In Part I of this series, I shared my thoughts on how a service contractor’s Digital Wrap enables them to routinely raise prices while retaining customers. We talked about (a) the importance of consistently presenting your brand as a premium product and (b) providing a superior customer service experience. Here in Part II, we’ll talk about the operational component.
The 3 Operational Must-Haves for Routinely Raising Prices
Now that your Digital Wrap has set the expectation that you’re going to charge a premium price and keep raising prices in the future, how are you literally going to do that?
Operationally speaking, there are three must-haves for routine pricing adjustments: (1) service contracts that set clear expectations, (2) a capable contracts system, and (3) a solid process for implementing and communicating pricing increases. Let’s look at each of these in more detail.
1. Service Contracts That Set the Expectation for Pricing Adjustments
Do you have contracts with your customer that establish your ability to raise prices on a periodic basis? You should. Being transparent and talking about pricing from the very beginning is a good way to set proper expectations.
You certainly need to be able to pass along material price increases to the customer based upon fluctuations in commodity prices. Explain to the customer how you source parts and how they can expect you to be efficient, but if the price of copper is up 100%, they should expect pricing on copper parts to increase by 100%.
Similarly, you need to be able to pass on rising overhead and labor costs. Your service contract should clearly set the expectation that pricing will increase as you increase the value of your services. This ensures that customers are not surprised by price adjustments that are not directly connected to materials. It will also reinforce your commitment to continually improving your services.
2. A System That Can Account for Individualized Contract Agreements
If you do have contracts that establish your ability to raise prices, do you have a system that scales the delivery of prices to customer invoices based upon those contract agreements? When a customer rightfully negotiates a special rate due to volume or some other relevant factor, are you going to get it right when you create their invoices?
Each contract with any given customer should ideally be just a short list of exceptions from your master pricing, with each exception being triggered at an item or location level. When you alter your master agreement, your customer’s exceptions don’t change until their contract renews or is renegotiated.
Anyone in your organization should be able to generate an accurate invoice if the system has the capability it should have. If you cannot, schedule a call with a ServiceTrade representative to see what you should be getting from your contracts system.
3. An Automated Process for Implementing and Communicating Pricing Changes
Finally, updating prices to increase them (or decrease them in the case of falling commodity prices) should be simple and reasonably automated. Generally, the customer should get some sort of notification before an auto-renewal period, and perhaps there will be a discussion about the terms of the contract.
With clear upfront expectations, a capable contracts system, and automated communication, you can successfully raise prices without a lot of fuss by your staff and without driving away customers.
And if your Digital Wrap has been active and customers can see all of the good stories about your services online, they cannot even consider terminating their relationship with you when the value of your brand is so transparent and obvious. A premium brand is worth the premium price.
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