It seems like business shuts down somewhere before Thanksgiving and starts back up for real somewhere mid-January. This provides us with some much needed time to reflect on our year and what we want to accomplish in the coming 12 months.
If you are anything like the many operators I have talked to over the last six months, one of the biggest questions on your mind is, how do you raise your prices?
Businesses get more costly to run every year. Between business expenses like insurance, new coaches, fuel, interest rates, etc., increasing in price and the need to increase wages to attract and retain employees, it seems that the expense column of our balance sheet is constantly getting bigger—even in spite of our best efforts to control costs.
Then 2018 added a whole new dynamic to this with another round of unfunded government mandates in the form of ELDs. While we were forced to install, maintain, train and manage this new tool, no one sent out checks to cover the costs. This mandate is another item in a long line of things that we are asked to do on the expense side of our businesses while we battle to even keep our rates the same.
As I have traveled, one of the most interesting things that I have seen is the almost universal belief that we simply can’t raise our prices without alienating a major portion of our buying public.
As we approach this new year and look for ways to do more, hire more, buy more, we must also consider how we are going to charge more. For some, this may be as simple as printing out the new price list with a 15 percent increase. If this is you, you are one of the lucky ones. If you are not, you are more normal than you might think, and you may have to find creative ways to get more for your services in other ways.
I think back to the last major fuel price increase we saw in 2011 and 2012. The industry realized that there was no way that we could absorb an increase like that and so, almost universally, we started to charge a fuel surcharge. Unfortunately, the increases in cost for things such as new coaches, insurance, and the like have happened quietly, slowly, and with little fanfare. This has led us to absorb these expenses into our business model, and as such, we have done little to try to offset these rates to the degree necessary to sustain healthy profits.
While I do not believe that we as an industry can simply, as one unit, raise our prices, I do believe that there is a path for individual operators to find ways to put bottom-line profits back on the bottom line.
Here are two strategies that I think are worth looking at in addition to, or in lieu of, a traditional price increase:
Ancillary fees
We operate in an industry where fees are part of the game. Whether you book a flight, rent a car or book a hotel room, the traveling public understands that fees are part of the game. Look for ways to make fuel surcharges, ELD compliance fees, airport fees, overnight parking fees, multi-day lavatory dump fees, driver swap fees, driver per diem fees or any others you can think of part of your plan. Done right, fees are part of a profit strategy. Not everything needs to be “included” in the initial quoted price.
Value-add services
As an industry, we come from a paradigm that whatever we do, it’s included. We need to start looking at our businesses and asking, what is our base level service? What does it include? We then need to look at what we are currently, or could be doing beyond that and charge for it. This may be WiFi, movies, snacks, onboard attendant, water service, first-class seating, luggage service or any number of other things.
People will pay for things they want or need. Think about the last time you rented a car for $19 a day for two days and paid $86. If you are like most people, you didn’t complain, report them to the Better Business Bureau or leave a nasty remark on their social media pages. Chances are you simply paid it and assumed it was the cost of what you wanted.
From our cell phone bills to golf club dues, fees have become part of what we expect as consumers and now they need to be part of what we do as businesses to drive more profit where it belongs: on our bottom lines.
