Tuesday, May 7, 2013

Focus grouping: minimums, fees, etc.

I have a question about people's perceptions about moving fees and what-not. I've always endeavored to offer top-notch service for affordable prices, but there's always a tension between what people expect and what we need just to keep the lights on. As the owner/manager/sometimes mover, I'm responsible for the bottom line and often see things primarily through the prism of the bottom line. I know we could raise rates and still get about as much business. But, do we need to? Not yet, but if gas goes up anymore, or any of a hundred other things get more expensive, or if a truck breaks down...

Anyway, what do you think about the following:

Minimums: it's common for moving companies to charge a minimum number of hours for their work, even when the minimum exceeds the amount of time actually worked. It is a defensible charge. You have to pay your guys for travel time to and from the job. You burn fuel during that time, too. And then there's the harder-to-measure wear and tear to the truck while you're using it to get to someone's job, and then head back to HQ.

If the customer decides to get started early and takes a few loads to the new place before the movers arrive, the job that the company was budgeting to take, say 3-5 hours, takes 2 hours instead. Now, we don't necessarily mind that, but we would like to know in advance so that we can plan and "fill the gap." We could have added another job to the schedule.

I think you see what I'm getting at. Minimums aren't always (or necessarily even often) sketchy. There's a good reason for them -- staying in business.

Nonetheless, I know that people often see that and think "What a scam. Charging for time you didn't work? There oughtta be a law!"

Base rates and zone fees: I don't know many companies that do it this way, but it's a slight modification of the minimum idea. The gist: They charge a "base rate" which is essentially a minimum amount needed to make the job worth it, or they'll charge a "zone fee" or sometimes what they call a "truck fee" to avoid having a high hourly rate, but still make enough to cover the basic, unavoidable costs like fuel and payroll for the non-billable time of the job.

Right now we do the latter: zone/truck fee plus low hourly rate. The idea is that our hard costs are covered, and the customer has control of the overall time it takes to do the job by being prepared. Prepare well: fast, inexpensive job. Don't pack: the job takes longer and costs potentially a hell of a lot more. To help customers keep costs low, we provide a free Moving Guide that shows them how to be as efficient as possible, thereby saving money.

Still, we're debating whether we have the best possible system right now. We're considering everything: minimums with and without raising rates, base rates plus our standard hourly labor rate, etc. We like the idea of being able to present the customer with just ONE simple, affordable rate. On our end, we like it because we don't have to calculate distances and give zone fees, which about 25 percent of our customers push back on. It's a completely legitimate, defensible charge, but the fact that I have to explain that immediately calls that claim into question.

So, thoughts? When you contact moving companies, or any service-oriented company, what do you expect? What raises the alarm bells? Your thoughts are greatly appreciated.

Thanks!
Chris

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