Operations

How To Get Clients To See Value In Your Rates

Jim Luff
Posted on November 16, 2017

So many of us have lamented we can’t compete with transportation network companies (TNCs) that charge far less for the same ride. But is it indeed the same ride? Our rates have to exceed those of TNCs because our operating costs are higher. Continuing with the hotel analogy, Motel 6 has cheap towels, soaps, linens, and carpets. The amenities you would expect to see in a room at a Hyatt Hotel vary widely from what you should get from a budget hotel. Our prospective clients are not the type who stay at discount motels.

Why Are Our Rates Higher?

A budget hotel can offer low rates because they don’t have to strive to meet high expectations like we do. For example, we searched for a hotel room in downtown Los Angeles on a Saturday night. The Marriott charges $322 per night while Best Western is $191. The hotels are blocks apart from each other, but worlds apart in the deliverables. 

Erik Bird, a former hotel manager for Marriott, says all employees are required to go through a formal training program, while employees of lower tiered hotels are given minimal training. The program is just one more internal cost. Bill Faeth, founder of Limo University in Nashville, Tenn., teaches his clients the value of practicing in the service environment. It’s one important element of the reason we command higher rates. Luxury vehicles and their amenities, extensive insurance coverage, and 24/7 human availability are all attributes that contribute to a higher operational cost compared to discount services.

What’s Your Flavor?

For the company going the extra mile to deliver luxury service, it’s not hard to justify a higher price. Have you ever noticed not all tacos are created equal? Taco Bell is perhaps one of the most well-known taco purveyors in the U.S. They are cheap and convenient. That’s probably where the buck stops. Have you ever had a street taco from a food truck and thought to yourself, “This is the best taco I’ve ever had?” Taco Bell is spending hundreds of thousands of advertising dollars trying to get you to come buy a cheap taco, while the independent seller with a cart is doing it better. He doesn’t even have a marketing budget and shows no interest in Yelp reviews. 

Instead, he focuses on one thing: The quality of the taco. Chances are he is buying meat daily from a butcher, and fresh onions and cilantro recently picked from the farm. He makes his own tortillas each morning. He hand prepares everything with the freshest ingredients. You can taste the difference. 

What’s your business serving up? Very likely, another company down the street is doing the same thing you are. They have the same vehicles delivering the same service. What makes you different? Your flavor has to be better. You have to keep the ingredients fresh. It doesn’t take a Taco Bell marketing budget to succeed. It takes intense focus on delivering the best flavored experience for your customers. When you find a taco you like, you will scour your city looking for that one single food truck that delivers that taco. Do you really care how much it costs?  Probably not! Focus on delivering the best service. When you’re the best, people care less about the price and more about the service delivery.

Identifying Prospects

To be able to justify a higher rate means going after the right client. The type of clients you should be marketing to are the ones who appreciate the finer things in life. They are the people who value having an ice cold bottle of water waiting for them after a long flight. They are the ones who appreciate a formally dressed chauffeur waiting for them with a signboard. They appreciate a chauffeur helping them with their luggage and knowing how to get to the Marriott without GPS. They appreciate a chauffeur who does not try to chat with them. They like knowing if they need to change their morning pickup times, they can call in the early morning hours and speak to a live person. These are the type of clients you desire.

Setting Rates

Former operator and industry educator-entrepreneur Bill Faeth created Limo University after years in the limousine industry as well as running other businesses. He has never been bashful about discussing why his rates were higher than others. 

“Having the lowest rate has certain implications of being cheap or substandard to the rest of the industry,” Faeth says. “When you know you deliver a great product, you don’t need to worry about being the highest price because people will value you for what your deliver.” Faeth has cautioned hundreds of operators about setting low rates; they could eventually wipe you out of business. With too-low rates, you won’t have enough profit to reinvest in new equipment when yours ages. You will not be able to attract top talent because you can’t afford to match your competitor. If someone can’t afford to pay your rates, he simply can’t afford to be your customer.

Making A Profit Beyond Expense

Based on my past experience, setting rates to meet operational expenses will never work. You must have a nice profit margin from every ride to be successful. It isn’t a greed factor; it’s about survival and looking to the future. You have to be able to replace vehicles, child safety seats, ice machines, computers, telephone systems, and of course you need to set money aside for unexpected emergencies. Many operators have had a chauffeur blow an engine or cause other catastrophic damage. You must have the funds available to handle emergencies. Eventually, you may want to sell the business. Let’s face it, people are only interested in buying a business that shows a strong profit margin. Underselling your service devalues your business in the long run and will make it harder to sell.

Convincing The Client

Inevitably, someone will try to talk you down in your price. Don’t let them. Be ready to defend your pricing with calm confidence. Your delivery should be matter-of-fact and on the tip of your tongue without hesitation. Here is a list of points you might make depending on your operation:

  • We are staffed 24/7 so you can always talk to a real person and that’s a big investment we think you would appreciate if your flight is canceled or delayed in the middle of the night.
  • We perform random, regular drug and alcohol tests for your safety. While it’s a major investment, we know it is one you would expect from us.
  • Our vehicles are equipped with cameras, navigation systems, and a GPS monitoring system so our managers can ensure every ride we deliver is as safe as possible.
  • Our professional chauffeurs go through an extensive training program before ever driving a client and receive ongoing reviews and training. While such training is expensive it shows in the quality of service we offer.
  • Our vehicles are stocked with amenities such as cold bottled water, the daily newspaper, a magazine or two, mints and gum, facial tissues, hand sanitizers or wipes, snacks, and other items we think you would appreciate. We also stock particular items for repeat clients based on past requests.
  • We are not just a ride. We are a concierge service that can help you with anything you might need such as reservations at the best Italian restaurant, finding you a local printing company in a hurry, or getting you into popular night clubs.
  • We maintain relationships with hotels, wineries, concert promoters, restaurants, and other popular destinations so we get the best parking and can often arrange upgrades and special services for you.

Related Topics: client markets, customer service, difficult clients, hourly rates, Lyft, rates, TNCs, Uber

Jim Luff Contributing Editor
Comments ( 2 )
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  • john michael

     | about 9 months ago

    I see the directions you are giving, I have read this twice!

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