By Murray Voth
Recently, I had a meeting with a shop owner who might be a potential client. I was showing him the gross profit margins he could achieve, the labour rates he could charge, and the materials and consumables he could collect.
I have permission from some of my rock star clients to share their KPIs to show prospective shop owners what is possible. After seeing the numbers, the prospective client said, “I can’t believe he/she is getting away with that!”
I’ve often heard other shop owners in the early stages of training and coaching say something along those lines: that there’s no way they could get away with markups like that. Then they take the first small steps and implement the changes that will help them become more profitable. They report their success back to the coaching group, and someone in the meeting will ask, “Did anyone of your customers complain?”
The shop owner will say that they had no complaints, or very few. And someone else in the room who is relatively new to the implementation process will say, “See, you got away with it!”
That’s when l turn to them and say, “No, he didn’t ‘get away with’ anything.”
I have always wondered why there is this sense that there is something immoral or illegal with charging more than the shop down the street. And that if you did charge more and the client did not complain, that somehow you got away with a crime. What a horrible way to run your business, always living like you are one step away from being arrested! I always remind shop owners that as long as the client was fully informed of what they were paying for before you started the work and did not complain about the price, they still perceived value in the transaction.
The reason the clients of a well-run shop don’t complain about repair prices is because they perceive, and receive, exceptional value for their hard-earned dollars. The reason many shops don’t hear any complaints as they make changes and increase their prices is because they are already giving more value than they charge for, and in many cases are underpriced as it is.
We live in a free-market economy. One of the principles of this kind of economy is that you can charge as much as you want, as long as the market will bear that price. At a certain point, companies or individuals will say that what you are selling is too expensive. It is self-regulating: as soon as you stop selling your product or service, you lower the price and sales increase again.
But one of the other principles of the free-market economy is that you can charge whatever you want, as long as, one) you add value, and two) the purchaser perceives value. In some cases, if sales slow down, rather than lower the price a seller might find a way to add value, and keep the price the same. (Or, if they are really good at this, even increase the price.)
But you might say that competition regulates price. If a price in the marketplace is too high, a new entry in the market may drop their prices in order to get market share. Yes, but what we all need to remember is that price (per se) is only one of many factors that determine your ability to charge a good price.
Multiple research studies have found that between 60 and 65% of the driving public would pay more for a premium automotive service experience. So, what is a premium service experience?
- The ability to request an appointment through your website. (Your website must be a responsive design, which means it adapts to any size of screen or device. Over 60% of searches for automotive service are done on a mobile device.)
- The ability to receive estimates and approve repairs through email or text.
- The ability to receive digital inspection results with pictures on their devices.
- The ability to pay digitally, either by text or etransfer or through the website.
- Secure after-hours drop-off and pick-up with a lock box.
- Transportation options, including a shuttle, courtesy vehicle, pick-up, and delivery.
- Vehicle is washed and vacuumed after service.
- Complimentary beverages at the shop, and a bottle of water placed in the vehicle after service.
- Complimentary Wifi.
- Easily visible and accessible parking.
- Any other extra services that comprise a premium client experience.
Now you might say, “I can’t afford to offer all those extra services!” Look at it another way: When your shop has good profit margins, it becomes easy to offer this kind of value.
Shops that offer these kinds of service experiences don’t charge separately for them. They have high enough service rates and profit margins that it is all built into the invoice. These shops did not get away with anything; they offered a lot of value and were paid well for it, by clients that appreciate this level of service.