Five Reasons Why Fixed Prices Will Fail Your Auto Repair Business
How is your appointment book looking this week? Are you booked a week or two in advance, or are there plenty of empty spaces? If you are booked in advance, congrats! If you fall into the latter, there is obviously a bit of work to do to get those places filled.
It’s when there are large gaps in the working day that some (ok, A LOT!) of workshop owners will panic and think they must be too expensive for the local market. Way too many have been tempted across to discounting and price matching, and even thinking that they need to take part in the devil of all price reductions – THE FIXED PRICE SERVICE!
I do a lot of travelling, and I always take note of signage on workshops and in driveways, particularly when they are advertising a special. I’ve driven through Sydney to the airport more times than I can count this year, and my stomach turns at the same point every time when I see a nationally recognised brand advertising services “from $149” next to the independent workshop advertising services “at $129”. I dislike both messages….”from $149″ means expect more than $149, and “at $129” means that workshop is never likely to make a profit!
Just in case you were considering jumping on the fixed price bandwagon, here are 5 reasons why fixed price servicing will fail your auto repair business…
- Fixed price services cause arguments. Too often customers won’t read your fine print, and when the bill tallies at more due to additional oil etc, you’ll have an unpleasant situation on your hands. Before you know it, you’ve got unfavourable reviews online, and your stress levels are through the roof!
- Fixed price services – or capped price services as our dealership friends call them- create un-winnable price wars, driving the price down (as it has done on this particular corner in Sydney).
According to Richard Phillips, Managing Director of Service Programs Australia, independents should “sit out ” competing with dealerships and large franchise groups on fixed prices for new cars, “and not join the race to the bottom, because they won’t win”. Independents should focus on cars 3 to 8 years old and stay away from the brand new car servicing market. In saying that, Richard says “better educate your customers” to make them aware of the value you provide.
Case in point here is my own workshop. The average age of the fleet we service is 2-6 years, and we would never consider offering a price match on a dealership capped price. We focus on educating our customers on the extra value they receive from us. Remember, “Price Is What You Pay, Value Is What You Get” – Warren Buffet. Our customers love that they get Bang for their Buck!
- You make no profit – Servicing at a rock bottom price will allow you to break even at best. If you knew what your hourly breakeven point was, you wouldn’t even consider doing a service for less than $180-$200. Think about it. What is your normal labour charge out rate? What are your oil prices? What are your filter prices? Don’t you have rent or mortgage to pay on the building? Council and utility rates, holiday leave loading, and sick pay? And the big question…do you want to own a business, or just a job? Fixed Price Servicing will only let you own a job. Many that operate a fixed price model think that loads of bookings and a packed out workshop must mean a successful operation….That is not the case…Turnover is not profit, especially when it comes time to pay yourself.
- You destroy your self worth – I’ve written about this in my book Turbo Charged and in many magazine articles- but it’s worth mentioning again. When you constantly discount your price in an effort to compete, you are giving away a little piece of your soul….Haven’t you worked too hard for too long, attended too many technical courses, and spent too many long days and nights away from your family, only to give away your best asset (YOU!) at a discounted price??? DON’T DO IT!
- You attract price sensitive customers who don’t appreciate the great job you do. You know the type. They want heavily discounted, they want free, and they want it all yesterday. Once you enter the fixed price game, any marketing you do will attract this type of consumer. I call them the bottom 10%. They might only represent 10% of your current customer base, but they are guaranteed to cause you 80% of your headaches….do you really want more of them? NO!
It’s unlikely that dealerships are going to take fixed or capped price services off the table any time soon…But you can play smarter, by better educating your customers, focusing on the value you provide, and remembering that you did not go into business to breakeven.
If my clients and I can play this game and win, so can you!
Rachael Sheldrick – The Workshop Whisperer, is Australia and New Zealand’s leading business mentor for self-employed mechanics. To learn more about transforming your auto repair business, visit www.workshopwhisperer.com.