Product Vs. Offer: Pricing Your Service

Product Vs. Offer: Pricing Your Service

Price and value often mean two completely different things, and while they’re often conflated, it’s important that you discern the difference between them, if only for the sake of your business. Pricing your services comes down to how you perceive your own business, so it’s best that you take some time to sit down and think about what you bring to the table. Sam Wakefield urges you to think about how you’re pricing your services. At the end of the day, you may just be cheating yourself out of turning a better profit.

We are going to talk about some fun stuff. It is a fantastic day. Do you know why? It’s because I choose it to be. That is a key principle for you as salespeople. First of all, I want to give a huge shout-out to my friend JP. Thank you for the insights you gave me. As salespeople of anything, I understand now that not all of you out there sell air conditioners or sell heaters. Some of you sell cars, plumbing, electrical, all kinds of things. I don’t know what you’re all into, but the philosophy is the same. When I say things like air conditioning or heater, substitute that in your mind with whatever you sell.

People Are People

If it’s a supplement, a tankless water heater, closets, drapes, whatever it is, the philosophy is the same. The sales conversation, marketing philosophy, sales philosophy, and closing techniques don’t change. It’s psychology. People are people. Use it in whatever element you can. It could be in dealing with your spouse, partner, kids, brother, sister, mom or dad. Whatever relationships, this philosophy is the same. We are winning people over to our way of thinking. Thanks, JP, for that. I appreciate it. You’re such an awesome person and your insight was very helpful.

We are talking about something that is a lot of fun, something that’s near and dear to my heart. That is how the customer or client perceives you. It’s how they perceive everything. I heard somebody say, “Your perception of price is not your customer’s perception of value.” It totally changes. Many times, we get bogged down into our perception of the price that we have no idea in our head of whatever the number that is assigned to what you’re selling. Maybe it’s a $10,000 project. In your mind, you’re like, “I don’t know if I would pay that price for this project.” This is why for years, I worked for way too cheap or free because I didn’t understand the value.

Here’s an example. I could learn electrical. I could learn how to change the switches. I know how to do it. I know how to change a light switch in my house. However, I’m not going to jump on YouTube and spend the time tracking down all of the ways that wiring can be connected. Maybe this light switch that should be turning this light on turns on the light in the other room and it shouldn’t or whatever the example is. What it has to do with this is you call the electrician. What happens a lot of times, and this example came from a true story, is the electrician comes in and he starts apologizing for how much it is.

It’s like, “I thought it was going to be a $40 repair, but I ended up needing another switch and a couple of other parts. It’s going to be $140 repair. I’m sorry about how much it is.” At the end of the day, it’s like, “Just do it.” I don’t care how much it costs. You know how to do it. The value to me is worth that $140 or whatever it is that the problem gets taken care of. I don’t have to spend the time to go learn how to do it. I don’t have to go to the store and do all these things. My time doing what I do is more valuable than trying to waste half a day figuring out how, going and getting the right parts, bringing it back, and running the risk of it not working once I get it installed because you know how to do it.

Pricing Your Service: We have to remember that as service providers, our perception of price is not the same as the customer’s perception of value.

You can do it immediately. You can get it taken care of. You get the problem solved. I will gladly pay you the $140 to go ahead and fix my problem and be on with life. That way I don’t have to clutter my brain with this other thing that I have to learn. The thing is we sometimes get lost in the mix of, “This is easy for me. I’ve done it for so long. It’s fast. It’s such an easy thing. I know how to do it.” Let’s say you’re changing a capacitor and we all know it’s a $15 capacitor or a $40 capacitor if you’re putting the good ones or however much it is. What we forget is the value to the homeowner. Could they do it themselves if they Google it if they went and got the part? They could but you can do it in 30 minutes and be done and they’re back up and running on with life. The value to them for convenience and knowing that somebody is going to do it right, knowing that somebody’s going to warranty it is worth the $330 or however much you’re charging for a capacitor change out. It’s worth it to them.

We have to remember that our perception of price is not the same as the customer’s perception of value. We’re going to start talking a whole lot about value and how to add value to what we do and how to add value in our offers to our clients coming up moving forward. The thing is when you get hit with, “Your price is too high,” that doesn’t mean your price is too high. That means you didn’t show enough value for them to perceive the price as being a reasonable price. Does this make sense to anybody? We’re jumping right in with this because it’s been heavy on me. I’ve been studying about how marketers work and paying attention to even spam emails and junk mail.

How do people write their ads in a way that they could make a better offer? Because here’s what’s going on in our society, in the heating and air world. I know it’s in every world. There’s a difference between good companies and bad companies. We all know the 80/20 Rule or the Pareto Principle. It’s 100% applies that 20% of the company does 80% of the work because they’re the best. If you’re the chuck in a truck who’s cutting corners, you’re not reading this because you wouldn’t put in the time or effort to work towards educating yourself to get better. However, that doesn’t mean that you are not a one-man shop who’s striving to better yourself. That’s awesome.

