Price Conscious Customers

Ange
Yes, absolutely. We’re going to unpack how you can convert price conscious customers without underpricing or overpricing your services. 

Andy
Right. Your pricing strategy today needs to consider the current economic climate while also allowing you to stay competitive enough to retain and attract customers. And of course, the profitable. 

Ange
Exactly. As trade business owners, your costs are actually affected by the current economic climate too. 

Andy
Yeah, the rising cost of materials, the demanding rise in labor rates, petrol, just to name a few.

Ange
So, Andy, in your opinion, are all trade sectors having the same experience? 

Andy
Yeah, I believe most are having the same experience, but if you sort of go down to that Mr. And Mrs. Jones in the residential sector, you know, they may be spending more money a little bit more cautiously at the moment, but if you’re a household within people that are in their 50 to 70 year olds, they’re definitely still spending their money.

Ange
Yeah, there’s actually a report that says the 55 to 64 year old demographic, for example, are emerging as the most influential and powerful super consumers. They’re typically empty nesters with a higher disposable income. 

Andy
Yeah, and they’re happy and willing to spend, baby! 

Ange
Yeah, but that could be all about to change for the residential market, with the Reserve Bank just recently announcing that more than 800 Thousand Aussie homeowners will fall off their low fixed mortgage rates onto more expensive variable rates later this year, and it’s gonna increase their mortgage repayments by $15,000 a year. What happens then? 

Andy
It’s clearly going to put a huge amount of pressure on some households. And, and that said, I think we shouldn’t change how we operate as trade business owners though. I mean, if you are used to doing an inspection report and informing a customer about what is going right and what is wrong, inside and outside of their property and hence what may need fixing, you need to make sure you continue to do exactly that and empower them to make the decision.

Ange
Yeah, you need to continue to actually ask for the sale because the reality is who are we to judge, right? 

Andy
Exactly. It’s important to remind your team to continue to do what they have always done. They can’t get all weird about simply educating the customer about their property. Just because they don’t want to spend money, it doesn’t mean that the owner of the property doesn’t want to spend.

Ange
Yeah, look, that’s a good point. Don’t let your preconceived ideas of money or your opinion of the current economic climate, Cloud the way you’ve always approached a job or change the way you speak with customers. 

Andy
That is exactly right because who knows, they may not even be price conscious. 

Ange
Yeah, that’s right. I think the tip is to be aware of the current climate but don’t change your processes and the way you speak with customers because of it. Fair? 

Andy
Yeah, definitely. 

Ange
So, do you think we’re about to be faced with a similar thing with customers being price conscious across other sectors of the market, like commercial and strata, and maybe the building sector?

Andy
I personally don’t think some of the commercial space and strata will be affected as much because the corporates are still making good money, but it makes sense to say that the real estate work will get squeezed with the investor market being smashed. It’s fair to say that if someone is feeling the squeeze on their own personal mortgage, the last thing they will want to do is spend any extra money on their investment property. It will be bare essentials only. 

Ange
Yeah. Look, talking about the building industry, I read an article from Master Builders Australia recently that claimed that we are falling behind on the housing targets. They’ve dipped to their lowest in 2023 and they’re not expected to rebound till 2026. It’s marked by rising interest rates. The labor shortages and the obvious bottlenecks on material delivery. So despite that, they claim that construction grew a modest 1. 5% during 2021 to 22. 

Andy
Yeah, it probably tells me that the government continues to focus on infrastructure development, which is, is, is great for the industry, just not in the short term.

Ange
Yeah. So let’s link these back to price conscious customers. Andy, how can trade business owners nail their pricing strategy bearing in mind the situation we’ve just outlined? 

Andy
So what you’re asking me is where is the sweet spot, right? 

Ange
Yeah. Well, if you underprice to please your customers, the consequences are obvious. You’re likely to struggle financially and your business will probably go under. But on the flip side, if you overprice, you risk missing out on customers because you’re actually too expensive compared to your competitors. 

Andy
Bingo! And that right there is the dilemma. In a price conscious market, there’s a few things you have to consider.

Ange
Well, Firstly, putting up your prices to compensate for the higher costs you’re facing is the most obvious step to take, isn’t it? But there’s a risk this could damage your relationship with your loyal customers and lead them to look elsewhere. And in a worst case scenario, you may lose even more money than if you’d kept your prices at the same level.

