By Charlie Greer, Contracting Business
How do you determine a flat rate for your trip charge? I say it should be $19, $29, $39, $49, $59, $69, $79 or $89. What kind of an answer is that? What about your breakeven-point, your overhead, your direct cost and your market statistics? Unlike the rest of your pricing, the trip charge isn’t a factor of your break-even point, your direct costs, your overhead expenses, or anything else like that. Your trip charge is your “regulator.”
Two Types of Contractors
For the purpose of this discussion, we’ll divide contractors into two groups. One group has all the work they can handle. The other group is short on work. If you have more work than you can handle, go with a trip charge in the higher range, such as $69, $79, or even $89. You might say, “If I do that, I’ll lose half my customers!” That’s the point. Because you have more work than you can handle, you can use a higher trip charge to discourage overly price-sensitive consumers. If you’re not in the position to lose a few customers, then you should go with something more moderate, such as $49. If you’re really hurting for business, remember this: The lower your trip charge, the fewer hang-ups you’ll get, and the more service you’ll run. Go with a number on the lower end of the scale, such as $19 or $29.To this you might respond, “Go out to the house for $19? I’ll go broke!” No, you won’t.
The Pricing Strategy
Most flat-rate pricing systems have two prices for every task. One is called the primary repair; the other is the secondary or additional repair. The primary repair is any repair priced somewhat higher than the same repair would be if it were a secondary or additional repair. It’s more cost-effective for the service company to do as much as is needed on one call than it is to do the same amount of work over several trips. Therefore, you can pass the savings on to consumers in the form of lower prices for additional tasks. These are the secondary or additional repairs, which are priced lower than the same task when classified as a primary repair. If you’re offering a cut-rate trip charge just to get in the door, you can recoup those expenses by incorporating them into the price of the primary repair. From a sales point of view, it helps me to get a higher average service call by offering customers an incentive to buy more now. I can say, “The more we do while we’re here, the more you save.” You might wonder, “What if we have a technician who’s always just charging the minimum charge? Won’t we lose money with a low diagnostic fee?” The answer is absolutely yes. Any one of your technicians who consistently collects only the diagnostic fee either needs some additional training or should be let go so he can work for a competitor and cost that company an arm and a leg in lost business and profits. Nearly 100% of the calls that I run with technicians involving non-working equipment result in our doing the repair. This isn’t to be mistaken with people calling around looking for prices on replacement equipment. That’s an entirely different conversation. I’m talking about people with nonworking equipment who are looking to have it repaired. My experience has been that by the time I get to their home, these customers have already done their price shopping. They want it repaired, and if they didn’t think it would cost money, they wouldn’t have called me out there in the first place.
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People calling around comparing service rates will often use your trip charge as the only factor in comparing your service prices with that of your competition. In other words, a cut-rate trip charge could actually convey the message that your service rates are lower than your competitions’, when in reality, they may be considerably higher. It’s funny. Your trip charge gives customers the least amount of information regarding your company, yet it influences their entire decision. Forget about the quality of your service. You could be sending people out on a prison work release program to do the work. However, they will never know it, because they based their entire decision on your trip charge.
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