A fair pricing guide for repair shop owners and managers
We operate in a small town, so most of the people I see were born here. I think about once a day I see a new customer, someone who just moved into the area or just got a job at one of the nearby businesses, or one that is here out of the blue with an unexpected problem; but nearly all our customers are repeat customers. Word of mouth is something the businesses here live and die by.
About four years after we opened, another auto shop opened across the street - literally. In this small town. Someone opened a shop and their driveway is right across from ours. People can actually go "across the street" to get a competitors quote. They are a chain business, they have about 10 other locations in nearby towns, and they always suffered in this area because they behaved like they could take it or leave it.
They cycled managers in and out, had no idea who their customers were, and charged way more for straightforward jobs than other shops. People would actually drive back and forth between our shop and their shop and get a quote on the same job. I remember several that happened right before they went out of business ... one was ball joints on a pickup, our quote was $880, theirs was $2,300. Another was a pressure line on the a/c on a Buick, our price was $340, theirs was $960. Crankshaft position sensor on a small sedan - our price $116, theirs $414. For the same job with the same parts from the same supplier.
In each case, we were not made aware of the price the other shop quoted until after we had given our quote and vice-versa. However in each of these three cases, after getting the quote from us and going back across the street, the customer was told by this other shop that they would price-match our price, which in most cases was about a third or less of their total price! And, in each of those three cases, the customer was so freaked out by that, they came back across the street to us anyway and paid us the full price we asked rather than pay them the same amount of money.
So what does that say to you? If it says that about 75% of what they are charging is just for fun or just to see what people will be willing to pay, then you'll be in agreement with most of their former customers, because they were out of business before long.
We are not the lowest price shop in town, we do not price match, we do not
compete on price. Leave that to Sears and Wal-Mart and Firestone. But we do
charge a fair price, and we are consistent. I hate using the word "honest" because it seems only liars have to protest that they are honest. So, I will
refer to us as "fair and consistent." Come in on Thursday and I'll quote you
the same price I did last Monday. A timing chain on a 2002 Chrysler Sebring
2.7 will be the same price for you as it is for your neighbor's Aunt Beulah. Got a coupon? That's okay, use it, that's why we send them. Bubba down the road quoted you something cheaper? If price is your only criteria, then by
all means, go there instead. Our price is a fair price and it won't change unless our suppliers change (which does happen - jeez - tire prices have more than doubled in the past three years - nothing I can do about that), so I'm not changing the price just because someone else is willing to do it for less.
People who are our regular customers don't only think about the price, they know we provide more than just the service at hand. They know we keep track of their history, they know that even if they only came in for tires I'm going to have someone check and top off their fluids, they know at each tire rotation we are noting the wear on their brake pads and giving them a chance to plan for their next service, they know even if they are just getting a coolant flush we'll give them a printout of any maintenance we note might be due.
You want to be Mr. Discount, it won't work, you can't command the kinds of prices on supplies that the chain stores get. Your bottom-feeding, low-price seeking customers are the worst ones that will cause the most problems, spend the least, have no loyalty, and just cause you to inherit the ravages their car has endured from having the most corner-cutting shops in town do whatever they have to do to make the job they are doing on it as cheap as possible. Yes, we make money, that's why we're here. Why would we bother if we showed up every day just to come home empty-handed? But making money means we have to do whatever we need to do to keep the money coming, right? In a small town, that means being fair and consistent.
I can't imagine why a customer would want to go somewhere where the owner was broke and unhappy, giving things away at cost, swearing he's not making any money, taking the cheapest possible price for a job because the shop is desperate for work. Running a business right should be rewarded, and if it isn't, the business won't exist any longer. Even if all my bays were empty, and a customer walked in and asked for a quote, then asked me to cut it in half or they'd leave ... I'd tell them good luck and if they change their mind, we'll have room for them. Changing the price is bad for business. If your price is fair, you should charge that amount. If you feel you have to cut the price to make a sale, then your pricing is not fair.
Different people with identical vehicles should be able to come into your shop on different days and see a different service writer each time and still come out with the same price. There should not be one price for a busy day and a different price for a slow day.
I understand the red-hot pull, the inescapable desire to make a sale and have someone say "yes" to you. That's sales. Salespeople live for that moment. But changing the price says something else about you that is bad in the automotive business - it says your pricing is all kind of randomly based on something other than parts and labor, it's based on the negotiating skill of the person in front of you. As a customer, how bad does that thought suck? So if you are an idiot, you pay the price they tell you, but if you are good enough, you pay less? I wouldn't go back there where I felt I had to brace myself for a fight every time.
Shops shouldn't fall into that trap, where every time you see a car you are sizing up your customer like an opponent, wondering what they are going to take from you, wondering what you can get away with taking from them. Further, it means you have to hire sales staff that can wildly fluctuate in their decision-making, and your profit will be completely unpredictable and possibly non-existent, based on how much arguing and embellishing they are willing to do. How exhausting and scary. Far easier, more controllable, and understandable to have a consistent way to arrive at a price and that’s the price. We don't bargain, negotiate, argue, apologize, or beg.
There is a way out of this if the customer wants to get the work done but can't afford it, or wants to only have their work done at your shop but has a budget problem. Never change the price, but change the offer. Look at the variables in your job quote and see what you can move around to make the price fit the budget.
Every job involves a combination of parts, parts quality, parts supplier/manufacturer, timeliness for delivery of parts and completion of job, technician labor items, store and manufacturer warranty. As long as the customer completely understands that you are changing the offer - such as, instead of lifetime replacement brake pads, maybe the ones with just a one-year warranty. Instead of a new alternator, a remanufactured one with a shorter warranty. If it's a thermostat and coolant flush, consider splitting that into two jobs and just doing the thermostat today, and schedule the coolant flush after her next paycheck. Maybe the local parts supplier charges more for the part than a mail-order one, which would mean if they are willing to do without their car for a few days, you might be able to order in a part from a cheaper supplier. Sometimes you can't ... I mean, a blown head gasket has only so much that can be shaved out of that job ... and too many things that can go wrong, you should know when to not promise a way out cheap. Then, sorry, better luck elsewhere.
Cheaper places in town also sell tires, and there's no profit in tires, but there is profit in keeping the customer. I will not change the price of the tires, but I might offer package deals to make it easier for people to stick with us - a substantial discount on an alignment, a gift certificate for a movie rental, have an employee hand-wash the car, something extra that I know the big box stores will never do. They will still pay the same price that the last guy paid and the next guy will pay, but they might have a little extra victory on their part for staying loyal to us.
Just as "the truth shall set you free," keeping a completely consistent and fully repeatable method for arriving at a quote will keep a whole lot of stress away from your front counter. There is enough in this business to stress you out - someone shows up in your waiting room with four kids, the parts delivery is late, another part breaks on the way to fixing something you thought was easy, your equipment picks the worst time to act up, your best tech broke his arm. Try to eliminate the stress you can control. Pricing is by far the thing that people complain about the most, that they are most suspicious of, and that they have foremost on their mind when they're giving you the hairy eyeball at the front counter. Just imagine if you never again had to argue about price. It is all up to you and how you handle it, and the best part is, it's never too late. Figure this out now, today, and you won't believe how much easier your days will be. And people will appreciate you for it. Yeah, they'll never like you, no one likes to spend money on car repair. But they hate feeling cheated or tricked or lied to, so why give them the opportunity to feel that way in your shop.