The psychology of plumbing pricing

We all know about pricing, right? Hopefully, we know the difference between markup and margin. We know how to calculate break even. Here are eight things you should know about the psychology of pricing.

Price complaints are healthy

If you do not get pushback from time to time over your prices, guess what? You are not charging enough. No one will say, “Wow, that’s less than I expected.” Or, “You really should charge more.”

People will groan if they think the price is a little high. Would you rather be a little high or a little low? A good test of your pricing is complaints. You don’t want everyone to complain, but neither should you welcome the absence of complaints.

People do not know what you should charge

Someone calls you to check for a slab leak. What should you charge? This much is certain, the consumer has no idea what it should cost.

Price for profit, price to market, or price for marketing

There are three ways you can arrive at a price. One is knowing your costs and pricing to achieve a targeted gross profit and net profit. This is the way most plumbers should price most tasks and products.

The second way is to price to the market. This applies when there is a market price and it’s generally well-known or understood, which means rarely. If someone in your market advertises heavily about a turnkey price for 50-gallon water heaters, for example, that might become the market price in people’s minds. You may decide to match this price as the market price even if it does not yield your target gross profit.

The third way is to price for marketing purposes. This is where you reduce your margins on some products or repairs and heavily promote that in the hopes that it will lead to additional work and set a perception about your pricing overall. No one approach is right or wrong. They can only be right or wrong for you.

Confidence reassures people the charges are fair

Whatever you charge, do not be apologetic about it. Today, I engaged a plumber to do work at my ranch. When the work was done, he tentatively asked me what I thought about $1,500. He seemed unsure of himself. I told him not to ask me the price, but to tell me the price. He then said $1,600 with the extra $100 to cover the drive. I smiled and handed him a check without mentioning that I told him before he came to factor in the distance to the ranch.

Here's the thing, if he would have told me with confidence that it was $2,000, I would have paid. If I would have objected to $2,000, do you think I would have been thrilled with $1,500?

Everything costs more

When someone complains that something cost more than it used to, agree with them. Everything costs more than it used to. Gas costs more. Food costs more. Rent costs more. Why shouldn’t plumbing cost more?

Customers need you

When people call you to their home, they are doing it because they either do not want to do the work you will perform or cannot do the work. You have a lot of customers. They probably do not have a lot of plumbers. They need you. Pound that into your head. People call you because they need you.

People will pay for peace of mind

For a customer, peace of mind means they can trust you in their home. It means they can trust you to show up. It means they can trust you to do a good job. Peace of mind means they don’t have to worry. That’s valuable. People will pay a premium for it.

Charge a premium for American-made products

It’s not always easy to source American-made products these days. It’s not always easy to determine what is American-made. Is it American assembled from foreign parts? Is it American parts assembled south of the border? Still, it is worth the effort to qualify as many products as you can as American-made and ask people if they want an American-made or foreign-made product. Most people will opt for American-made, which means most people will be willing to pay a little more. If your margins are constant, that’s more revenue and gross profit dollars for you. Plus, it helps your fellow Americans.