Pricing strategies exist for every retail environment, from supermarkets to high-end boutiques. When it comes to automotive repair, pricing can be a major competitive advantage when done well. Here’s how to use pricing strategies in the automotive business by leveraging the knowledge and experience of automotive service manager training online.
How do you price your labor competitively and still make a profit?
The first step in pricing labor competitively is to determine what your customers in your market will pay for your service and parts. We do this with a repair market survey. This is where you price a repair item (either competitive or maintenance) and call different service providers in your area to determine what each of them charge for that repair or service. Once you know this, you can effectively price your rates at the best competitive rate for your market. It’s best to call at least 10 other repair shops to get a realistic price for that repair. It is also important to understand the difference between what your customers are willing to pay and what your costs are so you can optimize for higher margins.
What are the 3 categories of services you need to price?
The next step in pricing labor competitively is to determine which category of service you are providing. There are three main categories of services: competitive, maintenance, and repair. Broadly, these are services that are not essential to the operation of the car and can be provided by anyone with basic knowledge and tools.
Competitive services are those that are necessary to keep the car running, such as oil changes, tire changes, and tune-ups. Maintenance services are those that keep the car running but don’t require any specialized knowledge or tools, such as replacing the air filter or changing the oil. Repair services are those that require specialized knowledge and tools, such as replacing a head gasket.
Pricing for each of these categories should follow a tiered system based on several factors:
Specialized Knowledge: If a service requires specialized knowledge or tools, then it should be priced higher than a maintenance or repair service that does not.
Time Involved: Services that take more time to complete should be priced higher than services that take less time.
Complexity: Services that are more complex should be priced higher than simpler services.
How to Deal with Customer Questions on Price
There is often some hesitation when it comes to customers asking about pricing, but there shouldn’t be. If a customer is asking for a price, it is a potential buying signal. This is your opportunity to present your service pricing and explain the full value of completing the repairs or service(s) in your service department.
There are a few areas to focus on when answering customer price questions.
First, explain the value difference you provide while highlighting the benefits of doing the service or repair with you instead of another repair facility.
Second, explain the full value of your service. This includes not only the price of the service, but also the time it takes to perform the service, the parts and tools needed, and any other associated costs.
Third, be transparent about your costs. This includes explaining your hourly rate, your parts and labor costs, and any other associated costs.
How to Deal with Customers Who Are Not Willing to Pay a Price
If a customer declines the repair based on price, you should try to understand their reasons. This may involve trying to find common ground, like explaining the importance of the service or the need for the service. You may also need to explain the full value of the service to them further by explaining what the long-term costs of not getting maintenance or repairs might be.
Where can you get help to determine the best pricing strategy for your market?
One option for finding help in determining the best pricing strategy for your market is to consult with a professional.
You should also complete a repair market survey. This is done by looking at their prices, their product offerings, and their customer base. You can also look at their advertising to see what is working well for them. You should also look at their layout, their website, and their service area to see what is unique about their business.
The DealerPRO Training Profit Potential Analysis
The final step in pricing labor competitively is to determine the profit potential for your business with a profit potential analysis. This can be done by getting in touch with DealerPRO Training, which can provide automotive service manager training online to help you calculate the profit potential for your dealership. DealerPRO Training can also help you calculate the profit potential for your service department, parts department, and overall dealership, to figure out strengths and weaknesses in your dealerships’ fixed operations.
Get Started with Your Profit Potential Analysis and Automotive Service Manager Training Online from DealerPRO Training
If you’re ready to discuss pricing and boost profit margins, contact DealerPRO Training. Our team of experts can provide automotive service manager training online that will help you calculate the profit potential for your dealership with our renowned profit potential analysis. Contact us today and let’s talk about your fixed ops performance.