To serve as the voice of the pest control industry, protecting the livelihood of pest management professionals while fostering education, promoting professionalism, raising ethical standards, enhancing environmental stewardship, improving public health and quality of life.
Mark L. Hendrickson, Wingra Group
If you’re in business as a pest control operator, you want to make a profit. You also want to serve your customers well and fairly. You know the drill: you don’t want to drive customers to a competitor because of high prices, yet you don’t want to give services away with too low a price. How do you price your services at that critical balancing point to make a fair profit and grow your business?
Build a Competitive Price Index
A wise consumer will often call 2-3 pest control companies to obtain a competitive bid for service. This is intelligent shopping. As a business owner, you need competitive intelligence on your side because it helps you determine what to charge.
How do you obtain such information? You take the initiative and get it with a few telephone calls or emails. You’d be surprised how much information you can acquire by placing a few anonymous phone calls to competitors. Be wary of caller ID, and if needed, have someone you know make the inquiries.
In approaching a competitor via phone or email, do not ask for the full pricing menu. Ask as a consumer would, about a specific pest situation. As an example, let’s say you’ll call competitors with a problem about mice. You’ll want to ask how they plan to eliminate the mice, whether they’ll use glue boards, bait stations, poisons and so forth. What is their price? Is the price for one time, or a series of visits to your location? Do they offer a long-term contract? What are the provisions of this?
Be aware that for them to provide a price, they may need to ask you a few questions in return, so be prepared. They may ask about severity of the infestation, where it is, whether you have taken any steps on your own in terms of elimination and exclusion. I suggest you contact at least 3 direct competitors, and keep track of what you learn. Then, price your services at 80-90% of what they are charging.
If you discover that customers want even a lower price, you could offer a “new client” discount, which gives you the chance to soon move them closer to market rates for your services.
Conduct such intelligence work at least once per quarter. In doing so, you’ll build your own competitive price index which is useful for:
Understanding pricing dynamics and your competitiveness in the market.
Developing optimal pricing strategies to grow your business.
Where Do You Set Your Price?
If you learn that a competitor across town is charging $150 to treat a house and you’re charging $90, you’re leaving money on the table. In setting your prices, you don’t want to be the lowest nor the highest priced in your market. In fact, consumer groups suggest that price should not be the primary factor governing one’s decision. They say that a low-priced company may not be charging enough to cover the cost of using the best materials or of spending enough time to get the job done. In contrast, a company quoting a high price may be overcharging for their services. The best consumers will check around. You should do the same in setting your prices.
Mark L. Hendrickson is President of The Wingra Group, a marketing and business development firm in Madison. For more information, contact him at mark@wingragroup.com.
Tim Dollmeyer, ActionCOACH Business Coach
What is the most important outcome of your business? It’s the easiest and cheapest to affect, and the most overlooked: Profit. You see, without a profit you don’t have a business – you have an expensive hobby.
So what are strategies for increasing your profit? For starters: measure it. As the saying goes, “You cannot manage what you do not measure.” The only way to know if any actions have made an impact is to know what you currently have.
Knowing your bottom line is not enough. You need to know your margin on every product line. You must measure the cost on every item or service that you sell. If you sell sandwiches, you should know the cost of each leaf of lettuce on each sandwich. Only after you know your numbers are you ready to move on.
Now comes the fun part: implementing profit strategies. The first and easiest strategy to increase your profit is to up your prices. I know what you’re thinking: “But Tim, if I increase my prices, people will stop buying from me!” You would be right if you would increase your prices by 25%. But studies show that a 10% increase in prices will barely be noticed. And even when it is noticed, the drop in sales is negligible.
When is the last time you increased your prices? Was it more than a year ago? What happened to your costs during that time? If you haven’t increased your prices within the last year, you need to raise them now! Besides, the customers who won’t buy from you as a result are probably not worth keeping.
You also need to focus on your product lines (if you are a service company, think of your services in terms of products). Which product lines are the most profitable? Also, what is the turnover rate on each product? It may well be that you need to drop a product with a high margin because nobody has need of it.
Focus your marketing on the highest profitability lines. You must also ensure that your staff is working at full productivity. Is there room for anyone in your business to become more efficient and thereby take on more work? Are you performing tasks that don’t bring value to the business? What can you delegate to your staff so you can bring more dollars in? These are just a few of many strategies you need to look at.
Tim Dollmeyer is a certified ActionCOACH business coach. If you have questions, call 262-672-2915 or email timdollmeyer@actioncoach.com.