Is Your Property Management Company Underperforming? Explore the 5 pricing structures that don't work

It doesn’t take a rocket scientist to understand property management entrepreneurs are under immense financial pressure. Inflation reached record highs at the height of the COVID-19 pandemic, and while numbers have since improved, costs across the board are significantly higher than they were a few short years ago.

As a property manager trying to make ends meet, every decision you make impacts your bottom line, and there’s no room for error.

You’re striving to maintain high occupancy rates while ensuring each property is well-maintained and profitable. Yet, every month brings a new set of financial hurdles. You’re not just managing rental properties; you’re managing people, expectations, and a slew of unpredictable expenses.

Here’s the real kicker: in today’s competitive market, even a small misstep can lead to significant losses.

If you’re a property manager and you feel like gasping for breath, trying to keep your head above water, learn the five outdated pricing methods that just don’t work.

Outdated Pricing

Property managers are notoriously bad at updating their prices, even if it’s just a matter of keeping prices in line with inflation and increasing costs.

Why? Because far too many property managers get stuck in a scarcity mindset. “If I raise my costs, my clients are going to run to one of my competitors.” Are you guilty of this way of thinking, too?

Let’s face it: nobody wants to raise their prices, but price increases are inevitable. The cost of everything has risen in the past few years, and that means your labor costs have risen, too. Not only are you paying higher salaries to your staff, but your costs for advertising, maintenance work, and outside accounting help or tax preparation have all risen, too.

It’s easy to generalize and think your customers are all penny pinchers looking for any reason to jump ship. In reality, your customers are consumers, too. They may not be thrilled about changes to your pricing structure, but they also can do the math for themselves. You may be surprised how little pushback you actually receive, should you be updating pricing that hasn’t changed in four, five, or six years.

Convoluted Pricing with Extra Fees

Nobody likes to get nickel and dimed; flat rate pricing or unlimited pricing is straightforward and allows customers to anticipate costs. It’s easy to understand and it doesn’t leave customers feeling like every little thing costs them more money.

You can see flat-rate pricing as the standard in many different industries. For example:

• All-Inclusive Resorts: You pay once to set foot on the property and you don’t pay again. Cruises often employ a similar pricing structure.
• Service Providers: Plumbers, electricians, mechanics…many of these companies charge a standard flat-fee for every job.
• Cable / Phone Companies: Cable providers have long offered bundles that include 250+ channels, even if you only typically watch the same handful again and again.

Options are great, until they’re not.

Are you familiar with the Paradox of Choice? This popular theory was developed in the 1960s and helps to explain consumer behavior. Basically, what it boils down to is this: customers like choices but not too many choices. Too many choices can actually harm your sales figures.

Is your pricing table so long you need multiple pages to display it fully? Are you adding on a list of extra costs and fees that reads more like a grocery receipt than a monthly management fee? Getting the right balance is hard work, so don’t tackle this challenge alone.

Custom Pricing Packages

Property managers are notorious for using custom pricing packages as a means of generating more income. There are a few problems with this approach, but one of the biggest is that custom pricing can hold you back and it make it impossible to scale your operations. If you’ve only got a few dozen clients, you might be able to remember the ins and outs of the pricing you’ve promised each of them. But you can’t reach 100, 200, 500, or 1000 doors with custom pricing in place for each client.

Not only does custom pricing slow you down, but it also makes it much harder to adjust your pricing in line with expenses. If everybody is paying you differently for the same core services, how do you determine how to increase your prices down the road?

Custom pricing can make sense in some limited situations, such as when an investor is coming to you with dozens of doors. In most other cases, however, there’s nothing to be won by using a custom pricing strategy.

Ask and You’ll Receive Pricing

Stop treating your pricing like it’s the treasure you need to protect behind locked doors. That’s not how consumers perceive it.

This is the cousin of the “custom pricing” structure—pricing you don’t let people see unless they ask for it. There are plenty of excuses business owners give for employing this pricing, with fear of being undercut being close to the top of that list.

The simple reality is that we live in a world where consumers expect to have instant access to pricing information. A/B testing shows again and again that it’s one of the first places new visitors look on a website. Why? Because everybody is window shopping.

You might even find that upfront pricing curbs problems for your business, including the following:

• Cuts out tire kickers and time wasters who aren’t willing to pay your rates
• Reduces labor costs associated with generating quotes for interested clients
• Eliminates disputes about costs (Your pricing is upfront and honest, so clients can’t claim they didn’t understand the pricing structure)

Bottom of the Barrel Pricing

Finally, don’t get stuck in a race to the bottom. Too many property managers get so worried about what their competitors are doing that they engage in price matching. Who can be the cheapest player in town?

Unfortunately, this brings a laundry list of additional challenges to the table. Not only does rock bottom pricing mean you’ll have to operate on razor thin margins, but it also tends to attract a certain type of client. You know the type: overly price sensitive and always looking to scrimp on costs associated with marketing, maintenance, and more.

At the end of the day, this can even torpedo your reputation. When an owner doesn’t give you permission to invest in property upkeep, tenants are left holding the bag. Most of the time, they are going to direct their anger directly at you, as the landlord is not part of the picture. Cue the fireworks. Next thing you know, you’re drowning in bad reviews, struggling to get leads, and the only people who do consider working with you are cheapskates.

Protect your business and your bottom line…just say no to bottom of the barrel pricing.

Do You Need Help?

Pricing strategy is complicated territory. If you’re struggling and don’t know where to start, why not get input from our team? We’ve worked with hundreds of property managers, and we know how to optimize property management businesses to achieve impressive results. Whether you’re a fit for our Mastermind program and our in-depth pricing coursework or you’re a startup looking for the basics, our team will help you to identify how DoorGrow can best help you to achieve your investment goals. Schedule you free kickstart call now!