AKRON (Aug. 16, 2004) — Tire dealers who menu price repair jobs must clearly explain the limitations or parameters of the price quote.
Those who don't communicate these are flirting with disaster, an automotive service software specialist said.
In my last column, Jerry Noble advised tire dealers and service shop operators to increase both professionalism and profitability by charging odd-change labor rates. Mr. Noble, a former technician, service writer and shop manager, worked as a tool dealer for nearly 20 years. Today he's president of Automotive Visions (www.auto-vis.com), developers of Take Charge Service Management Software.
Mr. Noble wrapped up an extensive interview with Tire Business by advising owners and managers who routinely menu price certain repair jobs to carefully clarify what the menu price does and does not include. Countless times he has watched well-intentioned service personnel confuse and/or anger customers by giving the false impression that the menu price was, indeed, the price for the job.
When the service writer reports back later that, for instance, the caliper piston is frozen or the rotors are worn below minimum thickness, some customers feel duped or misled. Then an ugly and unnecessary confrontation may occur. Or they conceal their anger and simply never come back. But they also bad-mouth your business to anyone who'll listen.
Truly successful tire dealerships and repair shops have talented sales people who know how to politely but clearly explain the limitations of a menu price. This additional 30-40 seconds of clarification builds trust up front and saves untold potential aggravation later with a skeptical or distrustful motorist. These communication skills always distinguish an exceptional shop from an average one, Mr. Noble noted.
Friendly, personal service is another hallmark of successful automotive service centers. Unfortunately, friendly service often hampers profitability by consuming more time than managers realize. That's why Mr. Noble urges owners and managers to maintain their personal service but to realistically account for the time. For example, make the first 15 minutes of a typical transaction count as 30 minutes in your billing.
In other words, somehow factor a 30-minute labor charge somewhere into the bill to cover the valuable time service personnel spend meeting and greeting customers as well as gathering vital information such as vehicle history, describing and defining symptoms, etc. Add up these 15-minute intervals over the course of 12 months and you'll see the total isn't trivial.
Over the years, careful observation taught Mr. Noble that fairly routine meet-and-greet encounters easily occupy 15 minutes. Slightly more involved ones routinely consume 20-30 minutes of your time. Doctors, lawyers and accountants don't hesitate to charge for increments of their time and expertise—often without yielding any answers or solutions. Certainly automotive doctors are entitled to account for their incremental time, he argued.
Finally, don't forfeit profits through ill-conceived or poorly reasoned discounts. For example, it's not uncommon to see signs boasting 10-percent discounts for senior citizens. But that innocent-sounding discount may cost the boss more than he thinks. Mr. Noble said that after years of analyzing the numbers, he found that a boss typically takes home 15-20 percent of the total invoice. So if the repair job totals $100, the boss takes $15-$20 of that as profit.
In previous columns, I reminded readers that the boss gets paid last. He or she pays the overhead—including salaries—first. Profit for the boss is the money that's left over.
Suppose the boss gives “$10 off” that 100-buck repair bill to entice seniors. If the boss gives 10 percent off $100, he or she forfeits $10. Yes, that means the boss gave away $10 of the $15-$20 he or she typically made in the first place!
Figures don't lie. Again, the discount amounts to $10—which equals a whopping 66 percent of $15. That $10 equals 50 percent of $20. Therefore, that supposedly harmless 10-percent discount ended up costing the boss 50-66 percent of his or her profit on this job.
The bottom line is to understand the true impact of discounts on profitability before you glibly offer them.