Pest Control Operator Q & A- Raising Prices

Pest Control Operator Q & A- Raising Prices

One of the most difficult challenges pest control operators face is meeting overhead. As labor costs, cost of pesticides, gas prices, and property taxes all increase; some pest control companies are left facing the inevitable… Raising prices to meet overhead, or closing the doors forever.

Question:

How do I tell my existing customers that I am raising my prices?

Answer:

The notion of raising prices strikes fear in pest control operators; and for good reason. Nothing will send your customers to the nearest competitor faster than raising prices. There’s a lot at stake when you decide.

Surviving a price increase means getting it right. You need to keep up the number of sales, avoid a customer exodus, and use your price increase to maintain the required margins.

There are a few pointers other pest control operators have used to help ease this price transition and avoid a mass customer exodus.

Find The Right Time

When you raise your prices, pick a time that will offer the least customer resistance. Your pest control business’s seasonality, growth stage and sales cycle all affect your choice. It’s best to raise prices when times are good rather then when they are bad. When gas hits $5.00 per gallon, everyone pays it. Raising prices when times are lean communicates to your customers that you are just passing the buck on to them.

Offer Customers A Price That Will Sustain Your Company Long-Term

Deciding on how much you should change your prices is very challenging. There are two theories out there: one large price increase, or several small ones over time and hope they go unnoticed. I find the latter strategy, “death by 1000 cuts.”

Set a price that you can sustain your pest control business for as long as possible. Customers can better deal with a price increase if they know the new price will hold steady for a while. You can even offer contracts that can lock in the new rate for a long time, so customers can rest assure the price won’t go up again in the near future.

Be Honest With Your Customers

If you have decided that conditions are such that you need to raise prices, be completely honest with your customers. Explain to them that raising prices isn’t for purposes of gouging them for bigger profits. Explain to them it’s a matter of survival. Many customers understand that your prices have to go up if you want to stay in business.

Brain science suggests that we tend to be more agreeable when there’s a reason for change. Have a reason and share it. Feel badly about raising your price? Share that too. Make sure your common sense explanation is short, straightforward, and consistent.

Changing Value By Emphasizing New Or Added Benefits

Price is supported by the value the customer perceives in the product and service in which the price is attached. Basically, your customers need some additional value of your product s or service if you are going to raise your prices. Focus on the benefits of your unique pest control method, a new and different product, or your company’s unmatched service.

Add An Incentive

Have you ever heard of the saying, “A spoonful of sugar helps the medicine go down?”
A small gift or gift card, a one time discount, or and extra free pest service can help ease this transition with customers.

Listen To Your Technicians

The pest control technicians are your front-line people. Make sure they are all on the same page with the company and that they’re all offering the same truthful explanation to the price increase.

Technicians have more face-to-face interaction with the customer then you ever will, so get some feedback from them. What are your customers saying about the price increase?

Raising Prices

Unfortunately, raising prices are a necessity for many businesses; and not just in the pest control industry. Make sure you absolutely need to raise prices before you do, and expect that you will not retain all of your customers during this transition. With a well thought out plan, you can continue to help your customers live pest free lives, and still stay in business.

Please comment below with your experiences. If you have any other pest control questions, just ask.

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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