Determine a Variable Pricing Structure in Service Using Repair Order Analysis

Determine a Variable Pricing Structure in Service Using Repair Order Analysis

Repair order analysis can help you create a pricing matrix to maximize profits while satisfying customer demand. In this example, we will use a pricing matrix to determine the best variable pricing structure for a dealership. Here is advice from our dealer service advisors on how to create a pricing grid for variable pricing that works for your dealership service operations.

What is a pricing grid?

A pricing grid is a tool used in service to help organize and optimize pricing and labor costs. The grid helps dealers determine the best pricing and labor combinations for service and repairs.

What to Avoid When Creating a Pricing Grid

When creating a pricing grid, dealers should avoid making assumptions about the quantity or complexity of the service required. They should also avoid pricing services based on the OEM prices for the same or similar services.

Creating a Pricing Grid with Repair Order Analysis

To create an effective pricing grid, we will use repair order analysis every month. This will help determine if the department’s performance is consistent with goals and guidelines. It should take into consideration:

  • Percentage competitive and maintenance sales: 60%, collectively
  • Percentage repair sales: 40%
  • Cost of sale (COS): 30% or lower
  • Average cost per flat-rate hour (FRH): Equal to or less than the average technician pay
  • Total ROs: 14-18* per service advisor per day
  • Total FRHs: 40-50 per service advisor per day
  • Average flat-rate hours per RO: 2.2-2.5; high line 3.0
  • Percentage menu sales: Upsell 30%
  • Percentage one-item ROs: 10%-15%
  • Model-year mix: New vehicles still under warranty should comprise 50% of your work mix—upsell maintenance

* Note: The number of ROs is not as crucial as the work involved. Your department may thrive on more work from fewer ROs. It is better to sell a needed service (i.e., technician time), not lines on the dispatch sheet.

Where to get help in building a pricing/labor matrix?

DealerPRO Training is the first and only training institution that focuses on fixed operations. Our trainers are experts in servicing and repair, and they can help you build a pricing grid that works for your dealership.

Get in touch with us today to speak to a dealer service advisor and find the service advisor training program for your dealership.