Your Price is too high! Or is it too low?

[bantar]

I received an email today from a Consumer stating "Your price is too high, so hell with you sir!" in response a marketing email inviting him back for his next service.   My initial reaction was uh-oh, quickly followed by "Why am I not hearing more pricing complaints?".   This is quite interesting as we were in a discussion last week, talking about our prices being too low.   We are priced competitively in the market, but with a higher service level, likely, we should be able to earn more with a higher pricing.

I remember reading somewhere that if you don't have enough complaints of your price is too high, then you are priced too low.    There is a balance in pricing.   On one hand, we have price leaders nearby (, with prices so low that they would go broke quickly if they were honest) that will rob the price shoppers blind when they visit as well as other reputable shops with various pricing levels.   

I operate a combo lube and repair shop.     My repair labor rate is a premium to the area and we have talented technicians that rate this premium.    I'm at a small premium on the Lube, but believe it should be higher and .    

After having a chuckle on today's email, I figured it would make for a good conversation.   What is the right Price-is-too-high-complaint rate?  1% 5% 10%?     We might get a 0.5-0.3% abandon rate at the counter over pricing.  I'm sure that there is a silent minority that just doesn't come back, yet makes no noise.

[alfredauto]

In case anyone has been under a rock home prices rose 20% in the last year. Food prices almost doubled. Parts prices went up a lot. Gas is 89% more. Half the shops in my area closed for good.  So I raised my prices. No more $19.99 oil change. Nobody really complains about the labor rate but they do vocalize about their 8 quart silverado synthetic oil change. 

[Transmission Repair]

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[Joe Marconi]

The biggest issue with our industry is the inconsistency with pricing and labor charges. And not just around the country; even in local areas.  After 41 years as a shop owner I will stand by my conviction that we have not charged enough and we have ALL suffered because of it.   

I do see changes on the horizon, but not enough shops are willing to charge what they are worth.  

I met an A rated Diesel Tech through a friend of mine, working on trucks in New York. His rate of pay: $45.00 per hour.  GOOD FOR HIM! 

By the way: Shop's Labor rate: $199.99 per hour. 

 

[NCTransmission]

I am not going to pile on, but I came from outside the industry and I have always believed that if 10-15% of your clients don't walk because "your price is too high" then you aren't priced high enough.  We provide excellent service, and we don't have ANY technicians on staff who have less than 5 years experience in the automotive world.  I HATE giving a quote prior to looking at a vehicle, and it's because every car is different.  Are you recently relocated from NJ with your 5 year old chevy equinox?  It's a rotbox, and I have the spend 3x the labor time to get your rusty crap apart?  That should somehow be MY problem?  Nope.  I have a minimum annual increase, we have the highest labor rate in the area and I am fine with it.  We provide service, above and beyond what that rate reflects, and my front office desk person and myself are full invested in the successes.  

Above and beyond the reflection of the area, have you calculated your costs to reflect your profit levels required?  I analyze about 2x a year what we need to be doing to provide for the services we offer, the employee satisfaction and for the best experience possible  I want to make money.  I want to reward my team for their efforts.  I want to save some money for those short months...  But I can't do all that if I am simply looking at my competition and determining what I will charge.

[bantar]

17 hours ago, Joe Marconi said:

After 41 years as a shop owner I will stand by my conviction that we have not charged enough and we have ALL suffered because of it.   

Not sure if I have this right, but I read this as.... to remain competitive, I must consider other shops in the area with lower prices.  We can be at the top with pricing, but not way over the top (of the median area pricing).  The median price needs to go up; otherwise, we suffer.

Did you know that large apartment complexes update their pricing as often as daily?   They will survey prices in a 10 mile radius and compare their rates against their comparable class (A, B, C, D).   Smaller operators will not have the resources to do such dynamic updates, so their pricing may change less frequently.   Maybe there is a business case for a pricing aggregator service that provides Market research data.

I know of a local well respected shop, with low labor rates, because his overhead is low.   He could charge more, but doesn't.  Complacency with earnings?   I know of others that focus on being the lowest cost as a strategy, but can't afford tooling.   Education?  

When you are first starting out, your schedule is a giant hole and not worth populating because any and every time will be open.   You don't want to turn any business away.   You are scared that no one else will fill this void.   Then when business starts getting better, you don't want to "rock the boat" with pricing changes for fear of taking a step back.   I think there's a bigger newbie challenge:  How to bill for ALL hours used.   What is the difference between Win Some, Lose Some outliers and we just estimated wrong?  How to tell the difference between technical efficiency and unknown job complexity.  Does the bill suddenly jump to compensate?   Can you explain it to your customer and not look bad?  Or do you just eat it?    These are natural survival instincts.  (I had all of these phobias and I can't say they're gone, but some are repressed!  🙂 )  The best shops have much of this already figured out.   This forum is one such place to learn from other successful leaders.

Personally, I see the repair business as a Trust Business.  If you are really Trusted, then, here are the keys.  Fix it.    I sometimes cringe internally when I'm asked about my labor rate, but 99% of the time, they just say, Oh.  My cringing is pointless.  It's not the cost that matters... it is the value received.

[Joe Marconi]

I don't think shops should consider other shops in their market area when setting prices. In addition, while overheard costs may differ from shop to shop, that should not be the only thing that is considered when setting labor and part margins. 

Yes, a shop with a low overhead is different from a shop that has just invested in new equipment and added 3 bays.  However, a job is worth what a job is worth.  And that may mean that the shop with the lower overhead has an advantage and will make more money as compared to a shop with a higher overhead.  But just because a shop has low overhead, does not mean that its will be low forever, and should charge accordingly to invest in the future.

If we are to raise the industry collectively, we all need to charge what we are worth. 

I hope this makes sense. Great conversation!