3 Sneaky Ways We Compete on Price…Even When We Don’t Mean to
I wrote an article on why we shouldn’t compete on price, and what to compete on instead. Here let’s explore some sneaky ways we might be doing what we don’t want to do!
To recap, if you compete on price (that is, if you present your low price as the reason someone should pick your service) you will lose in the long run and generally in the short run too. When you compete on price, you will forever be justifying your prices and that’s no fun way to run a business.
So let’s say you’re doing a good job competing on other things than price (like quality, timelines, professionalism) and you’ve gotten a good solid foundation to your business. There are still some sneaky ways you can accidentally compete on price:
- Offering a client a discount because they SAY they’ll refer you other clients in the future
- Offering a volume discount because it’s a bigger job or multiple locations
- Agreeing to use clients’ cleaning supplies for a discounted price
These three examples all seem reasonable to most people, but there are problems with all three that will eventually lead to problems surrounding price (which is what we are trying to get away from).
Example #1: Offering a client a discount because they SAY they’ll refer you other clients in the future
This is especially tempting to do for another professional that is in a position to give you referrals (say, a real estate agent or a leasing manager at an upscale apartment complex). You’ve arrived at your prices for your services because you take into account all things that a professional cleaner needs to cover, and your costs don’t fluctuate based on if you’re cleaning for a friend, or just a random person. Your costs are fixed. So to be fair to all people, it’s best to price the same for everyone (except maybe your mother LOL).
If you lower your price for a real estate agent who promises all kinds of referrals, what generally happens is they often don’t refer anyone. So you’ve given a discount for nothing. And when they do refer, they often mention what they are paying for your service so the next person is expecting the same discount. And so on, and so on. It’s not sustainable.
Example #2: Offering a volume discount because it’s a bigger job or multiple locations
This only works for services that have only fixed costs and you will have some variable costs that go up depending on jobs. For example, a single bank location may be priced at $500/month for you to clean. If the bank has three branches, they may believe that they should get it for less than $1,500/month. But in order to clean three locations, you’ll have to pay for travel time to the employees, thus you’ll have an additional cost for multiple locations so giving a discount isn’t appropriate.
Also, if you have a bigger job, lets say a large post-construction cleaning for a builder, you will have additional costs like ladders, shop-vacs, and additional cleaning supplies you might not normally need. These additional costs need to be covered by the cleaning fee.
Example #3: Agreeing to use client’s cleaning supplies for a discounted price
This seems like an easy choice, however relying on the client to have working equipment, enough cleaning supplies on hand has left cleaners in a bind. If the client’s vac is broken, you’ll end up using yours anyway. What if her mop is 20 years old? No thanks.
Consumable cleaning supplies like toilet cleaner or glass cleaner aren’t that expensive per house, it will really only save less than $1 per cleaning if you use theirs so it’s not much difference in price.