ACHRNEWS

The Positive Aspects of Flat Rate Pricing

May 1, 2001
Prior to the introduction of flat rate pricing to the hvac industry in the early 1990s, companies and technicians were committed to the “time and materials” method of payment for service.

But as more industry service companies are moving away from this method, more hvac customers are becoming aware of the advantages of an up-front price on service repairs. That is why I feel it is important to educate contractors and technicians on the benefits of utilizing a flat rate pricing system.

Flat rate pricing can bring credibility and security to a company because customers know how much their service will cost, technicians are allowed the time to arrive at the proper diagnosis and perform a quality repair, and owners know that their rates are sufficient to operate and grow a quality business.

A typical flat rate scenario is as follows. A service technician arrives at a home, performs a thorough diagnosis, and then recommends a repair with a fixed (not to exceed) price. The customer may choose to have the repair performed, or s/he may decline. Either way, the customer is satisfied that he or she is in control. With the time and materials method, the customer feels as though the meter is running and does not know what the cost will be until the service call is complete.



Bringing Reliability to Business

Flat rate pricing has become an acknowledged national pricing standard. Contractors who utilize a flat rate pricing system state that reliability is a strong component of a flat rate pricing system. Hvac and plumbing contractors can rely on flat rate pricing because repair time factors are adjusted by thorough feedback of actual service calls.

Today’s consumers are very concerned about quality and they like guaranteed prices. In a publication by Maurice Maio, president of Maio Success Systems Inc. in San Diego, CA, he mentions that technicians can feel confident when explaining to customers that the price is derived by reviewing thousands of similar jobs and using the average cost of those jobs to create the price. The price does not change no matter how long the service takes, which can enhance customer satisfaction.



Flexibility in the Workplace

A quality flat rate pricing system is continually updated with repair information and new additions to products and services. Suppliers and manufacturers can provide the most current parts information. Flat rate pricing systems also have the ability to be modified to personally fit and benefit the company. The pricing manuals are not a “one size fits all” system, so contractors can apply labor costs and parts markup parameters to customize their pricing.

One contractor who has actually seen the benefits and flexibility of flat rate pricing throughout his company is Mike White of Howell’s Heating & Air Con-ditioning in Ashland, VA. Howell’s Heating & Air Conditioning adopted the flat rate pricing method soon after it was created in the early 1990s, so now, according to White, the company’s customers feel in control of a service call from beginning to end.

Howell’s Heating & Air Conditioning and others in the business have in the past used the time and materials method of pricing service work. The problem with the time and materials method is that some customers are in the unfortunate position of paying more for a given service task than others, based on the skills and experience of the technician.

Howell’s has been very pleased with the utilization of flat rate pricing throughout the company. In fact, White suggested that flat rate pricing brings peace of mind to customers while encouraging technician training and allowing dispatchers and service managers to save quality time.



Time is Money

Companies do not have to incur the time and expense involved in building their own flat rate systems from scratch.

Given the time and expenses involved, it is often more beneficial to purchase a flat rate pricing system that includes ongoing maintenance and updates. This alternative offers a professional-looking product and allows the contractor to concentrate on the core business, which is serving the customer.

The flat rate system can be enormously profitable when comparing the system to the time and materials method. In years past, a company could actually lose money when a technician had more training and skill and completed a task in record speed. The faster the technician worked, the less revenue the company received from the service call.

As demonstrated and proven in the industry by Martin Brazil of Cody Air Conditioning in Hurst, TX, the flat rate pricing system allows technicians to perform a thorough diagnostic, quote the repair, and receive approval for the task to be performed. After the job is completed, the invoice is completed and payment is collected in the customer’s home, which cuts down on the time and expenses involved in billing and collection. According to Brazil, this has ultimately increased the company’s cash flow.

Today, customers expect a quoted service repair price, and flat rate pricing can fulfill this expectation. Goals for hvac and plumbing companies typically involve increasing customer satisfaction, improving reliability, flexibility, and profitability within the company, and setting a high value on quality of service.

By activating a flat rate pricing system, these goals can be met, dramatically enhancing the overall day-to-day operations of the company.

Hajduk is president of Callahan/Roach Products & Publications, a Texas-based product developer and publisher of pricing guides and other services for the hvac and plumbing contracting industries. Visit www.callahan-roach.com (website) or call 800-528-0212.

Publication date: 05/07/2001