Avoiding Billing Issues in a Time of Price Increases
In all industries, prices are rising, and providing good communication on your price increases and on billing in general is important. Three pest control experts share how their firms are handling this sensitive issue.
Communication is “definitely” key with price increases, says Billy Olesen, CEO of PESTSTOP based in Olympia, Washington. It’s a delicate balance—when questions about price increases come up, it’s also a great opportunity to talk about the benefits of the service and why the increase is needed (see sidebar for specific examples).
“Explaining rate increases isn't often fun, but I do find that through most of these honest conversations, an extra level of trust is earned,” Olsen says. “When a customer understands you're working not only on managing their pest issues but also keeping costs down, I find they become a better customer.”
PESTSTOP includes language in its customer contracts that the rate for service may increase by a certain percentage each year, but if it exceeds that, the company will then send customers a notice letter 30 days prior to the increase.
“It's important to have an attorney knowledgeable with your state's laws review your contracts and make recommendations,” Olsen says.
Hoffman’s Exterminating Co. Inc.
Hoffman’s Exterminating Co. Inc., based in Mantua, New Jersey, typically raises its prices about 3% to 6% every two or three years, after analyzing the firm’s own cost increases during that time—and balancing what customers would bear, what value-added services the firm could provide, and what the firm needed to survive, says William T. Hoffman, president and CEO. But over the past few years, customers likely would not have accepted price increases to cover the more than 10% rise in the firm’s costs.
“Everyone’s costs have gone up uncontrollably because of the pandemic—I don't think anyone predicted how much costs would go up,” Hoffman says.
During the pandemic, the company’s pricing held firm. Furthermore, first responders and people working in health care either received a substantial discount or the company just waived the cost of service altogether, he says. After the pandemic, the company kept to its longstanding practice of raising rates modestly—3% to 6%, even though its own costs increased substantially more than that.
“We didn’t raise prices across the board—some customers who were already paying premium prices didn’t get any increase,” Hoffman says. “We really took our time and analyzed the data to make sure customers were getting the value they needed. It took us a little longer to do that, but in the end, people got the right price for the right service.”
The company also didn’t pass the costs onto its employees by cutting their salaries—the company actually raised pay so employees could better withstand inflationary prices in their own lives.
“We just found ways to make our operations more efficient—we got very aggressive about not doing what we didn’t need to do anymore,” he says.
For example, the company stopped servicing customers outside its footprint in areas intended for expansion, instead referring those customers to other pest control companies in those areas.
“That way, our own people could be more efficient servicing territory in our existing markets,” Hoffman says. “That gave them more opportunities to make more money in their territory and we also saved on gas and less wear and tear on our trucks. So, for every dollar we give away, we maybe now get 1.5 times more by having our people be more efficient.”
The company also reduced manual tasks by implementing more technology, including automatic scheduling, billing and payment systems, as well as GPS routing to service calls. The company also started using remote electronic monitoring to reduce traveling to customers, and a more sophisticated phone system so remote workers could answer the phone.
“When we raised prices after the pandemic, we communicated to customers that we had held our pricing firm during the last few years despite our rising costs,” he says. “We told them that we didn’t feel that we should pass all of our costs onto them, but still aim to give them the best service and value we can possibly do by being more efficient.”
The company received very little negative feedback, and its cancellation rates didn’t spike because people couldn’t afford the service anymore.
“Overall, customers were very appreciative that we didn’t raise prices to fully cover our costs, but found other ways to operate more efficiently,” Hoffman says.
It's important to have an attorney knowledgeable with your state's laws review your contracts and make recommendations.
Rottler Pest Solutions
When Rottler Pest Solutions, based in St. Louis, gives prior notice of price increases to its customers, the company will make sure to either provide them with a range or the exact amount of increase, says Ashley Heavrin, director of customer experience.
“Saying a percentage and possibly increasing that percentage but then rounding up to the nearest dollar amount does not always go over well,” Heavrin says. “It might also get you in trouble by miscommunicating. Check your local laws and get external help updating your terms and conditions if needed. We include a link to our current terms and conditions on all price increase communication.”
