by Rodney Koop
Founder/CEO, The New Flat Rate
I have been stepping lightly for seven years now because I didn’t want to hurt any feelings, but I think it’s time to get out the meat.
“Where’s the beef?” should be the battle cry of our entire skilled services industry.
Where’s the beef when someone actually calls me for a service call and then does not buy when I get there?
Do you realize that 69% of the people who walk into a car dealership to look at a car will buy a car somewhere within two days? Within 48 hours, they will spend an average of $36,113 for a new car and $19,400 for a used car. I’ll bet most of you actually spent more on your most recent car purchase. Yet even after a homeowner found your number, asked around about you, called you on the phone, gave personal information to your call taker, scheduled a service call with your dispatcher, actually took off work to meet your technician, greeted your tech and explained the problem in detail, and sat through the technician’s explanations, for some reason after all of that, told your technician his price was too high and he would get someone else.
Are you kidding me?
That would be like going through an entire test ride of a new car, agreeing on the price, letting them drive your car and give you a price to trade, signing the work order, waiting an hour or more for the finance guy to get the paperwork ready, cleaning out your car, your trunk, your glove box, under the seats, calling your insurance company to tell them to insure the car, then after all that you sit down with the finance guy and tell him you are going to look for a car somewhere else because you don’t like his price.
Where’s the beef? How in blazes can you lose a sale when the customer spent so much of his time and effort to get to the point of sale?
That would be like picking out a basketful of groceries in the grocery store (one hour minimum for my wife) then at the cash register saying, “I think I’m going to go shop somewhere else,” and leaving the basketful of groceries and walking out.
Where’s the beef? How can you possibly lose that deal? They called you, they waited for you, they desperately want it fixed, and they can find the money, so how can you possibly lose that deal?
I can understand a few percent of customers having no money at all, no resources at all, or thinking that you work for free and will gladly send a bill in the mail sometime in the next six months, but one out of 10 sending you down the road…something’s wrong; two out of 10, you’d better check your deodorant; three out of 10, are you even in business? I have had contractors tell me they close five out of 10 service calls…are you crazy?
I understand that there are some pretty bright minds out there who would tell you that you need to raise your prices until you are losing 20% of your prospects. Twenty percent…are you nuts?
I did not go to an Ivy League Business College, (It’s that whole “send us your transcripts” thing). But even though I may not be as smart as some, I do actually carry a wallet; I am actually certified to walk into a store and make a purchase, so I do have that going for me.
Imagine standing in Walmart and just watching people, (yes, I do that, and not just at Walmart). Imagine that out of every 10 people who walk into Walmart with the intention of making a purchase, two of them walk out having bought nothing at all because they think the prices are too high.
Now imagine that you are the vice president of sales for Walmart with a big corner office in Bentonville, Arkansas, the hometown of the retail giant.
Imagine going into the Big Cheese’s office and saying, “Hey, Mr. Walton, good news: we are losing 20% of our prospective customers in our stores; I guess I finally got those prices right.”
Keep imagining…do you picture a guillotine? Because someone’s head is going on the chopping block.
So, where’s the beef? We’re getting a lot of advice in the skilled services, but it’s not working.
Oh, maybe it worked a while ago…like 20 years ago. Actually, 20 years ago would be 1998, and that is about when it all quit working. Go ahead do the math; think about your career in skilled services. What was happening in 1998? Everybody was switching over to flat rate pricing with some success. You need to go back farther than that back to the early 90’s when flat rate pricing was working really well, but by ’98, it was losing the magic, and by 2003, it just sucked.
But the hype; oh, the hype! Flat rate pricing is the answer; go to flat rate pricing; raise your prices; raise your prices!
Remember standing in Walmart. Why don’t they scream, “Go to flat rate pricing and raise your prices?”
Because they are not in the wholesale business. They are retail experts. Yes, experts. They would never put a coffee pot on the shelf for $39.00 and then raise the price to $49.00 if it wasn’t selling well enough or if their profits were down. What would they do? They would put the $39.00 coffee pot on a shelf with 10 other coffee pots priced from $9.95 (how does that resonate with the “raise your price” crowd?) all the way up to $389.00.
And now, what happens to the $39.00 coffee pot? It flies off the shelf, but so do the others. The only ones that don’t sell well are the $9.95 ones, which now look cheap, and the $389.00 ones, which only have a limited number of prospects anyway. But 5% buy the top one and 5% buy the cheap one. Everyone else buys in the middle.
I have spent hundreds of hours at Walmart, The Home Depot, Lowe’s, Menards, Sears, McDonalds, and dozens of car dealerships watching how people buy products and services today.
So, where’s the beef? Your pricing system doesn’t work and raising or lowering your price will not make it work.
