Your Ability to Handle Pricing Conflicts Can Make or Break You
How you handle pricing conflicts with customers will define your business. Think about it: If things blow up with a customer who thinks you’re gauging them, it has the potential to create a ripple effect online and in their network that could sabotage future business.
Being an all-star in handling disputes and conflict between your team and your customers is like a badge of honour. Happy customers will leave positive reviews, and frustrated customers will have their problems resolved before they ever have the chance to air their grievances online.
This is serious stuff, with a huge impact on your bottom line. Over 20% of the 1,000 reviews we analyzed in the restoration industry mention pricing conflicts, and even 1 negative review online turns away 22% of new prospects. The good news is that billing and collections don’t always have to be a minefield: the processes and culture you implement in your business around money issues can be a game changer.
The Catalyst Behind Pricing Disputes
To understand how to handle pricing conflicts, it’s important to know the reasons a customer's fuse might run out, exploding into a frenzy of complaints.
Over the course of our research for our recently released e-book “An Analysis of Over 1,000 Bad Reviews”, we found that 20% of all reviews mentioned feeling overcharged for work conducted. Of this 20%, there were crystal clear reasons why customers got upset:
- Surprise or hidden charges on a final invoice
- Disparities between work expected and work conducted
- Dishonest representation of labor or materials provided
68% of the time, one of these three issues were cited as a primary reason for a customer's negative review in this category of our research.
If your heart rate has increased slightly due to flashbacks of angry customers complaining over issues similar to those listed above, we’ve got good news. Here are some solutions you can use right now to help dam the flow of any future pricing disputes.
Explain Price Changes Proactively and Honestly
There are times when the quickest “sell” for a restoration business is to brag to a customer how quickly a job will get done. Not only quickly, but cheaply as well. Common sales phrases are things like, “This job will take us no time at all”, or “We can do this job cheaper than anyone else on the market”. While these things may seem true at the time, they don’t leave any room for unforeseen price inflation on materials, hidden damages that require additional equipment that isn’t seen on first walkthrough, or any other aspects of a job that create “hidden charges”, on a final invoice.
Using this sales approach can be a short term gain, but in the long run, it will only set you back.
The better, more successful approach is that of the “5-Star Restorer”. Being open and honest with the customer from the start of the job will reduce the likelihood of pricing disputes when it’s time for the final invoice. Continuing with the sales examples from above, better phrasing would be explaining to the customer from the start that although it may be a simple job that usually takes very little time, there are often hidden damages we can’t see that require different equipment, so we can’t guarantee a price right now. If the price does need to increase, be proactive and tell the customer immediately, and if it doesn’t, a customer never left a bad review for paying what they were promised, but at least they knew there could be a possibility.
Those who take the “5-Star Restorer” approach are more likely to see returning customers and an increase in leads because of a more consistent positive review chain. After all, research shows that 84% of people trust what online reviewers have to say, so people really do choose their services based on online reviews.
Take Photos, and Lots of Them
Taking photos of everything you find and see at the outset of a job will give the customer a better understanding of the work that will be conducted.
If this type of communication is overlooked, when that final invoice shows up on the customer's doorstep, you run the risk of them being furious when their expectations don’t match reality.
For example, if a job requires a basement to be completely restored after a flood, you will estimate it at a certain price point. As the job progresses, you might start ripping up floorboards and carpet only to discover you’re running into dangerous molds that need to be removed before the job can proceed. There is absolutely no way to estimate that for the customer. Taking photos of the mold, and showing the customer immediately will help them understand exactly what the extra work entails, and understand why the price is going to increase.
Avoid Bonuses Related to Profitability and Margin
As a business owner, it’s easy to tie compensation and incentives with profitability and margin as a way to get your employees to perform better. The higher the profits, the more money you have to pay your employees, right?
Wrong. This is a dangerous culture to nurture within your organization because it encourages your top level employees to find ways to weasel their way into a higher salary. This is done by stretching the truth behind labor and materials needed to complete a job, so the profits and margins after the job will be higher than what it really should be.
Customers will catch on to this. They will see that they are being duped into paying a bit extra after witnessing what was required on the job from start to finish, and how employees spent their time on the job site. If that’s the case, your business will likely be on the wrong end of a bad review.
Instead, focus on customer satisfaction. Project managers who consistently receive positive feedback from customers, whose jobs are finished smoothly without hiccups, should be compensated higher. Doing this will avoid any dishonest representation of material and labor as a way of inflating profit margins.
Handling pricing disagreements poorly can cause an onslaught of 1-star reviews. Start implementing some of these tactics in your organization and you will see an increase in happy customers once the final invoice rolls around.
If you want to learn more about pricing disagreements and other common ways restoration projects fail leading to 1-star reviews, check out our eBook at https://www.fivestarrestorer.com/.
Also check out KnowHow, for step-by-step processes that will help your restoration business provide more consistent results every time. Start getting work done right, and book a demo with our CEO here: https://tryknowhow.com/.