Pricing for Profits: Attainable Goal
He titled his seminar “From Service to Profits” and said there are several key components in getting from service to profits including service standards, pricing for profit, establishing a professional image, marketing to your customers, delivering the service, operating efficiently, and managing numbers and finances.
SETTING THE BAR HIGHFirst, he said setting service standards involves charging for a service that ensures retention and referrals. “Price is not an issue,” Buckley said. “You should have the highest standards in your market.”
He noted the best way to determine pricing is to shop the competition and temporarily raise prices as a way to experiment. Buckley said price shouldn’t be an issue if business owners are confident in their work.
“I have no issue with paying a higher price as long as someone takes care of me,” he said. “You should be proud of what you do, especially if you are the highest priced.”
Buckley added that a major reason for business failure is improper pricing, often based on business owners not knowing their costs of doing business. “Remember,” he said, “pricing is determined by the cost of the service you provide and profit is determined by your price. Set your service standards based on your cost and leave enough for a reasonable profit.”
Business owners should keep an eye on their competition, but only if they offer the same quality standards. In many cases, Buckley said there might be no competition, especially if owners can show higher standards and value for their services. “You must show the customer value in order to differentiate from your competition,” he said. “You can blow your customer away by simply following a system.”
Buckley said it isn’t necessary to show customers how they are getting added value, rather, it is important to just go out and do it. “If a customer has good feelings about you and your business, he or she usually remains loyal and will refer you to others,” he said.
PACKAGING THE SERVICES AND BEING EFFICIENTBuckley went on to explain more about the system and how every business owner should develop a package for the system. “The system is our package,” he said. “It is not just about fixing equipment, it is about a lot of things. The package must include a professional image and quality service.”
The importance of developing and maintaining a professional image is important because Buckley said it ties directly to pricing. “People want to do business with professionals,” he said. “And following a system leads to a professional image.”
The professional image is directly tied to the value that customers get, which Buckley called perceived value. He said, “If a customer doesn’t perceive value, price will be an issue. Remember, all customers are not created equal. Find the customers who will appreciate the value of your service.”
Buckley noted that customers should be charged 100 percent for the service system and business owners need to deliver 100 percent. “If customers don’t get 100 percent you have devalued your service and they will start shopping for a better price,” he said.
He said that delivering good service is something that doesn’t just happen naturally and that employees must be trained to deliver good service. Buckley added, “It is not always common sense to treat a customer right - we really have to train people to follow the customer service system.”
Finally, Buckley talked about the need to operate efficiently. The total package must include an efficient operation, which ensures a higher profit margin. “One of your jobs is to work with the numbers and make sure they are generating good revenues,” he said. “The most successful business owners understand their numbers and financial statements.”
Buckley noted that there are several ways to manage numbers and finances:
• Have a business plan;
• Have a budget;
• Be obsessed with numbers;
• Receive timely and accurate financial statements;
• Have an intimate knowledge of your financial statements.
“Magical things happen when you operate within a budget,” he said. “And manage your cash flow by always looking for ways to improve your numbers.
“Follow your system and if you need help, ask for it.”
For more information on the Dwyer Group, visit www.dwyergroup.com.
Publication Date: 07/23/2007