Andy
Well, listen, this is a real big one. There’s a lot more that goes into working out pricing, but I think the big thing is, don’t discount prices just to win a job. 

Ange
Correct. And when you know what your hourly rate is by doing your hourly rate calculator, you actually know your margins. So any discounts will simply be eating into your profits.

Andy
Yeah, that’s definitely an important one. And just because you find out a competitor is charging less. Don’t drop your rate to match it thinking it’s going to be okay. 

Ange
Well, never assume your competition has got their pricing right, right? 

Andy
That’s so true because most trade business owners have never learned how to work out their right hourly rate in the first place to make sure that they’re going to cover their costs and make a decent profit margin at the end of the year.

Ange
So, what are you saying? Don’t be a sheep.

Andy
Meh, meh. Exactly. That’s what I’m saying. Because there’s so many tradies out there that are still charging from 60 to a hundred dollars an hour. And really all they’re doing is buying themselves an absolute job. And you know what? You can’t make money charging that right. Unless you’ve got a massive team or you’re charging your staff a little bit and you’re making big margins on them, but there’s just no money in that. The only businesses that are charging rates like that have 20 or 30 staff. So if you’re a small team. And you’re charging between 80 and a hundred dollars and you make a little bit of materials here and there. You do not have a business. You just have a job. 

Ange
Whoa. Tell us what you really think. 

Andy
So listeners, let me ask you this. Do you know if your hourly rate even covers all of your expenses in your business? And at the end of the year, not only do you pay yourself a good wage, but you actually make profit as well?

Ange
Yeah. Look, that’s a really good question. 

Andy
And the thing is too, if we’re looking at the bigger businesses, there’s so many businesses that are way too top heavy. Like I’m coming across, businesses have four to six trucks on the road and they’ve got between two and four people in the office. I mean, how do you run a business like that? I mean, at Dr. Drip, when we were running at the end, we had one person in the office supporting five vehicles on the road, and that meant our expenses were kept really low. 

Ange
So what happens when your ideal customer thinks that they should be paying less for your service and challenges you on it? How do you respond to that?

Andy
You know, if Mr and Mrs Jones do ask for a cheaper price than your quota. Well, you need to be able to respond with confidence really. And it might be something like, well, Mrs. Jones, we’re doing this and this is the materials costs. And this is what we’re going to do. And this is how long it’s going to take. And you’ve got to actually have a chance to be able to sell them back in. Majority of the time, if you explain it to the customer, because they may have heard of a price from some billy bum crack down the road, you can win that customer back. And you know, if you don’t, then let’s face it, they may not be the ideal customer for you.

Ange
And to your point, it may not actually be about the price. They’re just trying to connect to value. So as long as you’re communicating what that value is, then chances are they’re going to go ahead with you anyway. So I guess the question needs to be asked that if you decide you actually need to consider putting up your prices, how do you actually go about that?

Andy
Yeah, you need to think about it tactically. You know, there are certain areas where you can justify a bit of a price hike or apply additional fees. Such as specialist services or maybe even premium products.

Ange
I’d add that you’ve got to actually sell your customers the benefits of your price increase. Like ultimately, you’ve actually got to remind your customer of the value that you deliver. 

Andy
Well, exactly. I think most customers, if they’ve realized there has been a price increase that they want to know. Maybe a reason why, but it’s then your job to ensure that they understand the value that your business is gonna offer and get them to agree.

Ange
Sorry to interrupt the episode today, but there’s something really exciting happening and I know you are chomping at the bit to tell our listeners more about it, aren’t you, Andy? 

Andy
Yes, I am. We are super excited to let our listeners know that we are touring the country again with our Lifestyle Tradie Live event. This September. Hell yeah! 

Ange
Other than your bald head, what can our listeners expect to see? 

Andy
Come on, come on, that’s a bit rough. Well, they’ll see how to go from chaos to control, with the ever changing economy and those high interest rate rises, there’s never been a more important time to get your business structure right. I’d like all our listeners to think of it like an in person, intimate podcast episode. 

Ange
Yeah, exactly. We really are real people. We don’t just live here in podcast land. 

Andy
Listen, if you’re sick and tired of working super long hours, you want to get off the tools, scale the business, maybe even sell the business, or just want to work on your business and not in it, then Lifestyle Tradie Live is for you.

