Price Wars: The Pest Control Industry Divided

Going Out of Business

As I was driving into work today I happened to notice a small street corner sign stuck into the ground advertising pest control annuals for $99.00. I suddenly began to cringe as I was left wondering how a pest control company could stay in business with pricing like this. The experience got me thinking.  

Why are so many pest control companies quoting such low prices with operating costs on the rise and profit margins shrinking?

 

I wish I had a solid answer to this question. I have seen numerous companies fail, in various industries, because they don’t know how to properly figure out their real costs and subsequently quote a job accordingly. To understand this complex issue, I dove a little deeper for some more answers.

 

Penetration Pricing

Penetration pricing is a marketing technique many new pest control companies practice to attract new customers. The new company will offer a relatively low initial price, compared to industry standards, in order to gain a piece of the market share. After gaining a portion of the market share, the pest control company will eventually raise prices in order to increase profit margins. The company can expect some customer attrition during this process.

 

Setting the Initial Price Point

When setting an initial price point a company must first determine their primary customer base. A price point will inevitably dictate who your customer is. If it is your objective to be cheaper than your competitors, you can be assured that you will attract those customers where price is their main concern. These customers are known as discount driven consumers or price shoppers.

 

Raising Prices

After the initial price point, a company must raise prices to stay in business. Raising prices can best be described as an art form and can be very difficult to bring about. If you raise your prices without offering something additional customers will feel like you’re cheating them. After all, you’ve already told them that your service was worth $ X.XX. We all saw what happened to Netflix when they suddenly raised their prices by 20%. Subscribers couldn’t cancel their services fast enough. When they opted to raise prices, they weren’t increasing the VALUE of their new price point.

 

The Disadvantages of Penetration Pricing

Penetration pricing establishes long term expectations for your services. Simply stated, you have to be careful when setting out to be the cheapest pest control company in your area, because you are essentially establishing that your new lowest price is what your services are worth. This expectation can also lead to a negative or “cheap” image preconception for your pest control company. Opponents of penetration pricing also argue that you will only attract bargain hunters that will eventually switch companies when prices are raised.

 

Industry Fear

The #1 reason we are seeing pest control companies quote lower and lower prices is because it’s driven by fear. These companies are scared they will lose a customer if they raise their prices. Likewise, they are scared to ask for a more reasonable price right up front because of the possibility of not getting the customer at all. It can be argued that companies need to sell the “value” in the services they provide or do a comparison of services and providers.

 

Industry Regulation

Many pest control companies are voicing their desires for a national or local pest control association where these low-ball price issues can be brought up among peers, and potentially have the playing field leveled. Many would also get on board with an advertising campaign to promote the professionalism of the industry. An excellent example would be The National Association of Realtors. Working together with a number of other pest companies can provide a larger presence in the industry.

Anyone can start an association, and the benefits can be huge. Members can also qualify to get big discounts on things like insurance and cell phones with group rate buying power. This also allows for the small-medium sized companies to get together and bid on larger contracts.

 

A Better Business Model

I have emphasized many times previously the need for pest control companies to focus on the VALUE of their services instead of just price alone. By focusing on the quality of your service, the premium products you use, and the availability and expertise or your technicians you strengthen you company’s value to the consumer.

There are so many other ways to compete, other than price alone. Find a niche in the market and work it hard. Find a way to set yourself apart from others in your business by doing something they don’t do or offering something they don’t offer. 

 

Business Model Triangle Business Model Triangle (Photo credit: Alex Osterwalder)

 

As an owner or manager of a pest control company, you must also educate your consumers.  “Buy cheap, pay twice, and still have a pest problem!” Remember to educate, educate, educate!!

 

Please share any ideas on how we might become united as an industry on this issue. 

 

 

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Calibration is very important to a Pest Control Technician.  Applying the chemical as efficiently as possible requires that his/her equipment be fully calibrated.  The effectiveness of the pest control treatments may have a lot to do with the technicians ability to calibrate chemicals and chemical applicators.  Calibration ensures that the chemical has been diluted and spread properly/evenly over a desired space.  Calibration also prolongs the use of valuable tools and equipment that technicians use by prolonging equipment lifespans.  At Bulwark we use Power Sprayers to treat the perimeters of our customers’ homes.  Non calibrated “rigs” would lead to motor burn out, hose damage, or nozzle failure.