So, where’s the beef? Sales training! Is that the answer? When did sales training really take off? Around 1998. And why did sales training take off in 1998? Because our technicians could not bring home the bacon with our flat rate pricing guides.
And why is that? Because in 1998, we began to “raise our prices” to compensate for the 20% or more loss of customers. In 1998, that thing called the Internet was catching on in a big way. In 1998, eBay and Amazon were catching on. In 1998, The Home Depot and every other big box store was putting their footprint right in your back yard and advertising deals to your customers. In 1998, our technicians were jumping ship because they did not like us harping day and night that they weren’t trying, weren’t doing their job, bringing the big bucks back to the boss.
And sales training, like a shooting star, flashes bright in a few of the techs’ eyes, then like that same shooting star, it disappears. Gone. And your service techs, well they left too! They went somewhere else to work, where they can either be appreciated for actual technical skill, or why not get the bucks themselves and just start their own business? I bet a lot of you reading this right now were a tech working for some boss that was trying to make you into a salesman and you didn’t like it.
Go ahead; map your careers and businesses and tell me that didn’t happen. Oh, I know you, like me, had some bright spots, didn’t you? You had some techs who, for a time, made it look like it was all going to work out. For a while, you actually thought you were about to hit easy street.
Then something happened and it all fell apart: in the meantime, all those techs that left you became your competitors, and now there are 10 times more competitors, aren’t there? You wonder why the phone doesn’t ring? Well, it rings just as much, but now it rings all over town, and that doesn’t even count the heavy hitting marketers. Oh yes, the third-party lead generators like the home insurance companies that spend about $100,000 in advertising for every dollar you spend. Do you feel it yet?
Then in 2000, the year that changed the history of the world, the manufacturing industry needed skilled hard workers and saw the dissatisfaction in the skilled trades industry. They pillaged skilled labor; they raped our industry…the first time in the history of the world that manufacturing paid higher than skilled labor. And what did it cost them? One to two dollars over what you pay, plus a piece of health insurance. And if you want to know the most powerful incentive I have ever run up against as an employer, I’ll tell you what it is. Vision and dental insurance. Yup, they will leave you high and dry; they will throw you to the wolves. If a carpet mill gives their children vision and dental insurance, you can kiss them goodbye because they are gone. And why don’t you provide vision and dental insurance? Because with a business model that loses 20% of your customers every year, you can’t afford it.
Do you hurt yet? So, speaking of hurt, just how much money have you spent trying to solve this problem? You know, like incentives, perks, bonuses, commissions, performance pay, sales training, meetings, coaches, memberships books, tapes, seminars? I could retire on what I spent trying to solve those problems.
How many times did your wife (like my wife) say “Ok, Rodney, we’ll give it six more months?”
Well, I don’t suppose she called you Rodney, unless of course your name is Rodney, but you get the point.
Why doesn’t flat rate pricing work anymore?
Because flat rate pricing puts the focus on the part (which they can buy cheap online or down the block), and it puts the blame on the technician.
The blame on the technician, that’s another entire story but it is a huge reason that you can not keep technicians no matter how much you pay them. No one wants to be blamed constantly.
Everything you try to do is simply an attempt to get the focus off the part and the blame off the tech and spending $50,000 on sales training will only work on 3% of all the technicians in skilled labor. And they will eventually quit working for you.
So, how’s that business plan working for you now?
Do you hate me yet? Don’t kill the messenger just yet.
Flat rate pricing depends on the technician to soften the blow, add the value, educate the customer, overcome the objections, and close the sale.
Imagine being in your favorite retail store and depending on a store associate to soften the blow, add the value, educate the customer, overcome the objections, and close the sale. Pretty hard to imagine isn’t it? So why the heck are contractors still trying to do it? Because flat rate pricing actually worked a long time ago, and they can’t get the taste out of their mouth. Every day, the Kool-Aid keeps being poured down their throats that flat rate pricing is the answer.
Well, it’s time to step on some toes, because those days are over. If you listen closely, you will hear the experts say, “Well you really need to get your techs to add value, upsell, look for more opportunities, schmooze the customer, create a relationship, educate the customer, overcome the objection, close the sale.
So, where’s the beef? Well, here it is. Americans spend over 40 times as much money each year eating out than they do on home repairs, and it’s sold to them by someone working for tips with the only tool in their possession: a menu.
That is why “I Kissed Flat Rate Pricing Goodbye!”
Cell 706-581-0622 anytime
Pricing enthusiast Rodney Koop is the founder and CEO of The New Flat Rate, a home service menu-selling system designed to put profit directly into the hands of plumbing, electrical, and HVAC contractors.