Ange
If you truly want to make more profit, gain back your time to spend it with friends and family, or take that three week camping trip you’ve always been putting off, then tell your wife or business partner to come along to Lifestyle Tradie Live in a capital city near you because nothing changes if nothing changes. Take this first step to really set your business up for success. As Andy said, there has never been a more important time to get this right. You will love it. 

Andy
Register now at lifestyletradie.com.au. 

Ange
So, that brings us to our next point of how do you actually stand out from the crowd when you’re considering quoting?

Andy
Yeah, if you’re quoting against say three others hypothetically, what sets you apart from your competitors? And often it’s not just the price that sways the customer, even when you’ve got those price conscious customers. 

Ange
Yeah, definitely. So customers may be more price conscious, but there are other factors that could ultimately convert them.

Andy
This is where the trust based selling becomes super important. It’s the power of the 1 percent and your customers will remember you for it. 

Ange
So at Lifestyle Tradie, we teach our members about these eight stages of the flow of a job. It’s actually all about how you build trust and rapport with new and existing customers, how you stand out from your competitors, how you deliver your quotes with confidence, and how you complete the work professionally every single time.

Andy
It’s the sales conversion pipeline, isn’t it? It’s like when people like to do business with people they like and trust and are easy to deal with, in inverted commas, the friendly tradie who turns up on time and does an incredible job. 

Ange
Well, true. And in Dr. Drip, if our team had to quote a job over 10 grand. Even though they would still ask for the sale on the spot, inevitably, Mrs. Jones, our residential customer, would want to have a chat with the other decision maker in the house, like her husband perhaps, before deciding on whether or not she should go ahead, especially if that price was high. So this is where leaving a credibility pack works an absolute treat.

Andy
Yeah, exactly. It elevates your authority position through a quality printed booklet by highlighting the benefits of working with you. I mean, it’s a chance for you to talk about your business, maybe the awards you’ve won and share great quality photos of work you’ve done in the past. 

Ange
That’s true. The thing that I love about a credibility pack, imagine I’m your customer and I’ve just now met all three individual sales people that have come to my house or different trades people, call them all sparkies, for instance. And I’m now comparing each one of you and I may have had a good feeling about you in my house and you’ve explained the product or service really well, but the price point is still high. So I still have to have a conversation with you, my partner, who has not met these people. So you don’t know anything about them. The only thing you see as my partner are three quotes in front of me in writing and at a price point. So of course you as my partner will go, well, let’s just go with the cheapest one. Whereas if I’m the one that’s met you all, these tradies who have come inside my house, and if you have armed me with a credibility pack that allows me and gives me the power, you’ve empowered me as to how to explain to my partner why I want this person. I want, you know, business C, for instance, even if you were perhaps the most expensive one. Then if you’ve helped me explain to my partner why I want you because you’ve given me this extra credibility pack, that’s what perhaps is going to get me totally over the line. This is the tangible selling tool. It’s tactile, right? I can touch and feel it. I can show you photos. I can tell you everything about this business because you’ve armed me and you’ve helped me convince the other decision maker why I want you to win the job. It’s just so much more professional. 

Andy
Exactly, and it’s the perfect conversion tool to get the job across the line when the price point is high.

Ange
Yeah, no surprises that communication is actually the key to customer service in all forms, whether that’s face to face conversation, whether it’s written word like this credibility pack, or maybe you’re sending text messages and the like. It’s all about constant touch points to build trust, to eventually lead the customer to saying yes to you doing the job.

Andy
Exactly. And building trust is the short answer because people want to do business with people they like and trust. 

Ange
Yeah. Look, I know we keep saying that sentence because it is just that important. That building trust over the course of interactions with a prospect before they’ve said yes is the clincher. You’re just literally trying to get someone to the very next stage of the flow of a job to ultimately saying yes to working with you. So here’s a great question for the listener. If you had to rate your business between 1 to 10 for customer service, meaning 1 being you’re pretty crap at it or 10 you’re exceptional, how would you rank your business?

Andy
Yeah, that’s an interesting one, isn’t it? I bet a lot of people are going, Oh, well, I’m right up. They’re near a 10, people actually like me, but it’s not just about you, it’s about your staff, it’s about your business, it’s about what you provide. So definitely, I think most people out there would say there’s some room for improvement.

