How service pros get creative in rate hikes — without losing customers
For many pool service professionals, the question of whether to raise prices can be tricky. The biggest concern, of course, is losing customers, especially if the company operates in a competitive market. Unlike building a pool, where the rising cost of materials is more readily apparent, raising service prices may not be palatable for customers.
“When you look at pricing in this industry compared to other professional trades, we are lagging behind,” says Hal Denbar, founder of Patriot Pool & Spa in Austin, Texas, and a founding partner of National Pool Partners, a multi-regional pool service company that launched in January. “If we want our industry to be viewed with the same level of respect by the homeowner as other professional trades, we need to elevate our pricing and be at a similar level,” he says.
A 15-year veteran of pool service, Denbar has raised his company’s prices over the years for many reasons — among them inflation, rising fuel costs, an increase in the cost of goods sold and keeping up with competitors’ pricing.
“It’s all about margin,” Denbar says. In setting his prices, he has determined the profit margin he needs to operate and grow a financially healthy business, which includes paying technicians, covering operating expenses and making enough of a profit to afford growth opportunities as they arise.
When notifying customers of price increases, he makes no announcement if it’s a small adjustment. For more substantial changes, he contacts customers by email two to three months in advance. He doesn’t worry much about losing them.
“If you have built trust with your customers, they will trust you as you raise prices,” Denbar says.
Tommy Sherwood, service department manager at Aqua Blue Pools, in Taylors, South Carolina, says his company doesn’t overthink price increases.
“We raise prices whenever we see the need and/or opportunity to do so,” he says. “Service professionals of all kinds must recognize their value and demand to be compensated for that skill and knowledge level with prices that coincide with that experience.”
When thinking about pricing, Sherwood advocates monitoring and analyzing the daily performance of each technician’s service route to determine profitability and the true cost of providing those services. When raising prices for recurring customers, Aqua Blue simply states when a new rate will be going into effect on the customers’ monthly invoices. If there’s pushback, the company will generally offer the customer a complimentary visit or system performance checkup in recognition of their history with Aqua Blue.
“We always request feedback on the service we perform and any special requests are added to all future work orders in our system for the customer, to give them some extra, personalized service attention,” Sherwood says. “We have had very little negative responses to raised prices, especially during this COVID-19 situation.”
Sherwood says that Aqua Blue is known to be more expensive than other service companies in the area, but also known to be more reliable than most. Someone is always in the office during business hours, and Sherwood says Aqua Blue has a higher level of reliability and performance than many local competitors.
“The level of performance is worth the extra cost to our customers, and especially those who have had to deal with the poor performance of others in the past,” he says. “They trust that our technicians know what they are doing.”
Carl Alfred is operations manager at Pool Scouts, a pool cleaning franchise based in Virginia Beach, Virginia, with franchise operators in eight states, primarily in the southeast. The franchisees set their own prices, but corporate gives guidance and tools to make sound financial decisions.
Every year, Alfred says, Pool Scouts advises its franchisees to shop their competition to understand what their specific market looks like, then to look at any expected cost increases in materials or labor and how those might impact profit margins. Franchisees are urged not to be the last pool service company in their markets to raise prices and not to do it based on gut feeling.
“We’re very analytical here,” Alfred says. “We do everything by the numbers.”
He notes that some franchise operators, after analyzing the competition and calculating projected costs, may opt not to raise prices but to reduce the number of services included in flat rate weekly pool service.
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Pool Scouts has one corporate-owned service company. When raising prices, Pool Scouts sends out mass emails — usually in January, February and April — and takes into account longtime customers who, in some cases, have service prices increased incrementally rather than all at once. Frequently, new prices are charged to new customers, while existing customers don’t see an increase for a year.
For Justin Lex, service manager at Swimming Pool Services in Waukesha, Wisconsin, maintaining profit margins is the key to pricing. So is shopping his competitors’ prices. The company sets margins based on covering all overhead costs, including employing top service technicians, which Lex says can be a challenge in a seasonal market.
“If you’re able to raise prices, you’re also able to attract good employees,” he says. “But you also have to stay competitive in the market, so it’s a fine line to walk. We are the most expensive guy on the block and we know that, but for us, it’s more about the experience and the level of service we’re providing clients.”
Every offseason, Lex and his service team send customers a maintenance renewal plan that includes an incentive to lock in last year’s prices if they pay in full by a certain date. The offer, made to the company’s VIP customers, may include other perks. Notification of significant price increases are sent out about two months ahead of time, so customers can change service companies if they choose. Reasons for the price increase are spelled out in detail: This year, for instance, the COVID-related rise in chemical prices, especially dichlor and trichlor tablets, has been dramatic.
“Customers appreciate us reaching out,” Lex says. “Communication is huge.”
Michael Rodarte, owner of Empire Pool Service in Scottsdale, Arizona, has thought a lot about pricing over the years. In early 2020, he completely revamped his pricing structure to fantastic results.
Rodarte got into the pool service business about nine years ago after working in finance. At one point, he was servicing over 100 pools, including a large commercial pool, and had three employees but was losing money. Over time, he scaled back until he became the single-pole operator that he is today. Several years ago, he changed his pricing from the standard “chemicals included” plan to “labor plus chemicals.”
“You keep your price the same,” he says. “Say it’s $100 with chemicals. Keep the customer at $100, but change to a plus-chems structure. That’s it.”
Like most pool pros, when Rodarte estimates the cost of servicing a pool, he’s making an educated guess on the amount of chemicals needed, which can vary. When the cost of chemicals goes up as they did last year, the profits for the “chems-included” companies go down. He figured that rather than deducting the cost of chemicals — one of his biggest expenses — from his gross income, he could add to that gross by marking up those same chemicals.
“I had been wanting to do this for years,” Rodarte says. “Like a lot of pools guys, I wussed out. I was scared I would lose customers.” He had reason to be concerned, he says, as “chems included” is the standard in Arizona, with few exceptions.
Late in 2019, frustrated with his profitability, Rodarte sent an email update to his 54 customers, informing them of many changes in the coming year, including the new pricing structure. He also detailed his rationale for the change and how it would, ultimately, benefit everyone. The changes took effect at the beginning of last year. Now, a year on, “it’s been amazing,” he says. “I only lost two customers, and I’ve never made so much money in my life.”
The only significant pushback he got was from customers who wanted a consistent bill, not one where the price changed month to month. Rodarte’s solution? “Sell the customer chemicals,” he says. “Done. Problem solved.”
Rodarte buys a quantity of chemicals that he charges to the customers, with a markup. These chems are now owned by the customers, stored at their houses and replenished as needed. Customers also have the option of avoiding the markup and simply buying their own chemicals for Rodarte to use.
Rodarte acknowledges that setting up billing for “chems-plus” can involve a lot of front-end work and that scaling can be difficult. For single-pole and relatively small operators, he is a big believer in this type of pricing, however, for several reasons.
“Pool guys would make more money and pools would be better taken care of if more of them adopted this structure,” he says. “I think, overall, this would benefit the pool industry.”