One of the biggest challenges commercial landscaping businesses face is identifying the best way to price their services. Many make the mistake of prioritizing how they sell rather than how customers buy their products or services. As important as pricing may seem, it might not be the top consideration for a customer when they are evaluating your service.
Often, customers are looking for transformation while businesses are thinking predominantly about costs. If your services offer high value, customers would be willing to pay the appropriate price too. And that’s what your landscape pricing strategy needs to focus on – Value.
Why is it Important to Choose the Right Pricing Strategy for Your Landscaping Business?
A study by Harvard Business Review has found that a 1% improvement in your pricing can add up to 11% to your profits.
Excessively high prices can drive away existing customers, very low prices may lead them to believe that your products and services are of poor quality. So, how do you price your landscaping services correctly?
The way you price your landscaping products or services will reflect directly on your business identity and how you add value to your customers’ lives. Your pricing strategy needs to provide your customers a bang for their buck, without compromising on service quality.
Selecting the right pricing strategy involves many nuances. There are multiple options to choose from and factors to consider: market conditions, variable costs, profit margins, clients’ willingness to pay, job complexities, labor charges, availability, seasonal changes, etc. It does seem like a daunting task, doesn’t it?
One thing you need to understand is that –
There is no one-size-fits-all approach.
Just like too many cooks spoil the broth, too many options confuse your clients, but having just a single option means the odds of rejection being 50%. The ideal number of choices is three. Netflix’s Basic-Standard-Premium strategy is a great example.
Presenting your options well and pricing them right is what you need to focus on. The different options need to cater to different types of clients: sensitive price buyers, high-paying clients, long-term customers, value-seeking clients, etc. Offer the right set of programs and you will start seeing increased profit margin and a rise in the number of customers that use your service.
5 Pricing Strategies for Landscaping Businesses
As a business owner/manager, you need to fully appreciate the service you are selling. That’s what your client is going to see, and not just the bottom line quote on your proposal.
Consider these 5 common pricing strategies for your landscaping business:
1. Market Penetration Pricing
If you’re a new business wanting to establish and grow a customer base, choose the Market Penetration Strategy. You basically start with slightly low prices and take over a market by undercutting your competitors.
The main reason to adopt this strategy is that you want to focus on market share over profits. It helps develop a good customer base at the beginning.
Keep in mind though that you will need to have extra funds to cushion upfront losses to establish a footing in the market. Often, low prices also build a low-quality product image in customers’ minds so you need to be careful. Gradually, you should start increasing your prices as your customer base grows.
2. Premium Pricing
If you’re an established business with a focus on quality services and are wanting to grow your profitability then choose the Premium Pricing Strategy.
As the name suggests you offer premium products i.e. your pricing is higher than the competition. Your Unique Selling Proposition (USP) is integral for this pricing strategy.
Once you’ve figured out you are the only company in the area to have a USP, it’s time to tell the world, and pricing it higher than your average run-of-the-mill competition is the most effective way to do it. Yes, many cost-sensitive customers might not go for your service but that’s ok because that is not your target market anyway. You would want to focus on the higher-end customers.
Premium prices put you on a pedestal in the industry but it is easy to feel entitled. Your service prices will need to reflect that in the quality and value you offer. You will also have to offer a very high level of customer service/experience.
3. Bundle Pricing
If you’re an established business with a focus on doing full-service projects for a fixed set of customers then choose the Bundle Pricing Strategy.
Pricing is done based on a bundle of services packed into one rather than individual services. If done correctly, it is a great way to upsell your services, drive your sales and boost your profits. It also allows you to build your relationship with a customer and pave the way for premium pricing.
Rather than charging by the hour for each individual service, offer your customer a well packaged customized bundle. Try to bundle all of your landscaping services be it lawn mowing, garden maintenance, mulching, etc.
4. Tiered Pricing
This is the most widely used pricing strategy and should be adopted by businesses that want to serve a wide range of customers. Also known as Price Bracketing, it offers the client the option to choose from different packages. Each package offers incrementally more value and considers the customer’s willingness to pay.
The best part about Tiered Pricing, for example, Basic-Standard-Premium (Good-Better-Best), is that your customers weigh your packages against each other and not your competitors’. This will help you win more bids, build flexible quotes that stand out in the market.
Often, the higher tier package is priced very high to give the other two a higher perceived value. There is found to be an extreme aversion where customers choose the comfortable middle tier. You should price individual tiers by keeping in mind the value it adds to different customer segments.
5. Price Skimming
Opposite of Market Penetration Strategy, you price your product high initially and lower it as new competitors enter the market. It sets a high value at the very start itself, making room for only premium high-ticket clients. This will drive your profits faster and help grow a loyal sustainable client base.
Again, this isn’t your average pricing strategy. You can use this if your product or service is perceived to add a lot of value. Let’s take a Zero-Turn mower (ZTR) for example. With precision steering, distinctive lap bar controls, and high mobility, most professional landscapers consider it the fastest way to cut a lawn. If your services include ZTRs, you should consider pricing your service high at least initially.
Whichever service you offer, you should be able to justify the high prices for your products and services. If not priced well, it might struggle in the launch phase itself.
Still, confused? Well, no strategy is foolproof
You can experiment with strategies to find what works best for your landscaping business. Assess your needs and objectives at the start before you decide. Do not be afraid to vary your strategy with what you have to offer.
No strategy is foolproof.
What works for your company is the best strategy for you.
Revise this occasionally to have an edge in the market. The industry is constantly changing and your strategy must reflect that.
Consider your goals and how established you are in the industry. You may adopt the Market Penetrations Strategy if your product is new and you are looking for rapid adoption. If you have something unique to offer, do not be afraid to offer Premium Pricing for your differentiator.
Purposeful pricing will help you set higher volume and profit margin per customer. This will require intentional brainstorming and diving deep into the psyche of your clients. Put their needs first as you walk a mile in their shoes. Prioritize what they want and need over how you want to sell. This approach will go a long way in building your business and long-term successful relationships with your customers.
If you have any questions on pricing strategies or need any clarification, feel free to reach out to us. Drop-in your comments below.