Members recently submitted information on competitors’ pricing and billing practices in their market. The contracts and invoices submitted revealed that our competitors are skilled at meeting customers’ demands for low unit pricing . . . and equally skilled at driving up margins with practices protected by clever contract language.
Among frequently reported strategies are contracts that read
- “. . . Customer agrees to pay charges set forth on Schedule A attached hereto and other charges which may become applicable.” Other charges can include Service Charge, Deliver Charge, Environmental/Waste Water, Fuel Surcharge, Multiple Service Day, Insurance, etc.
- Contract renewals are often printed in small type on a delivery ticket so an unauthorized person who thinks he is signing a delivery ticket may actually renew for 5 years. Bill more and come less is also very common.
- Opt-out increases are also imposed with small print on invoices or statements . . . “Effective the week of November 7, 2016, delivery frequency for mats serviced beyond one week will be changed from monthly to every other week and from every other week to weekly. If you do not wish to take advantage of this offer to change your mat service, contact your service sales representative.”
- Other methods include “50% or 100% billing” so a delivery of 75 shop towels is billed at 500 (total inventory; billed every week). These strategies and dozens more result in much higher total billing than the customer anticipated.
Universal Unilink Members take two distinct approaches to billing practices seen in today’s competitive market. Some adopted similar strategies to recoup margins while others take the radically different approach of “no contracts” unless custom merchandise is involved.
One Member has experienced 20% or greater growth year over year without using contracts. Key to his success is knowing his niche and strengths.* He targets local businesses and finds they are the most overpriced and least serviced.
“Today, every customer expects good service so selling service isn’t good enough. I emphasize specific ways I’m different from my competitors.”
- No Contract: “I don’t need a contract; I earn my customers’ business with every delivery. Is that compelling? When everyone else has contracts and you don’t, you keep your customers! My retention rate is around 95%; most losses are sold companies or out of business.”
- Bill Usage Only: My unit prices are higher, but I do not bill for inventory on towels, aprons, mops, etc. Explaining how many laundries bill inventory and how that drives up cost is very compelling.
- Loss Billing: “Raise your price and don’t bill for loss. Using a competitor’s invoice, I explain how the amount they charge for loss is 2 – 300% above what they paid for the product NEW!”
- Stable Billing: “I don’t have an annual price increase. To a customer used to seeing 2 – 3 increases a year, the idea of stable pricing is compelling.”
- Local Service: “You are in the community you serve. Service calls are not routed to a call center that doesn’t know where you’re located. All calls are answered or responded to within 1 hour. No waiting 2-3 days for a response. Compelling?”
After presenting his pricing and how his methods differ from the competition, this Member is often asked to analyze invoices. “I cannot tell you how many times I get the business even though I’m higher! Companies are sick of negotiating rates after every price increase. They just want service at a fair price – that is what WE offer!”
Watch future eUpdates for information on how other Members compete against the low unit pricing model.
“Contract terminology may provide legal protection, but it’s a last resort. Better to have systems in place that identify problems before a customer is so unhappy he wants to drop your service,” advises TRSA General Counsel Steven John Fellman. Fellman is a featured TRSA speaker at the Clean Show (www.trsa.org/cleanshow)at 8:30 a.m. Monday, June 5. The session is included in show admission.
- Who you are . . . (Strengths, Weaknesses, Opportunity, Threats)
- Does Who you are aligned with who you want to be (Opportunity)
- What is your value proposition (Strengths)
- What are potential Threats to your business
- Identify target customers . . . Are you aligned to their needs (Weakness or Strength)