Many companies have now reached the point where they can no longer push through higher hourly rates on the market. One way to increase turnover in Field Service is to introduce surcharges and bonuses. How do you achieve customer acceptance for this?
It starts with the usual bonuses for weekend and public holiday work. These are required almost everywhere. Travel costs can also be priced in using different types of surcharges. However, if you start charging additional fees for issuing a printed invoice, you can quickly get into trouble with your business partners.
In some scenarios, this may still be acceptable. For example, if the bank charges a fee for sending account statements by post. But if you are in the After-Sales 4.50 for issuing a written invoice for spare parts worth €1000, that doesn't really speak for the Customer orientation of your company.
How do I implement my surcharge strategy with as little headwind as possible?
Surcharges are generally accepted by customers if they appear justified from their point of view. To show you how you can achieve this, I will draw on the results of relevant studies. With the necessary knowledge, you will hopefully be able to improve your service revenue base in the long term.
Keep the comparable basic price low and generate sales through additional costs
As providers are finding it increasingly difficult to push through higher base prices, a colorful bouquet of all kinds of surcharges has grown on the market in recent years. Some have become really creative in this area. However, it is better to have a targeted strategy.
Based on the price lists, most customers are very good at estimating who really is the most cost-effective provider on the market. It is difficult to be deceived here. Very few people are fooled by a low basic price and a complicated surcharge table.
So you want to increase prices: Is it better to offer a higher all-inclusive price or charge a lower base price and get the money through surcharges?
Clear consultant answer: It depends!
Influence of the justification of surcharges: Internal and external factors
The customer differentiates very precisely on an emotional level how the additional costs are implicitly or explicitly justified. The introduction of a surcharge has a negative effect if internal company factors are blamed for the justification. In such cases, it is better to adjust the base price.
If, on the other hand, you can give external reasons for the surcharge, these will be better received than an increase in the basic price. In this case, the customer perceives the increased price as force majeure and is more likely to forgive you for being slightly more expensive.
internal factors:
e.g. higher salaries, the economic situation of the company or the failure to adjust prices for years
-> Increase in the base price
external factors:
e.g. changes in legislation, increased purchase prices
-> Increase or introduction of surcharges
Temporary vs. permanent surcharge
A surcharge may be demanded on a permanent basis. For example, in the form of travel allowances. Examples of surcharges of a temporary nature, on the other hand, would be the weekend and public holiday surcharges already mentioned.
Both types of surcharges have a negative effect on customer satisfaction if the customer blames internal company factors. In the case of external reasons, however, we observe an interesting effect: the customer is much more likely to accept a permanent surcharge than a temporary one.
Extra costs that are temporary in nature lead to annoyance on the part of the customer that the service could not be provided in a different time window.
Customers have already become accustomed to holiday and weekend surcharges. However, they should avoid further temporary surcharges.
The question of added value
The inherent benefit of a surcharge plays an important role in the customer's evaluation. If the additional costs result in added value for the customer, they are relatively well received. Preferential treatment or a fast response time are often worth a little more money to the customer.
However, surcharges that do not initially result in any direct added value should be avoided. This applies, for example, to the above-mentioned fee for issuing an invoice. Here too, if the justification is of an internal nature, the surcharge will be perceived negatively despite the added value.
"Implementing a surcharge strategy is above all a communication challenge. Give the customer external factors as justification. Don't give the impression that internal factors are responsible for extra fees. In addition, you should always communicate a clear benefit that is related to the surcharge. It must be clear to the customer what bonus they will receive for the value of the surcharge. If you can't do that, it's better to increase the base price." - Dr. Simon Tonat
Source:
Journal of Service Research (2018): Shifting the Blame: How Surcharge Pricing Influences Blame Attributions for a Service Price Increase; Florian Pallas, Lisa E. Bolton, Lara Lobschat.
