How to use pricing as a sales tool for your services
Discover how using subscription models, offering different pricing tiers, and more can be used to help your business generate more sales. The post How to use pricing as a sales tool for your services appeared first on Sage Advice United Kingdom.
More often than not, business owners and service providers think of their pricing as the last great hurdle before winning a customer.
In fact, some companies have made payments so seamless, their customers hardly even think about the actual cost. To give you an idea, Amazon’s 1-click buy system is worth billions now.
This is all well for e-commerce companies, but what can service providers do about their pricing in order to achieve the same result?
After all, a plumbing business can’t very well expect their customers to approach buying an underfloor heating system in the same way as ordering a spatula.
One answer is to leave the herd and go your own way. Instead of always fighting your competitors for the lowest price, the kind of price a customer won’t even feel, you can try using pricing as a sales model.
In this article, we help you how to do this.
Here’s what we cover:
Pricing for value, not for costs
This means calculating your prices based not only on the classic formula of costs + 10% profit, but on the value you deliver to your customer.
Let’s take a concrete example.
Gary wants to have someone install a new air conditioning unit at some point in February. He’s only willing to pay X amount because he has time and comfort on his side.
However, if Gary wanted the same service done the next day, in August, an HVAC (heating, ventilation, and air conditioning) company could charge him a lot more than X because at that point, he needs the service done as soon as possible and during the busy season.
This goes double when you’re thinking of how to write a tender in order to win commercial contracts.
Things such as 24-hour availability or minimal asset downtime are invaluable to customers who want reliability.
Generally speaking, if you’re able to offer convenience, you’ll be able to charge much more than a competitor who forces customers to bend to their own preferences.
Just like Booking.com changed the game for travel agents with a simple but supremely convenient self-service feature, you can also make use of a booking portal and catch all the customers who hate calling – even if your services are a little more expensive.
It’s all about the value you deliver, not your costs or the competitor’s price.
Make use of estimates and/or quotes
Estimates and quotes are specific to service providers, especially for jobs where the work needed isn’t obvious from the get-go.
Installing five smoke detectors might sound simple enough, until the security company realises the location is a protected historical building.
Then they’ll have to get plaster experts and new tools in order to get the job done.
This is where estimates and quotes come into use.
The first is an informal number a business might offer to give the customer an idea of what the final price might look like. The latter is a formal document where the costs are broken down and the contractor commits to charging that specific amount.
Both come with a sales opportunity that many providers neglect: the power of having options.
When trying to give an estimate, make sure you offer multiple numbers for different types of services.
Keep in mind that you’re pricing for value, so a next-day service will come with one approximate price tag, while booking four weeks in advance might actually win the customer a small discount that will make them happy and guarantee you work during a less busy period.
One great strategy for giving multiple estimates is…
Offering multiple prices is a great first step, but you still need to look at those numbers as sales tools and tailor them so they’re all appealing in their own way.
On one hand, only giving the customer two options can make them feel like they have to choose between dirt cheap and getting ripped off.
On the other, too many options and they’re so overwhelmed, they might just consult the competition for a more convenient process.
This is where good-better-best pricing comes in handy.
Tiered pricing has to be presented as good service, better, and the best so that no customer feels like they’re being short-changed, and you don’t damage your company brand by discounting.
There will always be people who only want the premium option, while a lower priced ‘good’ option makes your services accessible to more people, who could go on to become ‘better’ or even ‘best’ customers later down the line.
Consider a subscription model
Another way to shake up your pricing strategy is to create subscription options.
Software providers are experts at this, but this method can easily be adapted to other industries.
For example, in the field service industry, recurring check-ups can be bundled up and sold as a monthly package for a small fee, instead of a big one-off, yearly payment.
The subscription model can greatly benefit your customer retention rate as it takes the pressure off of the customer to continuously look for and book new providers.
At the same time, you gain a reliable, recurring source of income, which helps with cash flow management.
This overall stability between having a steady stream of returning customers and money in the bank at all times will give you more opportunity to expand your business and focus on growing rather than always struggling to keep afloat.
Don’t forget to tailor your invoices
No matter how good your pricing strategy is, there will always be situations where companies have to deal with non-paying customers.
While many are tempted to simply blame it on the people, a lot of it also comes down to how service providers actually ask for payment.
There will always be customers who try to wiggle out of a bill, but that doesn’t mean you should make it easy for them.
A page with basic errors and unclear layout can make you appear unprofessional and is something you’ll want to avoid. If you’re working with commercial clients or estate agents, they might even use it as a legal reason to delay or refuse payment.
When it comes to something as important as invoicing, even a little typo makes a big difference.
A professional invoice that covers all the required information will help you build trust and ensure that whatever pricing method you use, you don’t have to chase debts at the end of it.
Final thoughts on using pricing as a sales tool
There’s a reason they say information is the new currency. But that currency is only truly valuable if you know how to manage it.
These are just five basic methods of using your pricing as a sales tool, but it’s up to you to tailor them to your business.
What’s certain is that field service software can help you do just that, allowing you to run your business on a single screen.
Take your business to the next level now.
7 ways to take control of your business
Want to know how you can boss it at your business? Read this guide for top tips to help you master your business admin and truly take control.
The post How to use pricing as a sales tool for your services appeared first on Sage Advice United Kingdom.