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For those working in the industry there could not exist a more important equation dealing with safety.
Risk = Toxicity x Exposure

Understanding this is imperative. The goal is always to minimize risk or ultimately eliminate risk if possible. As a service manager I would always try to hammer this into our technician’s mindset. Worrying about our customer’s and technician’s safety is cardinal when it comes to effective pest control maintenance. I would always advise our technicians to especially be cautious when handling pesticides. The reason is “Exposure.” Technicians are consistently exposed to pesticides if they are not wearing proper PPE. Although the chemical may be of low toxicity, because there is a high risk of exposure while applying pesticides; Risk increases:

(Low Toxicity) * (Daily Exposure) = High Risk

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IPM: Integrated Pest Management

Integrated Pest Management (IPM) is sometimes referred to as a total science that encompasses the basic principles that guides the perception of the right way to approach pest control and pesticide application. The ultimate goal of Integrated Pest Management should be to identify conditions that are conducive to unwanted pest presence, the measurement of tolerable pest thresholds, and the best way to control pests in a manner that is the least destructive to the environment.

We can better identify conditions that are conducive to an unwanted pest presence by recognizing the three aspects that make up Integrated Pest Management.

The three parts of Integrated Pest Management are:

  • Environment
  • Insect/Pest
  • Food Source

The goal is to see how our homes play out relative to these three components of Integrated Pest Management. Integrated Pest Management is a science that focuses itself on these three factors and how they specifically can be applied to any specific property. For example I will give you my IPM perspective towards controlling scorpions. First and foremost I look for environmental factors that are conducive to scorpions and/or scorpion activity. I look for construction nearby which may have removed the scorpions previous habitat, or perhaps may have disturbed the current habitat and encouraged migration. Secondly, I would look for the introduction of new landscaping, and particularly types of agriculture used as a natural habitat for the scorpion. Furthermore, does the customer have various water sources, pool, poor drainage, etc?

Does the customer have a lot of make shift harborages for scorpions; firewood, old washer and dryer, kids toys, un-maintained brick walls/fencing? What type of (gravel/rock) landscaping are they utilizing? There are many different things that although artificially created produce an environment that scorpions are naturally attracted to.

In addition to environmental conditions, (and probably after recommending that nothing sit up against the house for at least 2 feet) I would focus on food sources. Although controlling the scorpion’s food source may be a good idea, I am always cautioned by my respect for their antiquity. The fact is that scorpions have been around for millions of years and have over the ages developed the ability to survive under the direst circumstances. Scorpions eat various insects; ensuring that you eliminate the scorpion’s prey of choice can help control an unwanted scorpion population. Divulging from my scorpion perspective to help add emphasis to the “food source” aspect of Integrated Pest Management I would like to quickly point to fruit flies. I would often run into customers who would complain about fruit flies and come to find out they have a huge pomegranate tree in their backyard with fully ripened fruit dotted throughout the problem area. The IPM way would be to remove the fruit (food source) and in turn, remove the pest.

The final aspect would be to look at the insect/pest or in this case the scorpion. The nature of this pest may justify more drastic measures because of the type of danger a scorpion bite poses to humans. Secondly, the threshold of scorpion tolerance is very low (as opposed to a fruit fly, where tolerance can be significantly higher). I have not met a person who could tolerate sharing their home/yard with scorpions. I would always recommend that every precautionary measure be taken when it comes to scorpion control.

The general theme surrounding Integrated Pest Management is that overall there may be a progressive approach that you can take to pest control that in some cases may not utilize pesticides or is more environmentally friendly. Sometimes changing environmental factors within your control can eliminate/control various pests. Desert Landscaping as opposed to Green Grass is conducive to different insects/pests. Sometimes controlling the availability of food sources; dog food, dog poop, fruit trees, wood, etc. will help prevent the unwanted pest who prey on your unsuspecting food sources. Finally, look at the insect and identify a threshold of tolerance. Insects/Pest all have its own implications on our environment. Nature’s equilibrium rests upon a delicate balance that requires the participation of all natural living beings and their life processes.