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Irate Customer Due to Rate increase - How do I handle?

Discussion in 'Business Fundamentals' started by dmjr77, Oct 3, 2005.

  1. dmjr77

    dmjr77 Senior Member
    Messages: 225

    Hello,
    I just got off the phone with one of my plow customers. He is mad at me since I had to increase the rate (plow & shovel walk) on his driveway by $4.00. I tried to explain to him that the cost fuel and insurance is more this year than last year, but all he could say is "I feel that is asking a bit much" Do you think $4.00 is to much? Any ideas on how I should handle it or should I tell him to find someone else?
    Thank You
     
  2. Young Pup

    Young Pup PlowSite Fanatic
    Messages: 5,491

    Is this a residential customer? I just looked at my prices from last year. I raised my residentials anywhere from 3 to 5 dollars last year. I got not one complaint. Now this year I don't think I am going to raise them. I am milling over that before I send the letters out at the end of the month. Me personally I don't think you need to give in to him. He can take it or leave it. Tell him everyone is getting the increase because of your overhead is well over you head. Sorry had to say that.
     
    Last edited: Oct 3, 2005
  3. All_Clear

    All_Clear Senior Member
    Messages: 206

    Well lets see... If you need to make $4 more because of costs and a customer does not understand then sorry they should find a new plower.

    Assuming you know your cost to run your business and thats what you need, then never lower a rate just for a single customer. You'll end up out of business fast. If however you value this customer and have to keep them then i'd say try to find a new customer in the area to off set the cost. Not much else you can do, ya win some ya lose some.
     
  4. dmjr77

    dmjr77 Senior Member
    Messages: 225

    This is a residental customer. I feel that I justified since at the start of winter last year fuel was $1.49 a gallon and now it is 2.79 a gallon. Am I out of line at all?
     
  5. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    Tell him "Thank you for your business in the past. I'll take you off my list for this winter. Again, thank you very much."

    If he calls back - "I'm sorry, Sir, my route has been filled".

    But that's just me - I won't plow for someone who thinks I'm gouging. Apparently, he was upset and now I'd be upset. There are other customers. Would you take on a new customer who wanted to argue with you?
     
  6. Young Pup

    Young Pup PlowSite Fanatic
    Messages: 5,491

    To me it should not just be the fuel costs making you raise your rates. You have Insurance,salt prices are going up due to fuel, You need to go get the salt as well. It just a business move.
     
  7. Young Pup

    Young Pup PlowSite Fanatic
    Messages: 5,491

    Well put Mick.
     
  8. dmjr77

    dmjr77 Senior Member
    Messages: 225

    I do not do sanding or salting, I sub contract it out. As for my insurance, I just checked with my insurance agent today and my rates are staying the same as last year. I feel by traveling 12 miles to get to his driveway, I feel that I am in line.
    Thank You
     
  9. All_Clear

    All_Clear Senior Member
    Messages: 206

    Well you pretty well answered your own question then, if you feel your in the right and its 12 miles to the job and he wont pay then, find a new customer in a tighter route. If your route includes homes right around it, like i said try to pick up a new customer and charge them your going rate to off set some cost of the other guy. However sounds like he wants a certain price and would bail on you if someone else comes along cheaper anyhow....
     
  10. cet

    cet PlowSite Fanatic
    Messages: 7,202

    If you find an educated customer or one that is good with numbers he will know that $4 increase will cover more then fuel and insurance. If you do 25 houses per snowfall then the increase is $100/night. I bet you don't spend $100/night total not just the extra. If you need the $4 then stick to your guns but don't blame everything on fuel. I raised one of my contracts last year from $12,000/year to $13,000. They phoned pissed off but I said that is what I need, no other explanation. They said they would look around and get back to me. I told them that was fine, we talked for a little more and before I hung up they agreed to the increase. Sometimes we price things wrong and they need to be adjusted. That is for the customer to understand. What percentage is the increase?
     
  11. dmjr77

    dmjr77 Senior Member
    Messages: 225

    cet,
    it figures to a little more than 12%, $33 to $37 for a plow and shovel.
    Thank You
     
  12. cet

    cet PlowSite Fanatic
    Messages: 7,202

    If the house is 12 miles away and then 12 more to the next job it might be hard to make money at that price. Drive time alone in the snow must be almost 30 minutes return.
    Our town isn't 12 miles wide and we don't leave town.
     
