Eat your vegetables and raise your prices

By

March 7, 2024

Bob Williamson

Bob Williamson

I decided about 15 years ago to hire someone to mow my lawn. This was after many years of operating under the delusion that mowing my own lawn was good therapy. The cost was $30 per mow for my half-acre home in suburban Philadelphia, Pa. I quickly gave away all my mowing equipment and enjoyed coming home from work to a nicely mowed lawn. My mowing guy held his price for the next 10 years.

That was until five years ago when he increased my price to $40 per mow – a 33 percent price increase! My neighbors were furious and many left for another provider, despite years of reliable, responsive and timely service. Some neighbors, who switched to avoid paying more, were unhappy when their new provider would miss weeks and not respond to their calls or texts.

Expecting the customer to appreciate the past 5 or 10 years of no price increase is both naïve and worse – it is unprofitable. Raising your prices needs to be like eating your vegetables: You may not always enjoy it but you do it routinely to live a happier and healthier life.

Then why do so many companies fail to raise prices every year? The short answer is that raising your price is hard.

Why is the practice of annual price increases (APIs) difficult? Here are five reasons why many companies fall short:

1. Daily beatdowns from customers and staff.

This can be a one-sided emotional assault on front-line staff. While the complaints about price are typically few – they are routine with no support for the holding price. Statistically, about 20 percent of customers complain about price no matter what. You can’t expect the same people to stay the course on routine price increases.

2. Competition that offers a lower price.

Like No. 1 above you will only ever hear about cheaper competition. Your best sales happen because they are confident in the value you provide. Dealing with hard-core price shoppers is a race to the bottom. Sell with execution and convenience.

3. Distractions with staffing issues are all-consuming.

Managers spend so much time and energy with their staff. Avoiding any hard decisions on raising the price is kicking the can down the road with great loss to the business.

4. Saving money elsewhere to maintain net income.

This is a worse logic. To maintain net income, you need to get the money from somewhere. Whether it is vehicles, advertising, or reduced employee benefits, your business will suffer.

5. Not letting the CFO, controller or accountant make the decision.

Using my lawn mowing example above, had my guy raised the price 3 percent every year, he would have received an additional $1,600 over the same period – an 18 percent increase. Plus, I would still be paying about $40 per mow in year 10. Your person in this role would be making an easy decision without all the distractions you are facing.

This is the easiest approach to staying on track. Following the discipline of API will allow you to grow and prosper.

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About the Author

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Williamson is pest & lawn director for Cetane Associates. He serves on the Pennsylvania Pesticide Advisory Board, is former president of the Lawn Care Association of Pennsylvania and former president of Warrington PA Rotary Club. For over 30 years, Williamson worked with Moyer, a large Mid-Atlantic residential service provider. Williamson has managed services including heating oil, propane, HVAC, plumbing, home security, swimming pool, lawn and tree care, and pest control.

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