If you’re reading this, you are already on the right track. We see this all the time. In our world, there are a handful of companies anywhere you go who are at the top of the top. They’re the most expensive or close to it. Usually, they’re almost the same and close. However, it doesn’t matter. It’s not about price. When you stack up the top companies and they’ve got the same certifications. They’re all NATE certified, whatever the certification is. They’ve all got the license, the insurance, the same accolades. They’ve all got the same president’s award or circle of honor, whatever your brand’s top award is. You’re certified triple platinum, double diamond, top dog certification. You’ve got the awards, but so have other companies in town.

When the homeowners say they get three bids, four bids, or five bids, if they all come from the same handful of top companies, what their problem is on paper you all look the same. What happens? One or two of those will come in with, “Here’s the cheaper price. We’re cheaper by a couple of thousand dollars.” This comes from what happened to me. I went to a home, made a great proposal, got it to the people and they’ve got to get one more bid. We’re going to talk a lot about this in the future, how to overcome this situation. It’s what’s happening. They’re getting the other bid. She hits me back with, “This other company who on paper looks like you because they’ve got all the same certifications. They’ve got all the same things. What’s the difference? They’re $2,000 cheaper and they’re including more than you even have in your proposal.”

She sent it to me and I was like, “You don’t even have to send it to me. I’ll show you that we’re not $2,000 more expensive. We’re $2,000 different and here’s how.” The way that you do that is you start to differentiate selling a product from making an offer. We do that by what’s called a value stack. It’s adding value and showing them perceived value so much that it’s ridiculous if they don’t buy from you if they don’t hand you money. If you can’t be the cheapest guy in town, be the most expensive and show the value to be that. There is no benefit in being the second loss leader in town. Besides you have to work so much hard to make any amount of money. Don’t work on being the cheapest guy. Don’t do the whole price drop thing. It’s ridiculous. Make a better offer because there are two ways to lower the price. Did you realize that there are two ways to make something cheaper? The first way is to drop the price, to lower the price for them.

The second way is to increase the value. As you increase the value, the price seems cheaper. Here’s an example. Imagine that you’ve got a $1,000 item. It doesn’t matter what it is. It’s $1,000. That right off the bat sounds expensive. We’ll call it the new iPhone. iPhone is $1,000 and that was a huge deal. At the same time, it’s a commodity on its own. When you look and jump online, you can go to the Apple Store, Best Buy, anyplace online, or in your town that sells the iPhone, it’s going to be the same price. It’s a commodity. It’s a matter of where you’re buying from. There’s no differentiation because you’re selling a product. Now imagine that it was maybe Steve Jobs’ iPhone when he was alive. What does it have with it?

Pricing Your Service: You have to start offering value items that are little or no cost to you but are a massive perceived value to the client that the competition is not doing.

If he were to sell his iPhone straight away, not for the fact that it was his iPhone, it would just be $1,000. However, don’t you think that he would have a list of rich, famous, important people’s personal phone numbers on his iPhone? He’s probably got Tony Robbins, Bill Gates and Elon Musk, or whoever these business titans. Their personal numbers are in there. I guarantee it. How much value would that be to you as a business person if you could get in touch with probably lots of athletes, sportspeople, actors and famous people? Would there be value to that if all of a sudden, you had all of those personal cell phone numbers? That kind of a network could potentially be worth millions or hundreds of millions or more, but we’ll say that’s a $1,000 value to be able to have that list of those phone numbers.

Also, because we know that leaders are readers, he probably had a massive amount of training, courses, and different things that he’s bought over time and probably had those downloaded on his iPhone as well. It’s not a stretch at all for 5 to 10 years’ worth of education to be $50,000 or more worth of investment into education. That’s downloaded on there too. How much would that be worth to you to get that entire catalog of personal growth and education instantly? Not only that, he’s got all of this access and I could go on and on and on, but then here’s the thing. There is only one of those phones. You put it up for auction with a starting bid of $10,000. The auction would go way up because the value now that is associated with this offer is it’s not just an iPhone anymore. It’s a tool. It’s an offer where all of these things are combined because the perceived value is all of a sudden dramatically more than the value of the phone itself.

An Apple To Apple Conversation

When we offer what we do, the best way to take it away from price is not even an apple-to-apple conversation, especially when on paper, the company looks the same. On paper, the reputation looks the same and the installation looks the same. You have to start offering value items that are little or no cost to you but are a massive perceived value to the client that the competition is not doing. How do you do this? Do it with the inexpensive things because you’ve got to price yourself to cover. A good way to do it in the heating and air world is to take things like surge protectors. They’re super cheap but the value is massive. We sell ours for close to $500 per system. Surge protectors on equipment is a no-brainer for people nowadays. When you can say, “I’ve included this when the competition didn’t,” it’s a 497 value. The next thing is, “I chose for your project this thermostat Wi-Fi connected. It’s the upgraded version that has a remote temperature sensor for the other rooms, so you don’t have the upstairs-downstairs issue anymore. That upgrade alone is a $200 value. I’m including it at no extra charge.” We know that on the backend, the cost difference is not that much between thermostats.

