What if the customer wants a price reduction?

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by Tom Watson on September 29, 2013

Many years ago I had a situation in which an existing customer of mine called and asked me to stop in and see him right away.

While a call like that doesn’t always mean “bad news”, it does make me think something’s wrong. In this particular case the customer was a facility manager who was a seasoned pro.

He was a suit and tie type of guy who always came across as polished and professional. At times I thought he kind of “looked down” at me, but I didn’t really care about that. I mean…as long as the check he sends clears each month, he can look down all he wants.

 Me and a facility manager discuss price

The next day arrives and I made it a point to stop in to see him. We quickly went into his office to “chat”. He soon cut to the chase and told me he was having other cleaning companies come in and give prices for comparison purposes. After sifting through the numbers he noticed that we were on the “high side”.

Now… he was right about that, as I tend to price my services a little higher than the rest. That’s not always the case, but I do try to get the most possible for what I do. After all, I’m not doing this because I like cleaning toilets. I’m doing it because I like making money.

While my approach has plenty of upside, it also has a downside in that I may not get every single job I bid. Not that you would land every account anyway, but when you bid high you have to be prepared to lose out to a lower priced company.

So to make a long story short, he indicated that he really liked my company but our prices were too high. This conversation came as a bit of a surprise because we had been cleaning this office for a few years at this point not to mention I never had a customer ask for a reduction. In fact, it’s never happened since either!

Making my case for keeping the price “as is”

Because I was caught a little flat-footed, I had to improvise some type of response and I had to do it quickly. My initial defense mechanism was to enforce the obvious, and that was the fact he LOVED the employee I had stationed at that account. The guy I had working, and still do, is a great worker who knows how to handle an account.

He not only does what he needs to, he also does extra as needed to make himself invaluable to the staff. So working that angle I drove home that employees like him cost money (I need to pay more to attract good candidates). That in turn gets passed along to the customer, and there is absolutely no way around that.

After that I pounded home the fact that I was as easy as pie to get a hold of and I never dropped the ball concerning the cleaning. From there I went on and made mention that NO MATTER WHAT, someone will always be cheaper.

To illustrate the point, I told him that if I lowered the price to 50 cents per month, someone would probably come in at 35 cents to steal it away from me. After making the few points I set out to… I rested my case!

The “Verdict” on price is in… please take your seat

When the proverbial jury came back… IT DIDN’T MATTER. The manager indicated to me that it all boiled down to this… “You either lower the price or you lose the job”. Hmmm…. not the best of choices to be left with! Again… I had to think on my feet!

Much like your life flashing before you when impeding doom is about to strike, I had a blur of thoughts cruising through my brain. I weighed the pros. I weighed the cons. Then tried my best to consider everything on balance to determine whether I should keep the job or let it walk.

Now I was still a little confused by where I was and how I got there because he wanted a price reduction BUT he never actually said “how much”. So I asked him the following… “How much were you thinking?”. He said something along the lines of “what can you do?” Hmmm… another decision!

Instead of going high I went low and indicated a 5% cut would be workable. He said OK! Wow, not as painful as I first thought! At the end of the day a 5% cut is not much bigger than a hill of beans, especially when you consider I was a little high to begin with.

As I look back and think it through, this is what was going through my mind. Knowing this MAY help you if something similar happens. Keep in mind that these were RANDOM THOUGHTS, and each of them “may not jive” with the other thoughts going through my head at the time! Ready? Here we go…

1 If he wanted a big reduction in price (something totally unreasonable), I would have let someone else do the cleaning. I simply don’t like giving others control over me like that (I like controlling the TERMS).

2 I did a lot of carpet cleaning and floor care for this guy too (at the same facility). So even if I took less for the cleaning, tons of money was still around for me doing the other stuff.

3 The employee who works the account for me is a personal friend. So even if I “broke even” on the cleaning and I didn’t have any carpet cleaning or floor care to speak of I might have kept the account JUST FOR HIM. He is a good guy providing for his family and if I can do a good deed “so be it”.

4 This customer was someone who always paid on-time and that is a big positive. Besides, the more customers you have (especially ones who pay on-time), the more EVEN your cash flow is (IE: money flows into your account in such a way your bills are able to be paid without any “sweat”).

5 The account was right around the corner from my office making it easy to manage. These type accounts I just love! This is one of those “little details” that I factor in all my accounts.

6 I could always raise the price down the road to get it back in line with what I wanted as far as the monthly profit was concerned. Incidentally this is exactly what I did! So basically the price cut lasted exactly one year.

As you can see, balancing the thoughts above “on the fly” was a bit of a challenge. I think it all worked out myself! I took a few less bucks than I would have liked but I kept a good employee and an account that paid on-time among other benefits. Luckily for me this exact situation never happened again!

As I look back it’s kind of funny in that this manager didn’t really want all that big of a price cut. I mean 5% is really nothing! Ultimately I think he “just wanted something”. So when I offered the 5% he viewed it as a “win”. This manager has since moved on to bigger and greener pastures but I still have the account!

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{ 4 comments… read them below or add one }

1 James Stevenson September 30, 2013 at 10:47 am

Once again a sound message.
Just considering the possibility ‘primes’ the mind.
Also, one persons idea of a discount could be very different to anothers, so don’t offer too much to start with too.
All good advice for any business.

2 Tom Watson September 30, 2013 at 11:05 am

Thanks James!

3 julius October 1, 2013 at 4:20 am

Hi Tom, your writeups met most of my needs n experieces in cleaning especially this particular one on price cut. I had a bitter taste of it cos i was kind of seen d client a jokker when i was told to cut my
monthly bill afer 3yrs .b4 i knew what was happening they close my acct. The story wld have bn better if i have what you just shared b4 then.Anuway thank for sharing this.I owm you one. Julius

4 Tom Watson October 1, 2013 at 7:41 am

Hi Julius! I feel your pain… losing an account you worked hard to get is a tough one, but all we can ever do when that happens is just try to replace it with a better one. Thanks for your comment and touch base if you need me.

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