Negotiating Prices with Customers

[uis]

We provide technical service and repair to commercial
restaurants on their HVAC, Ice Machines and all Kitchen
Equipment Repair.
Our truck charge was only $20.00 a trip until this past March
when we had to raise it to $25.00. We have not received any
complaints.

However there is always one customer that will pose the
question you have to say no to but you want to be careful how
you say it at the same time. One of our customers gives us
more work/calls than the others and we have always offered
them a lower price on refrigerant, truck calls, labor and
parts; you may as well say on pretty much everything. When
we raised our prices in March we were charging this
particular customer only $15.00 for the truck charge. In
March we started charging this customer $20.00. We have
received a request asking us to go back to the $15.00 truck
charge. The customer sited the fact that gas prices have
gone down significantly since March. That may be true, but
the "retail" prices have not gone down too much. I
want to tell this customer in a nice way that I apologize, but
we cannot lower our truck charge to $15.00.

Any suggestions on how I can present this in a positive,
business manner and not come out looking like we're greedy?

Thanks.

[Spider]

You want to lose the customer that gives you with the most work and on whom you probably make the most profit, for $5?

What am I missing here?

How big is your operation? Where are you located? How far is the truck driving for this $20/$15 charge?

[noshmarketing]

Agree with Frederick. Although I'm new to running a business, I've been an independent contractor for a few years. My most difficult customers were the ones who paid the least and complained the most. I would avoid changing your business model or components of it just to please them. Make room for people who value what you provide at the cost you provide it.

[uis]

We are a small business located in San Antonio, TX. Employees consist of my husband and two (2) other workers. The truck driving varies; it is between 20 miles round trip to 50 miles round trip.
Thank you for your response. Is it still the same?

[Spider]

We are a small business located in San Antonio, TX. Employees consist of my husband and two (2) other workers. The truck driving varies; it is between 20 miles round trip to 50 miles round trip.
Thank you for your response. Is it still the same?20-50 miles? for $15 or $20?

You need to get your calculator out and add up all the expenses of that truck, including depreciation, plus the cost of the driver, insurances, gas, taxes, inspections and maintenance, etc. Also add loading and unloading time. I think you will find it is costing you over $100 per trip.

Of course, it is possible you cover these expenses, or some of them, in your overheads and therefore in your markup. In which case, the trip charge is really just a nominal recognition of the service you are providing.

It would be better if you knew exactly how much these delivery trips are costing you and how these costs are currently being accounted for. Then to make sure you are being properly recompensed for the costs incurred - which may be as a trip charge or an increase in your markup. In this latter case, you will now be able to advertise "Free Delivery!"

But to answer your initial question, $5 is neither here nor there. It just doesn't make sense to lose a client over $5. I would reduce that client's charge to the $15 you had earlier, then do your homework to see how you plan to deal with the costs in the future.

[noshmarketing]

Ahhh... I read Frederick's response the wrong way.

I think he has a point about not haggling over $5, but the reality is the price discrepancy is now actually $10. Next time you raise your prices, it will be more. Perhaps you should just make a note of the exchange and not do anything about it right now. It will be good for you to create similarly strong relationships with your other customers. I've read many times in various places that rarely is price the single determining factor in a decision to purchase. It might help to try not to make price the focus of your service.

Just some thoughts!

[huggytree]

my trip charge is $55 and i know i lose money on it typically...$25 is way to cheap

if you never raise prices your going to be in trouble in the future...your going to get too far behind

last year the yearly union raise meant i should raise my prices $4 per hour....i questioned over and over if i should raise it or not.....i decided i had to or it would effect my prices in the future.....i didnt lose 1 customer......no one even questioned it

if it were me i would raise this customers price....but i would also explain they are still $5 less than typical...make sure they know they are 'special'.....i would also recommend trying to get to know this customer better and becoming friends with them...i take my large customers out to dinner with my family, some i trap shoot with......becoming friends with this customer may take the edge off price increases and since they are your largest customer its just good business....

when a customer turns down my dinner invit. i always know they are afraid to get close because 'price' is all they want...they dont want to be close because they know they will be moving on in the near future when a lower price is offered by a competitor...

you have to raise your prices someday....today is the day....if you cant afford to lose them at this point you may have to eat the $5....i make sure i have a very diverse customer base....if i lose 1 customer it doesnt effect me much....i dont let customers dictate MY PRICES....Your the Boss...not him....you make the rules and prices for your company...not him....everything goes up in price...all my suppliers go up 1x-4x a year....sometimes by 10percent

[Steve B]

I don't really understand why you give them a price break on everything. I would work on bringing up their price on everything. However, you may need to do it gradually and you may need to find some new customers first just in case they walk away. They are right about the cost of fuel - so you've lost any logical argument on why you would raise their trip charge at this point. I would get rid of the trip charge for everyone and just build it into your general fees. I think people find it insulting to pay a seperate line item for something like that.

[huggytree]

larger customers typically expect a price break..i get it.......but it doesnt mean as a business owner you have to give it to them....it may mean you will not have any large customers........i dont and thats probably why...everyone gets the same price

[LFinkle]

I think your challenge is the customer is not focused on your relationship in a partnering type of way. No one wants to pay more than they have to and every customer will ask for a break in pricing if they think they can. You have to make them understand that the additional fee is not directly related to simply an increase or decrease in gas prices. You can't be in a position where each time the price goes up or down you are renegotiating the truck fee. Reality is that it simply costs more to run businesses today and gas prices are just one piece of the equation. Perhaps you could negotitate something like keeping the fee at $20 and after X amount of trucks within a certain amount of time they get a rebate. I'd keep the amont high they have to schedule before the discount.

[Matt Ohne hamen]

I can't believe that people are so rude that they won't pay a $25 charge. I guess they think fuel is free! As a contractor outside of Philadelphia I can't stand how cheap people are! Check out a website called Nastyclient to help protect you from working for deadbeats.