You're Not Pricing Right, Mr. HVAC Contractor
You’ve never haggled over the price of a McDonald’s hamburger. You may have opinions about the relative quality of fast-food, but you always pay the listed price. Same for restaurant food, or car washes.
For so many services, you always pay up, because: That’s. What. It. Costs.
That’s how it should be for your HVAC, plumbing or electrical service business. If you’re not using a menu-based pricing method that establishes a set price for every service item, you’re losing money, and will always struggle to pay the bills.During an enlightening hour of discussion with Rodney Koop, which covered a variety of subjects, this HVAC-contractor-turned-pricing-expert shared the basics of his “New Flat Rate” menu-based pricing method, which for quite a few years now has been solving the pricing problems of those contractors who are willing to change, through Koop’s appearances at industry shows, seminars and personal on-site instruction with business owners.
Contractors have basically four pricing options: time and material; standard flat rate pricing,that puts a price sheet into the hand of the service provider, so they can do up-front, no-surprises pricing and collect on the job; a hybrid “selling technician model,” which means you must hire technicians who have selling and communications skills; and menu pricing, where you can get back to hiring skilled technicians who understand quality and craftsmanship, who you provide with a simple pricing menu, and the customer chooses the service they want. Only the menu pricing method will bring true profit, and real business success.
“Menus are so simple and so powerful that waiters and waitresses use them to sell hundreds of millions of dollars in products and services every single day, with no sales training at all,” Koop said.
But sadly, true menu pricing is glaringly absent from service industries.
“Less than 1/100th of one percent of in-home service providers use anything that even remotely resembles the simplest, most basic car wash menu. And people will pay as much as $60 to $80 for the highest priced car wash. That’s the power the menu has to dump cash into your business.”
Many contractors believe they’re using menu pricing, but most of the time, they're mistaken, Koop says.“The enemy of the in-home service provider is their belief that they tend to believe that they’re using some type of menu system. And because they think they are, they don’t open their minds to a true menu pricing schedule. They don’t understand that a menu is different than trying to package and bundle options,” Koop explained. “The secret of a true pricing menu is to create profit where it previously did not exist, and get paid for knowledge, wisdom, and experience at top value, which puts real dollars on your table every day. The menu creates profits for those high-value things.”
You’ve all heard the story of the mechanic who visits the out-of-commission factory, taps on a valve and charges the factory $1000, because he knew which nut to tap or which valve to adjust. The point is: expertise matters.
“The only way to get paid for expertise is to have the guts to charge a high amount and say, 'take it or leave it,' which you really can’t do five times a day all year long. The other method is to have a system that does it for you. That system is the menu,” Koop said.
The new car business is another example of menu power. The most expensive new car financing menu includes car washes, tires, all service, roadside assistance, a free loaner and more.
“And guess what? Somebody selects those items from a list of menu options, because dealerships find a menu is the only way finance managers will be sure to offer every item,” Koop revealed. “Finance managers in a car dealership typically make $75,000 to $150,000 a year. Yet they still neglect to offer every item without a menu. And we send out technicians making $20 an hour, and we think they’re going to represent the company the way we want them to?”
The menu takes the human factor out of it.
Rodney Koop's New Flat Rate is offering free first-looks at The New Flat Rate pricing method in four cities in 2018. CLICK HERE for information.
About the Author
Terry McIver
Content Director - CB
As director of content for Contracting Business, he produces daily content and feature articles for CB's 38,000 print subscribers and many more Internet visitors. He has written hundreds, if not two or three, pieces of news, features and contractor profile articles for CB's audience of quality HVACR contractors. He can also be found covering HVACR industry events or visiting with manufacturers and contractors. He also has significant experience in trade show planning.