Price Fix

Price Fix

It’s economic hard times and clients may inquire about discounts and renegotiating contracts prior to Winter 2020-21. How to best manage through these scenarios without giving in to a price reduction on winter services.

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If you haven’t received it already, the phone call or email from a client seeking to renegotiate the terms of their winter services contract may be inevitable.

In fact, according to recent industry research conducting by the ASCA and Snow Magazine, the majority of snow contractors believe their clients are having cash-flow problems in the wake of the COVID-19 pandemic, and nearly half (44 percent) anticipate these clients will seek to reduce the scope of their snow and ice service before winter. A little more than half (51 percent) of contractors expect clients will approach them about renegotiating the terms of their winter service contracts.

 
In some instances, this scenario is already taking shape. Throughout the industry snow contractors are reporting instances of clients firing vendors, putting contracts out to rebid and advising to lower price points. Likewise, the pandemic’s trickle-down effect is beginning to reach contractors as property owners are forced to delay their payments beyond 30 to 60 days because retailers and non-essential businesses have been unable to pay rents over the last six to eight weeks.

“Our clients are already experiencing some deep cuts, which means there will be deep cuts for us, too,” says Troy Clogg, owner of Troy Clogg Landscape Associates and a veteran snow contractor serving the Greater Detroit market. He anticipates client will ask him to scale back winter services based on trends he’s already observed with summer landscape services.

“It’s going to be about reaching out and being a partner to [clients] as we go through this and try to help them determine how to best keep their properties safe and not violate ASCA Standards,” Clogg says, adding he’s reluctant to compromise on Industry Standards. “This is the best time to find out what type of relationship you have with the client and what type of relationship the client has with you. If the relationship hasn’t been tested yet, it will be.”

So how should contractors best react when faced with contract and price-reduction scenarios?

First, resist the temptation to enter client meetings resigned that the client is going to want some sort of price discount. Instead, approach these situations with a positive, assumptive mindset, says sales consultant and business coach Marvin Montgomery.

“Customers aren’t stupid,” he says. “They can smell self-doubt. They can smell if you’re insecure. They can smell if you’re in the position of already thinking about bending and dropping the price. You want to go into these meetings with confidence.”

In addition, contractors must place themselves in a state of heightened preparedness when entering these meetings, which means examining all of the options and alternatives available to them and to clients in the event the meeting turns into a negotiation. This includes not offering the client a discount.

Montgomery offers this back-and-forth scenario:
CLIENT REQUEST: “This whole pandemic has really put us in a tough financial position and we’re looking for you to help us out by giving us price break heading into next winter.”

CONTRACTOR COMEBACK: “We’ve already considered you might have that issue and here are some of the services we looked at that we can reduce …”

Don’t wait until the client meeting to begin thinking about your options. Instead, compile alternatives that avoid any sort of price drop?

“You have to be very careful bout how you broach this topic,” Montgomery says. “I always say you don’t want to use the word ‘discount,’ but you do want to use the word ‘adjustment’ ... or maybe it’s a two-part word, ‘temporary adjustment.’”

If price becomes an unavoidable discussion point, contractors must come to terms with what “justifies an adjustment,” Montgomery says. For example, if you’re willing to adjust the price, while the client resign for another three years? Will the client let you manage snow and ice on three additional properties they have?

“If I’m willing to give up something, then what [is the client] willing to give up? It shouldn’t be one-sided,” he says.

At this time, while the economy is on thin ice, be aware your clients may be testing all of their vendors on price points. Therefore, Montgomery advises contractors to standing firm and inform clients they’re already received the best price for snow and ice management services, that you don’t mark the service price up to mark it down.

“Before you even make an adjustment on the pricing you should be asking [the client], ‘Where do you need to be,’” he says. “What happens is, you’re giving them 10 percent off, but they were only looking for 3 percent.

“And if an adjustment is made, make if very clear this is a one-time adjustment only, and next year the price will be back to where it’s supposed to be,” he adds.

Mike Zawacki is editor of Snow Magazine.