Avoid Pricing Pitfalls

When asked in an online poll to identify their most common customer complaint, nearly 50 percent of Lawn & Landscape users said their clients objected most to pricing. This is hardly surprising within an industry plagued by low-ballers and premium pricers – and the need to find a happy medium. Concerns about pricing may force a contractor to sacrifice profit and substitute first-rate pricing with lower, competitive prices.

During the American Nursery Landscape Association’s 2002 Management Clinic, Louisville, Ky., Jan. 31-Feb. 3, landscape architect Kent Gordon England discussed several misconceptions related to pricing within the green industry, and the need to consider reputation, service worth and the company’s future when establishing accurate prices. Common pricing myths, and Gordon’s proposed solutions, are listed below.

Myth #1: I need to raise my prices because I want to make more money.

Truth: Pricing of your products and services defines the quality of the customers’ experience, the quality of all of your employees’ lives and the financial health of the company. Focus on these very important issues and the profit will take care of itself. We must engage all of our customers, employees, vendors and bankers in our business. If it is all about us, and not about them, we will never succeed to our fullest potential.

Myth #2: If I raise my prices any higher, my customers won’t buy from me.

Truth: If you raise your prices, the only reason your customers won’t buy is that they don’t find value in what you are selling. If you don’t give them valid reasons to purchase, yes, they will find your product or service too expensive. Ask the simple question, “What can I do to each and every product to make them so desirable to my clients that the price no longer becomes an issue?” There are three elements that are part of a business: quality, service and price. You only get to pick two of these three to embrace in your business.

Myth #3: We can’t charge $100 per hour because the competition is only charging $50.

Truth: Prices that your competition charges for their unique products and services are irrelevant with regard to your pricing structure. You also sell a unique product and service. Unique only means it is different. It does not mean that it is special. If we must rely upon our competition for our pricing structure, we will surely fail in business because all of the average companies are not pricing their goods at a high enough price now. It is very important for you to understand the need for a drastic change in your pricing structure to create the type of success you only dream of now.

Myth #4: I need to raise my prices by 3½ percent this year to cover overhead.

Truth: Pricing of your products and your services should be done with the future in mind, not just the existing financial commitments the company currently has. If we are determining our pricing strategy using traditional accounting methods, we are limiting our company to the resources typical of the industry. But, should we price our goods and services so that they are 30 percent, 40 percent or even 100 percent high than they are now, then and only then may we provide the quality and service that will separate us from the crowd, and the resources to grow your business.

Myth #5: I focus on the total of my gross sales to measure my company’s success.

Truth: The absolute first and foremost thing that you need to focus on is not your gross sales, but your gross and net profit. It is here and only here than the key to improving your company’s ability to providing better products and services is found. Only with additional capital may you expand your products and services, improve your customer service and train/retain your key employees.

Kent Gordon England is president, Kent Gordon England, Campbell, Calif.