Other options are to put the price increase on the bottom of an invoice or include language within contract terms and conditions that the company does not need to notify for a price increase, she says.
“We’ve found that prior notification separate from an invoice works best for our customers,” Heavrin says. “They like to be informed and we get very little pushback.”
But before a company can get customer buy-in for any price increase, internal buy-in must happen first, she says.
“To do that, we share talking points with everyone on the team and let them know the ‘why’ behind it,” Heavrin says. “Each manager talks to their team about the upcoming price increases and answers questions. From management, to call center, and in the field, we want everyone saying the same message.”
Rottler Pest Solutions uses Clypboard for customer relationship management, which includes a “very easy” tool for price increases, she says. One feature is that it allows managers and technicians to view and approve once the increases are queued up.
“This way they feel more involved and in the loop on the process,” Heavrin says. “By clicking ‘approve,’ they are also committing to the increase for their customers and stand behind it.”
Externally, the company tries to stay as transparent as possible with its customers, encouraging them to call or email the company with any questions, she says.
“We are very fortunate as well to have ownership that is more than willing to connect with any customers that really question the increase,” Heavrin says. “There’s never many, but customers really appreciate the level of engagement our ownership has. It shows what type of company we are and that we truly care.”
Making Billing Easier Through Automatic Billing
All three companies now leverage automatic billing, which has made their operations—and lives—much easier.
“Back in the day we would print invoices and put a stamp and mail them, hoping customers would send back checks,” Hoffman says. “Now we give them the option of putting either their debit or credit card, which enables them to more easily pay their bills on time and gives us much better cash flow. Customers have the option to pay immediately, monthly, quarterly or annually.”
More than 85% of Rottler Pest Solutions’ customers now have automatic billing, particularly since all new customers over the past several years are required to start the service, Heavrin says. This also benefits the company’s account receivable processes “in a very positive way.”
Likewise, PESTSTOP in 2022 started requiring all new customers to sign up for monthly auto pay with their credit card, Olsen says. As a result, amounts “stuck in accounts receivable” have been cut in half, and income has been much more stable throughout the year.
“Getting a credit card when they set up service has also largely solved client no shows and saved a huge amount of time,” he says. “The processing fees are definitely something you’ve got to watch, however.”
PESTSTOP has a ready-made list of ways to overcome customer objections to price increases, depending on the type of increase:
Standard across-the-board increases on all new business. This includes customers who had used the firm’s services in the past but had stopped for a time.
- Objection: Last year, you did a wasp service for X dollars, and now you want to charge me more for the same job?
- What the customer is likely feeling: A little shocked, as they have probably already budgeted for what they thought the service was going to cost.
- Overcoming the objection: Empathize, briefly explain why the increase was necessary. Most of the time, this is the easiest objection to overcome, because they're calling again since we did a great job when they used our services in the past. This is a great opportunity to sell a maintenance program to prevent the next issue, emphasizing to the customer that maintaining control is often cheaper than fighting an issue after it's established.
Raising the rates current customers are paying.
- Objection: I've been a customer for years, so I shouldn't have to pay more.
- What the customer is likely feeling: Betrayed, as they likely believe it's an arbitrary increase. They may also just be overwhelmed at all the other price increases in their life.
- Overcoming the objection: Remain calm, empathize and understand why they may be upset. Then explain why the increases are necessary to cover our own cost increases, and then reiterate the benefits of our service.
Account-specific increases based on the increased cost of servicing the account due either to a lack of cooperation in managing the conducive conditions that increase pest activity, or because of the environment the customer has little if no control over—the next-door neighbor starts raising chickens, a refuse transfer station moves close by.
- Objections: I can't control the issue, I don't have time, or that's what I hired you for.
- What the customer is likely feeling: Helpless—my pest management company isn't working hard enough or they're just trying to make more money.
- Overcoming the objection: Remain calm, empathize, and be honest about what extra service they can expect from the increase. Connect with them and offer solutions if there are any. Break down how spending more now can possibly save them more money in the long run.