The issues associated with variable service pricing has plagued industries such as HVAC, electrical, plumbing, etc., for many years. As its name suggests, variable pricing can vary widely, and can be detrimental to establishing a relationship of trust between customer and the service technician / company.
Flat rate pricing is a system wherein the variables involved in setting a cost for a particular product or service is pre-calculated according to certain pre-established parameters (e.g., product price and average labor time primarily) and then charged to the customer in a flat rate fashion.
The concept of flat rate pricing was developed in order to do away with charging the customer by the hour for labor and with parts and equipment marked up. Hourly based charges sometimes confuse customers who often think they are being overcharged because labor costs are so high in operating a service business.
As a result flat rate pricing was developed. The concept of flat rate pricing first started in the auto industry because there are so many parts and pieces on an auto. Therefore every part and piece on an air conditioning system or any appliance for that matter, has a known approximate amount of time to repair/replace that item give or take a few % because of history in performing each task.
The time suggested for each item is referred to as task time. The XactRate system provides a business with the breakeven cost of doing business per hour / per technician based on the parameters established by the Company Admin.
XactRate’s flat rate structured service ticket takes the task time per selected item (task time is editable on a ticket) marks up the task time as pre-determined by the Company and the item that is taken from one of our XactRate’s catalogs which has a pre-determined marked up price. The task time (labor) and item (parts or equipment) are added together in the background but not displayed separately.
The sum of the task time and item both having been marked up are priced as one total price all unknown to the service technician generating the service ticket, and of course unknown to the customer.
This method of pricing has been widely accepted in the service industry but has been very difficult to manage until now. XactRate performs the job effortlessly with no fumbling around with printed outdated catalogs.
To create flat rate pricing a determination of the standard time and average cost of the product and service being provided. The flat rate price is set based on particular product and associated service activity. For instance, calculation of the amount of average time taken by a technician to complete a task using a replacing a particular type of motor in a particularly type furnish.
Apart from its obvious benefit of easing the pricing calculation, flat rate pricing helps to set a standard against which workers and the business can evaluate their performance.
This process also helps a business’s better understand their costs, break-even price and sales mark-ups. Knowledge is facilitated by understanding and evaluating individual product and service pricing and performance. Bloated or insufficient price points can be singled out and addressed more easily. A tracking and reporting mechanisms keep company management informed regarding any change in the structure of a particular unit that might have an impact on the price fixed.
Overall, flat rate pricing can dramatically enhance the efficiency and the bottom line of the entire business.