Professional Christmas light installers: are you charging too much (or too little) for your services?

Make customers happy with our guide to pricing strategies!

The Question

How do I price my professional lighting installation?

This is a commonly asked question and as long as you walk away with healthy margins, there’s no right or wrong answer.

The first question you should really be asking is: What do I want my margins to be? Or, how much do I want to make?

The second question is: How much can I charge and have happy customers?
If the price for your desired margins is less than or equal to what you are able to charge, all while maintaining happy customers who return year after year, then you have set the price correctly!

These pricing considerations above combine two different types of pricing strategies: Standard Mark Up Pricing and Value Pricing. Assuming your service is top notch, balancing these two pricing strategies will help your business grow and be profitable with a repeat customer base every year.

Standard Mark Up

Standard markup is a fast and easy method that boils down to one simple formula: actual cost + markup = price. While markup is one metric to use, a related metric is margin, which many business owners use to make key decisions. For example, ask yourself the question, how much do I want to earn to make my business worthwhile? Most people can better relate to the answer of this question by thinking in terms of margins.

Let’s start with a healthy margin of 30% (the margin you’ve personally determined to be suitable for your lifestyle) and work backwards from there. Let’s also say a string costs you $20 including shipping. Using this handy calculator, that means you’ll need to charge $28.57 on the string.

Value Pricing

Value pricing refers to setting your price based on what customers are willing to pay. It comes from the idea that the price of your Christmas light installation service is set at the customer’s perceived value of what is being sold.
Value pricing doesn’t factor in the cost of the product or competitor prices. The goal is to set your price as high as possible while keeping a minimal number of customers from being driven away and looking elsewhere.

This pricing strategy works particularly well in the Christmas light installation industry because the leadup to Christmas creates favourable conditions for the customer to really want the service. They are either too busy with other things while getting ready for the holidays, or they simply don’t feel safe or able to do a professional job hanging the lights themselves. There is also the inherent “keeping up with the Jones’” mentality of Christmas lights. The fact that everyone experiences this at the same time every year gives you ample opportunity to carefully consider what your pricing should be and what the marketing messages should say to further increase the perceived value on the product and service you are offering. Advertising “commercial grade, custom-fit, Christmas lights that can withstand the coldest and wettest of climates” or “free storage” would be an example of increasing the perceived value of your service.

Value pricing doesn’t force you to charge a price close to the product’s cost or what a competitor is charging. This gives you more flexibility regarding the pricing structure. It also motivates businesses to offer the best products and services possible. Since the goal of value pricing is to maximize the value of one offering over another, using this strategy tends to help a business develop a higher-quality and more useful products or services. There is heavy emphasis on the customer and this can positively impact your reputation. Therefore, it's important to follow up with customer surveys and get feedback, which will help promote interaction with customers and foster brand loyalty.

The success of your pricing model strategy directly impacts your margin. While other pricing strategies limit potential revenue based on expenses or competitors’ prices, value pricing gives you unlimited potential on revenue opportunities. Your company’s brand recognition, product distinction, and perceived value to customers drive your net income. Value pricing is only effective if customers can distinguish the increased value of what you offer compared to the alternatives, such as buying lights from big box stores, or competitor light installation companies in your area. This difference creates the element of perceived value.

Communication is key to demonstrating value to customers. Anticipate customers’ questions regarding your high price point and have answers ready for them. It’s imperative to do your research then educate your customers via marketing and other communications how your products and services are distinct and increase the perceived value in order to maximize your room for margin.

In our next article, we will discuss how to present your pricing in a manner that is clear and concise so that customers feel they have adequate information to make a confident and quick decision of hiring you.

Did you like our Pro Installer pricing tips? Click here for Part 2!

Join Our Newsletter