Ange
True. I want to change tact a little bit because you’ve probably noticed that many people are actually feeling a bit more wound up, perhaps as usual in the marketplace. And the thing is, anger is a normal reaction to stress. 

Andy
Yeah, it’s interesting, Ange, because about communication, most disagreements are around pricing and then it happens to be misunderstandings or false expectations. And this is the problem when you don’t have an upfront price that everyone agrees on. There’s just so many blurred lines as you go down the path. 

Ange
Yeah. So instead of maybe going on the defense, we actually really need to be patient with our customers. Often a really simple conversation about pricing can help alleviate any friction. So guys, the current state of the economic climate has definitely got many people feeling a bit more wound up than usual. So you might run into price conscious customers just a little bit more frequently. Just remember to be patient, have some compassion and understanding in tougher times, especially with your most loyal repeat customers.

Andy
Now you’ve heard our tips on converting price conscious customers. What’s the one thing you can do today to keep the flow of work Going in this current climate? 

Ange
Will you put up your prices knowing the potential pros and cons? Can you adopt technology to automate more tasks and squeeze margins on a job? In which ways can you improve your customer service game or where can you add a dash of patience, compassion, and understanding to the mix? 

Andy
There’s certainly plenty to consider as always, but what about our listener challenge this week? 

Ange
Great idea. Let’s hit up our segment, Ask A&A Anything. Okay, so we’ve had a few people with a similar question. How to manage the ebb and flow of workloads when you’re either flat out or there’s nothing with no middle ground? 

Andy
Yes, this is definitely a problem or a challenge that most trade business owners experience from time to time. It’s the all or nothing scenario. The question is, how can you fill up your schedule with work fast when there doesn’t appear to be too much happening on the horizon? 

Ange
Hmm. When there’s a will, there’s a way. So here’s some of the things I suggest you do. If you work with residential customers, then local Facebook groups are a great way to let the community know about your services and how you can help.

Andy
Yeah, let’s face it, everyone does want to use a local tradie. 

Ange
Yeah, that’s right, I reckon. 

Andy
Well, think about the problems you can solve for people. You know, you can offer a free inspection report to help your customers learn about preventative maintenance in and around their home, and it could also prompt them to take some action.

Ange
Yeah, another low cost solution. Remember, your current database is actually where the gold lives. So maybe send out an SMS with an offer to your database to get an immediate response from your loyal customers. 

Andy
Yeah. We loved it in Dr. Drip. We used to send out an SMS and we always got a great response with customers booking in a job.

Ange
Yeah, absolutely. It’s all about making sure your business is actually top of mind. 

Andy
And then you’ve got to ask yourself, well, when was the last time you actually picked up the phone and called some of your other contacts out there? It might be real estate, Strata, builders, whatever it may be, whatever market segment you work in, get on the phone and have conversations. Because the thing to remember here is some of these, they have preferred suppliers. So you may not be the only person. There may be three people that are at the top of their list. So building that rapport with them will help you make the top of that list and hopefully stay there.

Ange
So, Andy just suggested maybe calling contacts, but better still, maybe even drop in with something like a basket of muffins or cupcakes or something and see if they have any work available and ready to be completed. You need to make sure they know that you are ready and available. 

Andy
Yeah, and in the long term, we recommend you take a good look at the market segments you work with and it’s best to diversify your work. Like having a few real estates, maybe a few strata companies to balance out the residential market for example.

Ange
Yeah, look, when one market segment slows down, often the others keep going or lift. 

Andy
And let’s face it, in your business now, make sure you don’t have all your eggs in just that one basket. 

Ange
Yeah, that’s right. A few great ideas to think about. So, what are you going to do to generate work and be profitable? Cause that’s what we’re here for. Helping more trade business owners make more profit and lead a better lifestyle.

Andy
Hell yeah, Ange. 

Ange
You know what, crew? It’s been a great podcast here today and we appreciate you listening. 

Andy
We’ll be back next week for another jam packed episode of The Tradie Show. 

Ange
Have an amazing week. See you.

Andy
Subscribe to The Tradie Show wherever you get your favorite podcasts. Rate and write us a review or for more information about Lifestyle Tradie, head to lifestyletradie.com.au.