The Right Ways to Set Pricing Based on Competition

Unless you’re volunteering, making money is the point of being in business. The pricing for your services, though, is hard. You’ll need to consider what others are charging in your area to set, and eventually change, your price. The proper pricing analysis is going to be key, and it’s not just how much everyone else bills by the hour or the job. You’ll need to do serious research to place yourself properly in the market.

Who is Your Competition?

Your competition is anyone who provides the same products or services. That is the short definition, but you’re probably missing some competitors you don’t realize. For example, lots of business owners don’t consider Craigslist aka “pizza techs” as competition. You’re providing an entirely different level of service than these people. They aren’t in the same league as you.That is a true statement and a key to setting your pricing. That doesn’t mean they aren’t a competitor. When clients need computer repair, they’ll consider all sources. Some sources may not be wise or reliable, but they’re still competitors.

Another competitor you’re probably forgetting is the manufacturer itself. Apple, for example, has the Genius Bar and gives free support to Apple customers. They’re probably the most extreme example, but all manufacturers offer tech support through the phone or email. Places like Costco or credit card companies will give “concierge” tech support and intercede on issues. Free support is difficult to compete against, but like Craigslist, you offer stuff that sets you apart.

Along with those sources, you’ve got national competitors like Geek Squad and platforms like On Force.Your community has local or regional providers.The best place to look for these companies search engines. That’s what potential clients will use to find them. Don’t forget traditional sources like phone books and Chambers of Commerce. If you’re targeting businesses, they’ll still often look there.

I think the best place to look for competitors is your existing and potential clients. You should be asking each client how they found out about you. After you get to know them and provide excellent service, ask them who else they considered for the job. If you’ve taken over from another provider, you already know who you replaced.

What Extras Do You Give Away Regularly?

Price is how much you charge, but value is how much you deliver. You might be charging more, but the customer is getting more for the money. Take for example those techs that charge outrageously low rates like $20 an hour. They’re often not that experienced and working as a hobby. Price-conscious customers love these people because they’re bare bones and get the job done. They are your competition, but you might be providing more value. Some clients appreciate that value and some don’t. That client wasn’t fully price conscious. Otherwise, they just would have called tech support. From what I’ve seen in the industry, here are the top things you’re providing, but not always promoting.

1. Skills & Experience: A cheap company that takes too long to fix the problem comes out rather expensive. Do you have the experience to work on multiple platforms? The more solutions you can keep in-house, the more value to the client.
2. Tools: Do you have tools that get the job done efficiently. For example, do you have special cable testers or use managed services software to detect, repair and prevent problems?
3. Insurance, bonding and background checks: Can you be trusted with valuable equipment? If something goes wrong is there a third party that will protect the client’s assets?
4. Response time: How long does it take to reach someone, get an appointment scheduled, and get a problem resolved? Each of these is a different metric.
5. Record keeping: If a client has a problem in the future or needs a copy of an invoice, can you provide it? Does your organization have an institutional memory?
6. Payment Options: Not paying at time of service is a privilege, not a right. You don’t have to accept credit cards either. Those services cost you money.
7. Staffing: Do you have a team of people so that if you’re not available someone else can do the work? That could be employees, subcontractors or partnerships with other firms.
8. Accessibility: Can clients reach you after business hours (even if you charge extra for that) or are you a 9-5 Monday through Friday operation? Can they reach you by phone, email or SMS? Can you provide remote support?
9. Specialized Industry Knowledge: Have you worked with clients who have to comply with HIPAA, PCI, FINRA and other specific issues?
10. Client Service: You might know your technology stuff, but do customers feel comfortable with you in their home or business? Do you give away estimates, surveys, or quick answers as part of your service?

That’s my short list, but you might have others for your market or skill set.

Surveying Your Competition and Gathering Pricing Data

After you figure out everyone you’re competing against in your market, it’s time to gather data. I covered this before, but I suggest making a spreadsheet with the names, phones numbers, and date of inquiry. Then, ask a friend or someone through a service like Fiverr to make these inquiries for you. It’s awkward for everyone if someone from your company does this research. There isn’t anything unethical about competition research, but some companies get offended by it.

The examples earlier are the common things I see companies include as part of their service. Your business might have other unique extras that we didn’t cover. When you’re doing your research, check to see if your competitors are offering more value. Also, see if they’re offering something you’re not. For example, we started experimenting with scheduling clients through SMS. Nobody else in the area offers it and clients love it.

Communicating Your Value, Then Your Price

When clients ask how much you charge, your price per hour or job isn’t the right response. You’re not obtuse, but you can’t communicate what you offer based on just the price you charge. After you survey your competition, you need to show your value first to the potential client. Listen to the customer’s pain points and present your value based on those pain points. The potential client may mention down time, so mention your expertise and quick resolution time. Other potential clients might not like outsourced tech support, so you’ll focus on your customer service skills during your pitch.

If you just answer the question asked, you’ll immediately compete with others solely on price. Clients don’t often ask why you charge more than someone else. They just go with the cheapest bid. Why shouldn’t they? Once you answer the cost question, you’ve moved away from value.

When answering a client’s question about price over the phone, pick those selling points that separate you from the competition. For example, “With our 25 years of experience in the industry and our professional tools, we get the job done quickly and effectively. Thus our hourly rate is $125.” Just pick one or two key points, don’t list them all or the client will get annoyed you didn’t answer the question. If those key points aren’t winning clients, pick some others to include in your answer.

When you get an email or the opportunity to give a written proposal, that’s when you can point out all your extras. You don’t want to overwhelm the client with information they don’t need. By the way, are you giving away that proposal or charging for it? Again, that interaction might be an extra service you are providing that your competition doesn’t!

Charge for the Extras to Make More Money

Airlines are famous for this pricing strategy. They take a service you’ve come to expect and slowly start charging extra for something they used to include for free. Want a checked bag? That will cost you. Want an assigned seat? That will cost you.

I don’t recommend that exact strategy, but the idea makes sense. Instead of raising your base price, raise prices or charge for features that aren’t core to your service. If area pressures are forcing you to keep your rates lower, you might start charging extra for after-hours service or emergency response. If you’re not taking payment at time of service, charge a convenience fee for other payment options. One pricing option I learned about at the IT Jetpack Unconvention is charging extra for remote support. You’re making it convenient for the customer and remote control software costs extra. Why not charge for this feature?

Putting Pricing All Together

Each computer repair company will have to determine their pricing based on market conditions and the unique features of their business. If you raise your rates too high or too fast, you’ll price yourself out of the market. After you look at what others are charging and what they’re giving, you’ll still be able to make a great profit and keep your clients.

Written by Dave Greenbaum