PLCAA Members Provide Feedback On Fuel Surcharges

Three questions were formulated to elicit member response to this issue. These questions, which provided room for response, were faxed to several Regular (lawn/landscape company) PLCAA members on Feb. 28. With 146 respondents, PLCAA provided the following summary and evaluation of the responses in its March 2000 Member Bulletin.

Question 1
Do you plan to add a temporary fuel surcharge to your customer invoices to offset rising gas prices?
No: 84% – Yes: 16%

Very lopsided results to say the least. Reasons for not imposing a surcharge followed a similar theme. In many responses, PLCAA members noted that they had already mailed contracts or renewal letters for 2000, and changing those now would undermine customer confidence. Others also cited tough competition, especially at this time of the year, as a reason for not imposing a surcharge. Many members had already implemented a general price increase for the year and did not feel justified in adding to that, even temporarily. Others noted that seasonal pre-pays were already coming in, and imposing a fuel surcharge would require the LCO to "go back" and ask for more money.

Two real significant responses stood out among the many received. One was the statement that gas expense was not a significant expense, especially for chemical lawn care operators. This may not be the case for mowing maintenance contractors or for those who regularly pull trailers, but a large number of PLCAA members simply did not consider fuel price increases important enough to jeopardize customer goodwill.

Second was the opinion, voiced again and again, that the radical increase in fuel prices was a temporary situation which would self-correct over time.

Question 2
Do you plan to raise prices across the board to offset rising gas prices?
No: 56% – Yes: 44%

Here there was a more balanced response. Those answering yes, in many cases, have already done so for any number of reasons. In most cases, prices are raised on a regular basis simply acknowledging regular increases in the cost of doing business. This "annual" adjustment in price seems to be somewhat of a trend in many parts of the country. In other cases, the PLCAA members cited increases in the cost of labor and insurance as their reason for raising prices rather than taking that course of action in response to fuel prices.

Those PLCAA members not having an overall price increase most frequently stated that because they chose not to raise prices at the first of the year, doing so now was simply too late. Others again cited an extremely competitive market as their primary reason for not raising prices. Some did state that they would consider raising prices quoted to new customers rather than try to increase prices to older accounts.

One thing was very clear in all responses to Question #2. That is how absolutely "locked-in" we all believe we are to prices quoted at the beginning of the year. Virtually every comment reflected the belief that a lawn care company cannot raise customer prices once set for the year. No doubt, this reflects the service nature of our business in which we believe that such service is continuous, from treatment to treatment and year to year. Thus, once the customer commits to continuing service "the next year," we feel an obligation to perform that service at the agreed upon price for that year. Indeed, in 21 years in the industry, I [author of the article, Bob Andrews] have only heard of two cases in which an LCO raised prices in mid-season. In both instances, those increases were met with such a firestorm of protest that they were quickly withdrawn.

Question 3
If you don’t plan to raise prices or add a fuel surcharge, what if anything do you plan to do to offset rising gas prices?

Here, PLCAA’s poll yielded some answers that should have been expected from those who have demonstrated the creativity to build their own businesses.

Some members indicated they would raise prices on add-on or extra services that were not part of the contracted or agreed upon annual lawn treatment prices. In this vein, others indicated they would add new services to their menu in order to sell more things to the same customer, hopefully offsetting increased costs of operating. Many members indicated they would take a closer look at their routing in order to reduce fuel consumption and, thus, fuel costs.

In other responses, PLCAA members stated they would increase the response time for service estimates and service requests so that they could "bunch" such requests and reduce redundant drive time. Clearly, one way to reduce fuel costs is to increase your customer count in routes already served rather than going out even further into outlying markets.

The results of the PLCAA poll on fuel surcharges show that the increase in fuel prices, although unwelcome and unexpected, is largely looked upon as another bump in the road for LCOs.