You all have heard or seen the ads for "up front pricing" also know as flat rate pricing. We all know about time and material ways of charging. Each of these types of pricing have been around as long as all of us can remember.
The First Method we will take a look at is the "Up Front Pricing" or Flat Rate. With this method the customer calls the the big name plumbing company and is told that a trained service tech will show up at the customer house with a "travel fee"of any where from $49.99 to $99.99. The customer is told at the time of the appointment scheduling this fee will be wave once any work is complete. Now the Licensed service tech ( which the company has spent more time on sales training than plumbing training) will show up at your house and evaluate your problem and come up with a "Up Front Price" for you. Now here is what most people do not know and I can tell you from my previous experience working for a Big Name plumbing company which used the "Up Front Pricing". Most if not All plumbing Techs working for the big name plumbing companies are paid on a commission do you really want a commissioned sales tech diagnosing the nature of your problem and explaining to you his recommendation for a solution to your problem?
As far as I can tell from searching the web is that "Up Front Pricing" originated about 25 years ago with a company named George Brazil in Southern California. There concept was this Increase labor rates greatly, increase the profit margin on all materials sold and make a ton of money. The problem with this method is most customers are unaware of over inflated hourly rates and cost of materials. Until it is too late. The customer has taken the day off from work, waited on the plumber to show up. Now he is here the customer is aware of the "Travel Fee". The plumber diagnoses the problem give his quote which most of the time is very high and the customer gets sticker shock. Now what does the customer do he/she knows if they reject the bid he/she must pay the "Travel Fee" go back find another plumber and most likely take another day off of work or pay the over priced price
Now lets take a look at Time And Material
I must admit up front this is my method of practice
With Time and Material most companies do not charge a travel fee some charge you from the time they call you to tell you they are in route to your house.(Larry Stinson Plumbing does not. Your time starts when we arrive in your home). The general public has been lead to believe that most people who practice this way take there time to over inflate there price. This might work if you where not there to watch them and determine if the tech is working or wasting time. with this method your tech works 2 hours you pay for 2 hours not three or more as the book from the upfront pricing told the tech it would take. In most cases the tech is paid by the hour so he has no gain to oversell you on things you may not need.
The obvious and not-so-apparent results of years of flat rate pricing
The general public is paranoid about calling a plumber out of the phone book. (For good reason).
The average cost of plumbing service to the consumer has gone up dramatically, way beyond the cost of inflation - primarily due to the flat-rate. (Those of us on hourly have seen a dramatic drop in profits - leading to the conclusion that maybe these flat-rate shops are on to something)
The mechanics are poorly trained, as the bulk of most training is sales oriented.
There is little evidence that the plumber’s perspective is anything other than profit. If they do not up sell, they will not make what they would make if paid an hourly wage.
The pride of being a professional plumber is very lacking today. (I see these guys all the time). Turn over is high within the flat-rate service shop due to burn-out from long hours and high stress. One guy I interviewed was fired from his last job for not making his $1500 a day minimum sales quota at a flat-rate shop.
Customers rarely call twice making larger ads necessary in the yellow pages
Full-page ads are common ($15,000 - $25,000 per month!) in the phone book. If you pay out this much to advertisers, there isn’t much left for payroll.
Small local shops are invisible, as they can’t compete with large advertisers for exposure. Small neighborhood shops mean lower overhead and best pricing to the consumer (use them if possible).
Liability insurance costs have skyrocketed for all due to poorly trained incompetent plumbers causing property damages.
In Conclusion, I would say that the flat-rate plumbing shops cost the consumer more for most repair jobs than an hourly plumber. I believe that the hijacking of the service & repair plumbing trade by the unscrupulous sales & marketing professionals has had a great negative impact on the quality of the mechanics and the integrity of the trade as a whole.
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