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Discounts on services


General Business Discussions

A place to talk about general business discussions.
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  #1  
Old 03-24-2009, 09:53 PM
SuperiorPower
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Lightbulb Discounts on services

I have seen people in other businesses make a marketing mistake and thought I would share this with you all so you can avoid the mistake.

In the housing rental market you have people competing for the same clients just like in the landscaping busniess. In an effort to attract customers some of them offer 2 months free or something to that affect if they sign a 1 year contract. What happens then is the customer does not have to pay for 2 months. when the 3rd month rolls around they don't pay the rent. By the time the land owner gets enough to evict them the "customer" has been living in the apartment for up to 5 months without paying a single month rent. It does not take a rocket scientist to see this is rather hard on profits. How does this apply to landscaping?

I suppose most of you have customers sign contracts (or as most folks prefer to call them, "service agreements"). When you have them sign the agreement you may give away a free service like one or two mowings for free or something to that affect. Some businesses may prefer to mow for free up front to help attract customers. I am not against using free services but would suggest a different approach. (I am not talking about giving them a free soil test or something to that affect to get you there to give an estimate.) Perhaps if you give a free mowing, give it at the end of the season. For example, you may want to mow the yard for half price half way through the season and then maybe do it for free at the end of the season. This gives the customer a motivation to complete the contract. Otherwise, if you mow their yard the first time free they may cancel the contract/agreement after the first week or two and go to your competitor who may provide them with the same "deal". As with the renters, deadbeat landscaping customers can do this several times and get a service for free for an extended time period. Don't let your business be taken for a ride......
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  #2  
Old 03-25-2009, 04:34 AM
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We did this in the security industry and it worked well however you are correct about giving the incentive up front so what we did is if you signed a one year contract you received one month free however it was the 12th month of the contract, that seemed to cure the problem of people taking a free ride up front.
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Old 03-25-2009, 09:25 AM
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Quote:
We did this in the security industry and it worked well however you are correct about giving the incentive up front so what we did is if you signed a one year contract you received one month free however it was the 12th month of the contract, that seemed to cure the problem of people taking a free ride up front.
Very neat! How did the company get customers to resign up for the next year? I bet a lot of what they did could be applied to lawn care as well.
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Old 03-25-2009, 10:57 AM
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Very neat! How did the company get customers to resign up for the next year? I bet a lot of what they did could be applied to lawn care as well.
We had the best automation software on the market, problem was selling the service as we were the smallest monitoring station in Canada at the time. Once the clients experienced the level of service compared to what they were receiving we knew we would have a high retention rate. We also gave commercial accounts access to their own alarm activity, open and close information for their store so they could ensure employees were opening and closing on time and a host of other small things the competition was not able to do. Our retention was 99.6% and in 5 years we went from the smallest to the largest, 18 employees to start 451 when I resigned in January. Average growth after the first year stayed around 300%....it was quite a ride!
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Old 03-25-2009, 05:15 PM
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Default Food for thought...

Here is my only issue with this:
I considered offering a free service or free month type of a deal & it immediately occured to me that I would have to make it the last month of the contract. Then I thought about how I have written into my contracts that (there is an early cancellation fee) if a client wishes to discontinue service after the 12 months please notify us, & do not pay the 13th invoice (My monthly clients are required to pay for each month by the 1st of the month for the following month - they pay in advance). If the client does not notify us & does pay the 13th invoice this automatically starts the next year with the same conditions as the 1st year (including early cancellation fee).
I did this bacause it occured to me that If I have to go to each client & point out "hey your done with 12 months! Thank you, Now, would you like to sign up for the next 12?" It raises the question, "Do I want to continue?" Why waive this flag? Why make something that is a non-issue suddenly an issue?

When you sign up for cell service for 2 years they don't call you up at 730 days & say do you want phone service tommorrow do they? No, they just continue to provide their service at the same rate & everyone is happy. They have already had you for 2 years & covered the initial cost of the phone, so now you continue contract free until your phone breaks.... Want a new one? Sign this 2 year contract....

Our situation is similar but different. In my case my clients are allowed to finance the expensive rainy season over the slower months, If the sign up in the spring (& that's when most do) then I need those slow months to get back to a profitable figure for that account. We need the whole 12 months so the contract protects us so they don't cancel after the 7 month growing season. I need that contract to renew to protect me the 2nd year too (& for each & every subsequent year).

So, If I gave them the 12th month free then that would be a huge reminder to clients that they are now free of any future obligation, this would probably cause your retention numbers to drop off a bit. Now, I do quality work so I don't rely on an agreement alone to retain clients, but they are a good security net to have in place.

Sorry to run on here. Do you guys follow my thoughts on this?

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Old 03-25-2009, 05:33 PM
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Yes that is a very good point.

How do you suggest wording your contracts so that they are automatically Re-newed or however that is handled?

Also, one problem I think could arise is if you are not cutting in the winter months or late fall and early spring, do you do anything or suggest a lawn care business owner do anything to keep your face shown?

If so, what should you do? Any additional services?
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Old 03-25-2009, 06:25 PM
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With cell phone contracts, at least here it;'s month to month after the initial term. One can word into their agreement the contract will automatically renew for a period of 12 months unless 90 days notice is given however, once again, at least here you can't enforce the automatic renewal in court should you have to go that route. I understand laws are very different between countries, states or even municipal so it's worth looking into just FYI.

I personally see clients as relationship building more than just a cheque/payment etc. I send a woodworking letter to my woodworking clients every quarter updating them on what we are up to, recently included the lawn care business and received quite a few emails back. I will do the same with the lawn care business.

Having said that we all loose a customer for whatever reason from time to time but I know for myself the service is there so I don't tend to concern myself so much about them leaving at the end of a contract or term.

Twelve month agreements would never fly here, lawn care is a 5 month top service requirement, lots of other things that tie into it, especially leaf clean up as we are mainly old growth hardwood in Halifax, we get a lot of wind damage so there is tree work etc. That would be a major concern if I am only at the property 5 months a year but billing 12, although I know the number of visits is being spread over time, clients may become a receivables issue. Snow season is 4 to 5 months so that is an additional service also.
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Old 03-25-2009, 07:18 PM
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I realize that makes it a completely different situation, I understand that. Here in Florida it's year round,it's just about half the frequency (bi-weekly) in the off season months.

Steve,

For your refference (& others too), here is how I have it worded in my agreement:

This agreement will continue in effect as long as both parties are satisfied. To cancel service client must provide written notice 30 days in advance of intended cancel date. If you do not wish to have us continue a 2nd year simply notify us & do not pay the 13th monthly invoice. Otherwise the 12 month cycle will automatically restart with the same conditions as the 1st year.

If I were to move north & start my business there, I would figure out a way to include maybe lawn care (for the summers), Spring & fall Clean ups, & figure out an average price per sq ft per season for snow removal (so you take the good with the bad if you have a heavey winter the client lucks out, if you have a light one then you do). I'd want to add it all up & divide it by 12, Then you are in constant contact with clients all year round & in a better position to maintain the relationships from year to year & retain clients year after year.

That would be would I would try if it were me. Might not work for everyone up there? I would present it as a better way for the client to budget all the work they will need all year round at a predictable preset rate. Everyone likes to know what's coming up as far as expenses because you can be ready for it. That's why people use credit cards or finance cars, tv's etc. "I want this but can't pay it all right now, On credit I can make payments that are predictable & manageable!" So tap into the way Americans (& most of the world) are used to buying goods & services, Let em' finance it!
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