On 4/13/2012 9:51 AM, Stormin Mormon wrote:
I got a call today, and fellow wanted my prices. I quoted my usual price. I
can tell over the phone, the "uh, I'll call you back" routine. The price
that I used to get, before. Not making any sales.
Should I lower my prices, and figure that a low price job is better than no
job?
Christopher A. Young
Learn more about Jesus
www.lds.org
.
This is a very complex question that depends a LOT on your business
model and financial condition. How many employees you've got standing
around. What's in the warehouse depreciating.
Lowering prices is generally bad psychology.
All you have to do is read the stuff in your mailbox or watch TV.
It's not about price. It's about perceived value and creating a sense
of urgency to purchase.
Car companies do it by bundling a bunch of high-margin features you
probably wouldn't buy and telling you you're getting a bargain
on the deluxe package.
Food stores do it with a coupon. Milk for $1.99/gal (with $10 purchase...
not including booze, cigarettes...endless list of exceptions).
Good Saturday only. Low price on something you want.
Urgency. Collateral purchase.
With a service business, you have to make the phone ring.
Once you have 'em on the line, you have options.
People often buy from the last place they contact.
If you've got equivalent pricing, you need urgency.
"We've got a special this week. Free air filter with
furnace service." 1-year additional labor warranty
on high-efficiency furnaces. Giving away something that may cost
you nothing, but has perceived value to the customer.
"I've got a truck in your area this afternoon. I can give
you 10% off the trip charge if we can do it this afternoon."
I'm a low price doityourselfer/tightwad.
The torsion spring on my garage door broke last weekend.
I googled and discovered that you can't buy the springs any more.
But you can use the conversion chart to get similar springs
with no guarantee that they'll work. And there ain't much you can
do to change the torque of the spring after it's wound.
They're expensive and expensive to ship. And no guarantee that
the door will balance well enough for my wimpy opener to manage the lift.
So, I grit my teeth and started thinking about having it done.
I narrowed it down to four places.
First place had a coupon for door spring replacement and the lowest price.
Their address was local, but the phone was half a state away
and long distance. I drove by the address...It was a residence.
Took 'em a day to answer my email, but didn't answer ANY of my questions.
Third was out of business.
Fourth wouldn't sell me springs and the installed cost was high.
I visited the second choice last because of the logistics of the trip.
Springs of the converted size were a little more expensive than
the cheapest I'd found online. They could do the job the next day.
They guaranteed the door opener would work when they were done.
So, I spent an extra $100 more than DIY for the peace of mind that it
would work. People who know the tightness of my wallet would think I'd
had a brain aneurysm.
Turns out that the door balance was a non-issue, but I didn't know that
at the time.
There was some urgency, I wanted the garage door open.
I didn't take the cheapest option.
I bought from the last place I visited because they instilled
confidence.
Cutting price without a long-term analysis is risky.
Increasing perceived value is always good business.
Coupons are used because they limit the damage and don't
create long-term expectations of lower price.
I wouldn't count on the economy getting better any time soon.
Discretionary spending is down.
You'd best offer services that people MUST have at a price that
will keep you in business.
Sometimes you just need a new career. Hanging on to a failing business
too long drains your resources to the point that you can't afford the
startup of the new business.
Merging with a similar business can benefit both.