deluxe” version of your services. At least 5% of people will buy it because they just buy the expensive thing by default. Price is always elastic because of the person - if it wasn’t, there wouldn’t be any upgrades when someone buys a car. The more affluent your market, the more likely they will take the deluxe package.
There is “price”, and then there’s “presentation of price”. This means structuring the services you sell, how you package it, how you market it, and to what audience, and how you deliver it differently than the competition. These small, subtle differences allow you to set a higher price, because a direct comparison to lower prices can’t be made. Why? You’ve built in value-added benefits and features to your service – something the competition doesn’t offer.
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