A landscaping business is quite different from other service businesses, especially when you put to mind the widely varying dynamics, such as the size of the yard, location, complexity of the job, special requests, climate, and more. Therefore, while it may be straightforward to determine the prices of traditional goods and services, pricing landscaping contracts calls for more detailed scrutiny of the various price determinants.
This article lists the different pricing strategies used by businesses globally first and then presents incredible tips for choosing the right pricing strategy for your landscaping business.
According to the Queensland Government in Australia, your overall pricing strategy depends on whether the demand for your goods and services is elastic or inelastic. Elastic demand implies that a change in price significantly affects the demand, whereas inelastic demand means that a price change doesn’t considerably affect the demand. A landscaping business can be said to have elastic demand, given that a price rise beyond a certain level may make customers not buy from you.
It might seem challenging to put all the different components of a landscaping job into one quote. Luckily, you can take advantage of specialist software for landscapers, like this one developed by Jobber, to help you set reasonable prices and quote them to your customers in a presentable manner that portrays you as a serious and modern entrepreneur.
With this in mind, here are the most popular pricing strategies you can use as a landscaper:
- Market penetration: Offer low prices for your products and services in a bid to set up a significant customer base, after which you can raise the prices to match the prevailing market averages. You can consider this strategy if your landscaping business is fairly new and you still don’t have a sizeable number of customers.
- Psychological pricing: Capitalizing on your customers’ emotional response rather than rational judgment, for instance, setting prices for a certain product line at USD$199 instead of USD$200. It’s said that customers usually digest the first digit of the price rather than the last digits. So, in this case, seeing number 1 will be more alluring to them than seeing number 2, though the difference between 199 and 200 is almost negligible.
- Geographical pricing: Charging different prices for different cities and towns. Some cities, generally, house high-income earners. Consider charging different rates for the lower-income cities/areas.
- Premium pricing: Charging higher amounts to create the impression that your products are more valuable than those of your competitors. Consumers usually relate higher prices with value addition.
- Bundle pricing: Offering reduced prices for customers who purchase in bulk. For instance, you can pair up lawn mowing, live fence trimming, flower garden maintenance, and watering trees and offer the package at a lower total price than if the client was to order each of these items separately.
- Price skimming: Setting high prices for new services and lowering the rates once competitors arise with similar services. For example, you might be the first in your neighborhood to install subsurface irrigation with a smart controller capable of flow sensing. So, charge high prices until your competitors catch up with you.
- Economy pricing: Minimizing production costs to offer the lowest price possible for price-conscious consumers. You wouldn’t want to leave out those consumers that want to spend the least amount of money possible in landscaping. So, think about minimizing your costs, for instance, in fuel consumption for lawn mowers – can you use electric ones instead?
- Image pricing: Targeting high-end consumers who take pride in luxurious products. For those clients inhabiting exquisite locations, such as lakefronts or next to golf resorts, you can design a high-end package particularly for them.
- Loss leaders: Heavily discounting one or two products to entice customers to your business, knowing that they’ll also buy other products that you offer at standard prices. For example, you can underprice lawn mowing services to attract customers, with the hope that they’ll order other services, like flower trimming, irrigation, and installation of outdoor lighting, from which you’ll make enough profit to offset the losses you incurred with lawn mowing.
- Competition-based: Setting prices that match your competitors’ prices. You’re almost sure that your potential customers will compare your prices with those of your competitors before ordering anything. If they find your prices way too high, they may not do business with you. So, ensure that you set your prices reasonably in accordance with the current average market rates.
Factors To Consider When Setting Landscaping Prices
For your landscaping business, here are some critical factors that should help you choose the right pricing strategy:
- Scope of work: First and foremost, you’ll have to make a reconnaissance survey of the site and note down every job detail. Consider the size of the compound that needs landscaping, distance from your offices, safety hazards at the site, ease of access, required materials, and client-specified timeframe. Then, factor all these into your pricing calculations.
- Labor cost: Official reports reveal that many workers are underpaid by their employers, and you should take care not to be on such a list of shame. So, bear in mind the minimum hourly wage for your country and ensure the prices you set for your landscaping services will adequately pay all your team members.
- Material Costs: Some of the common landscaping materials you might use on a given project include compost, mulch, floodlights, plants, cement, trees, lawn turf, fertilizer, gravel, timber, boulders, and landscaping rock. You’d want to confirm the current market prices before committing to supply them at a certain price.
- Overheads: Also, remember to take into account your office rent, utility bills, internet charges, legal fees, advertisements, insurance, and such-like costs. The jobs you do must cover these expenses as well so that you remain in business.
- Profits: Last but not least, and perhaps the most important, ensure the prices you propose to customers leave you with a decent profit after completing the job. A good goal is 15 to 20% for residential contracts and 10 to 15% for commercial ones. It’s the only way your landscaping business will survive. Many new small businesses fail to register and maintain a net profit, don’t let your start-up be one of these.
Price Your Services Appropriately For Profitability
To wrap it up, the need to correctly price your landscaping services can’t be overemphasized. Whatever pricing strategy you want to choose, ensure that the revenue generated exceeds your expenses. That’s actually the very essence of business. And to make the pricing and quoting process easy, please don’t forget to make use of appropriate software.