However, we can offer it as a huge value add. You could go down the list of all the things that you do. We schedule a quality control person or you can go back out yourself for a quality control inspection after the installation to guarantee that your systems running the way it should be. This is a $119 value if you give away a maintenance plan with your new installs for the first year. That’s something we do. I recommend it. It’s great. Don’t give it away. Build the price into the project, but don’t break it out as a line item and give them an opportunity to say they don’t want it. You put it into the project and then when you are selling your system when you’re making your offer to them, that’s when you can say, “Here’s something else that we do. We include for the first year our maintenance plan, which is super important because we want to get a full tune-up on this system twice in the first year to make sure it’s off to a good start. It’s doing what it’s supposed to be doing. That’s a $280 value or whatever it is. For us, it’s a $280 value. We include it at no extra charge because it’s important in our quality control process to make sure that you get exactly the project that you’re looking for”.

When I go in and I make an offer for a system to a client, I go through every single one of these items. The client I had that I locked in, we’re $2,000 higher than the other company. I went through this value stack with her. I said, “All of the things that we’re doing at $1,650 additional value that doesn’t cost you anything does this.” I explained the differences in attention to detail, the differences in price, the differences in quality of installation between us and the competition. It’s amazing because she was like, “This is awesome.” The cool part, which is even better, is we were talking about a mid-level system the whole way that she was comparing to.

Once I gave her the value stack, she got back to me with, “We’d like to go ahead and upgrade to the next level up at the same time.” I’m like, “No problem. Let’s get it done.” That’s how you do a value stack. When you’re making your proposal, when you’re making the presentation, we’re not selling products anymore. We are making offers. When you make an offer, you have so much value in the project and the way that you present it. It doesn’t make any sense that they would go with someone else because they don’t get anywhere near the same value. It’s about their perceived value. Every single thing sold separately would cost what you’re telling them is the value and we’re not making stuff up.

We know a la carte items when you do it with a project, they don’t cost us nearly as much or they’re nothing. However, if you do it by itself, it would be $500 or $700 or whatever it is. When we do it with the project, we can give that value, outline it, and add it up. That’s called the value stack. It’s how you move and differentiate yourself from anyone else in the field. I guarantee you, nobody is doing this. This is a different concept for presenting in our industry or any industry that has to do with any kind of trade, even cars or whatever it is. People don’t do this. Your regular everyday salespeople, comfort consultants, and project managers out there, they are not presenting this way. When you present this way, it’s going to change everything for you.

Pricing Your Service: When you’re making your proposal, when you’re making the presentation, you’re not selling products anymore; you are making offers.

Try this method. Do something basic. Let’s say you’ve got an allergy issue. When you go through and you’re presenting your project, you’re presenting your offer. You’ve gone through the presentation of the different types of equipment. The big caveat here is you have to do this before anyone ever sees a price for anything. The value stack is before the price. You have to show all of the big values and added up for them before you ever show the actual prices of what you truly priced your offer. Let’s do a scenario. We’ve got a house. They’re going to go with a two-stage air conditioner, 92% furnace. It’s got one bedroom that is too hot in the summer and we’ve got allergy issues.

When we make our offer, we go through with, “Here’s the equipment.” You show your full retail price, fully booked price with no discounts, no rebates, nothing. It’s this value. The next thing is, “This room is now going to be the same temperature as the rest of the house year-round and it’s this value.” What would it cost to a la carte fix that and it’s this value? The next thing is, “The allergen problem we talked about. This is going to make a dramatic difference with that. Here’s the value and again, it’s the fully-loaded book price if you would do that a la carte now, all of that together.” You then go through everything else like your maintenance plan and all the things that add up every bit of the value. In the end, “Here’s the value that you’re getting. I’m not going to charge you that. Here’s what your price is when we bundle all this together.” People love bundle pricing. “Let’s bundle this together. It’s however much it is. Why don’t we get on the calendar?”

That’s how to do the value stack. It’s so powerful. We’re going to be diving a lot more into this. If you haven’t, join the Facebook group. Go to Find the link that goes straight to the Facebook group. I’m going to be doing a lot of videos on how to present this way, how to use the value stack in different parts of the visit, different parts of the call, service call, and service appointment, all a lot of different ways. Join the community. It’s people like you and me that are crushing it every day and constantly striving to be better. That is the community where we share all kinds of things. We’re all getting better in there. This was a longer-than-average episode, but this was a big topic and I wanted to get it all in. We’ll break it down more in pieces in the future. Until then, every single one of you, go out there and save the world one heatstroke at a time. Save the world one frostbite at a time.