Convention Recap: Are You Suffering from FORP?

Don’t sell yourself, and your services, short

By Rich Lindblom, AVB Marketing

By now, most folks have probably heard of the acronym, FOMO, or fear of missing out. FOMO refers to the concern over getting left behind or being closed out of a great opportunity, which usually results in an impulsive or poorly timed purchase that all too often arrived too late anyways.

Well, I’m here today to tell you about something far worse and far more deadly to retailers than FOMO, and that is FORP.

I’d be willing to bet that nearly half of all retailers are afflicted with this business-threatening affliction. As one of the lucky survivors of FORP, I feel it is my responsibility to spread the word to others in hopes of saving them from this malady.

OK, I’m sure you’re wondering that the heck FORP means. It’s an acronym I created that stands for fear of raising prices. I’d like to share with you a story about FORP, how it affected my appliance business, and how I finally beat this debilitating condition.

Related: Why You Need to Charge More for Delivery

Chicago is without a doubt one of the most competitive markets in the country, with an appliance retailer on every major street corner and seemingly some guy on every block doing service out of the trunk of his car.  That’s why my brother and I were paralyzed with fear when it came to raising our prices on anything. For 10 years we honestly didn’t have the guts to raise our service rates, not even once, even though our expenses had gone up 30-40% over that time.

Like many of you, we profoundly feared that if we raised our rates, customers would find someone else to perform their service work. But because our costs were so much higher than the last time we changed our rates, we were barely breaking even on a call. Something had to change.

Finally, out of desperation, we did the unthinkable: We raised our service rates dramatically. We went from a charge of $65 to $99 for a service call.

I’m sure you can guess what happened next. Nothing.

Our loyal customers barely batted an eyelash at the higher rates. Did we lose a few service calls? Sure, we lost a few, but almost all were people we had never serviced before anyway. Looking back, I would put the percentage of lost calls at less than 5%. 

Thanks to one simple, long overdue change, we were generating 50% more revenue on 95% of our calls! My brother and I looked at each other in amazement, wondering what we had been so afraid of.

Having conquered the case of F.O.R.P. we had long been suffering from, we came back a year later and raised our service call charge again, albeit on select products ($149 for refrigerators, dishwashers and built-in products). And then a couple of years after that, we raised our rates a third time, to $149 on everything.

After seeing the results in our service department, we took a long look at our sales department and made some changes there as well. Realizing that we didn’t have to be the absolute cheapest in the entire Chicago market, we went back and raised our installation rates, which also hadn’t been changed in many years. We shopped our competition and made sure our price for the installation of each product category was right in line with all the big-box stores around us, and the result was about a 30% increase in our installation revenues. 

From that day forward we shopped our competitors’ installation rates twice a year and, no longer troubled by FORP, raised our prices multiple times without fear to avoid selling ourselves short.

So, if you suffer from a bad case of FORP like I did, don’t despair! There is hope. I found the cure and so can you. Begin by doing a deep dive into your company’s service rates and installation charges.

Let’s face it, in today’s marketplace, especially in larger markets, everyone is priced pretty much the same on merchandise. But you have the best salespeople, the best service technicians and the best installers in the industry, earning you the right to charge at least as much as your competition. (And if you ask me, even a little bit more.)

At the end of the day, the difference between getting by and making a profit can be as simple as what you charge for things that people don’t shop around for, like installation and service.

AVB’s Rich Lindblom is a past principal of Advanced Maytag Home Appliance Center in Schaumburg, Ill.  He now brings his 45-plus years of hard-won retail experience to fellow BrandSource members through his YourSourceNews columns and as Product Manager of AVB Marketing’s new SYNC point of sale system. You can reach Rich at rich.lindblom@avb.net.