  13. Makndust

    Makndust Senior Member
    Messages: 324

    Your well justified. I raised my rates 25% (yes you read right). From 60.00 / hour to 75.00 / hour. I was feeling a little bad until tonight. My 12 year old son was helping me put on a new set of boss v plow blades. He asked how much they cost (180.00 per set). I started explaining the 150.00 here and 200 there thing and he couldn't believe it. He asked me how I could stay in business with such expenses. With my rise in fuel and insurance costs it kinda puts things into perspective.
     
  14. hickslawns

    hickslawns Senior Member
    Messages: 617

    I don't know who said it, but someone on this site said "If you feel guilty about sending out your bills, then you are probably priced where you need to be. If you feel like you are giving your customers a break then you are underselling yourself." Maybe not the exact quote, but that basically covered what they were saying. I don't feel guilty when I send my bills, but I am not doing charity work. Who paid the tranny rebuild last year (although it should have been my driver, I fired him instead because he knew better)? Who pays the insurance? WHo pays the fuel? Who leaves their wife and kids for sometimes days at a time? Who takes off on Christmas eve when necessary? We are in this to make a living. If a customer can't understand the need to occasionally raise prices to offset rising costs, then they are not concerned about whether you will be there next year and years to come. They are concerned about the bottom dollar. I can respect that. If I can't afford something, I don't buy it. I don't go into Walmart and try to beat them down on a price either though. It is priced there to make them a profit so they can stay in business.

    My opinion: Tell them take it or leave it! Just do it tactfully like Mick said.
     
  15. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 10,868

    The 12% increase is fine assuming you needed to raise your rates 12%. What percent of your costs is fuel? Did your fuel costs increase 12% as a percentage of your gross profit? Or were you low in the first place as someone else said?

    I raised a customer 75% one year. I screwed up on how much had to be mowed, was way off. After the first year, explained the increase to him, he stated he had to get other bids, I told him I understood, we still have that customer today.

    Just a personal opinion. I don't 'feel' a price increase is ever justified. I justify it with facts. Feeling is an emotion and emotions are not objective or quantifiable, facts are.
     
  16. Up North

    Up North Senior Member
    Messages: 921

    dmjr77,
    Stick to your guns man. I'll bet you anything that most "professional plowers" in your area have raised their rates more then 12%. I'd say if he's not happy and won't pay the increase...sayanora!

    Buck
     
  17. DBL

    DBL PlowSite.com Addict
    Messages: 1,310

    $4 is nothing...i dont know anything about this customer but if hes gonna get all rilled up over $4 then hes probably gonna ***** all year long
     
  18. Mark Oomkes

    Mark Oomkes PlowSite Fanatic
    Messages: 10,868

    Did you happen to notice the part where he said it came out to 12%? What about the comment if the guy plows 100 driveways in a night, that's $100 total. Does anybody go through that much fuel in one night in one truck? $4 is nothing if you are talking about $100 (4%), $4 is a lot when you are talking about $4 (100%).

    What if he get's serviced 30 times a year, is that still nothing? We still don't have an answer whether he is raising his price because he underpriced it initially or if his costs have actually gone up 12%. If either one of these is true and the customer won't accept the increase, then yes, he is better off without him. But if he just went up 12% because he felt that would cover his costs--but not knowing the facts--then maybe his increase is out of line. We don't know and shouldn't give him an answer one way or another until he answers us.

    What I am trying to point out is that any of us would be a tad upset with a 12% increase in anything we purchase if there wasn't a good reason behind the increase--salt, plows, fuel, trucks, health insurance (I wish it was only 12%), etc--but when we are educated about why something costs 12% more, we either pay it or find something cheaper. Why do we get upset at our customers for doing the same things we do? It is possible to price yourself out of the market, even if you provide the best service in the world, not everybody can afford that, therefore you will not be able to provide yourself with a living at that pricing level. It's called remaining competitive and capitalism, someone will always be looking for a more efficient way cheaper so that they can get the work you have. So don't go condemning the customer without knowing all the facts, he's doing the same thing you would do if you were in his shoes.
     
  19. TRUE TURF LAWN

    TRUE TURF LAWN Senior Member
    Messages: 290

    i went up $10.00 on residential and $50.00 on commercial i Had no complaints. :waving:
     
  20. Up North

    Up North Senior Member
    Messages: 921

    Fuel alone has gone up what...75% higher then at this time last year? I think a 12% increase is well within line. All my accounts are getting hit with an increase as well, $5 will be the minimum increase, in most cases it's going to be $10 more then what they paid per push last season.

    Buck