Editor’s note: This is the third installment of a multi-part series, “Workflow to Cashflow,” by Dave Schedin, of CompuTrek Automotive Coaching & Training, who has more than 40 years in the automotive field and has coached shops to higher profitability since 2006.
In Part One, we looked at understanding labor rates to create profitable labor, in Part Two we dove into parts pricing mindsets. This week we’re going to look at value package pricing for the win/win.
Incentive vs. Discount: To be frank, repeated discounting from the get-go is a “diss” to our service. Not only does it devalue what we do and offer (do doctors discount?), but it’s not prioritizing the health and safety mindset of their vehicles because you’ve created focus toward price, shifting that to your main value.
Training the customer mindset to believe you are a “discount shop” has the potential to put those customers in a “wait to service” status because they know you can be counted on to drop your prices. After a time, they start to believe your prices are high and expect the discounts should be their norm. When your marketing is repeatedly about discounting, whether it’s a flyer/mailer or in person, the marketing/discount can mislead customers into believing that your shop has false retail pricing. This perpetuates doubt about your retail cost propelling them to always negotiate with you because what’s in their mind’s eye are discounts. You train your customers essentially for haggling on price!
Incentives, on the other hand, are designed to do just that: incentivize customers to not just buy — but buy more. Incentives, done right, come with a different set of value words and reasonings and is woven into the value of what you offer.
Sample value words and reasonings from CompuTrek’s Service Advisor Training:
“Mr. Jones, your vehicle has revealed during the diagnostics and testing it needs these value repairs. (Value expression for each one would be done based on the vehicle system.) As with all vehicles systems, one system affects another, and your vehicle revealed that of the 30-35 other critical systems connected to keep it operating trouble free, you only need about five or six that need to be caught up to speed to be fully dependable, reliable and safe.
“The repairs needed from the diagnostics as a value package pricing, accounting for overlap of operation, are around $1,450. Of the five to six other services, based on what the vehicle revealed, three should be done today and the other few can be done in the next three to six months. However, in light of what the vehicle needs in repairs to be reliable today, and counting on overlap with all that is needed, you would save about $75 to $100 in overlap by completing them all today.
“They could be done later but I would just as soon see you save an additional $75 to $100 doing them now. As a value package price for all the current repairs and services needed, your vehicles is estimated at $1,950 and with taxes, you would be in the $2,150 range. And if I know now I can get the parts coming, your vehicle should be done on Thursday around the 3 p.m. range and when done, should I call you on your work or cell number?”
Incentive Value: drives in more labor and parts dollars in the same visit via the same vehicle. This creates a higher efficient and larger RO average.
Above is just one way to use incentives in value package pricing. Here are some other incentive thinking scenarios that typically drive in more work:
- Deferred Work: “Hey Mr. Jones, I realize the vehicle created the $950 expense today and the other needed work was chosen to be deferred until later. I wanted to let you know that April is our “deferred work month,” which means if you have it done the same month then we have an incentive of 10 percent off labor, up to $100. We have an opening available on Monday the 27th where we could get your vehicle fully caught up to be altogether dependable for you. When we call for the appointment reminder the week before, should we call or text your reminder?”
Incentive Value: drives in more labor and parts dollars in the same month via the same vehicles.
- 2nd Vehicle: “Hey Mrs. Jones, when we were preparing for your Jeep to come in today, we also noticed in your family fleet that the Pontiac’s vehicle history showed it was in need of servicing as well. April is our ‘2nd vehicle’ incentive where if you bring in your second vehicle in the same month for service, there is 10 percent off labor up to $100 incentive you could apply to the Pontiac as well. When we are done with the Jeep, for convenience sake, do you want to drop off the Pontiac while you pick up the Jeep?”
Incentive Value: drives in more car count in the same month plus saves you a possible shuttle ride or Uber expense.
- Vital Fluids: “Mr. Jones, your vehicle has revealed it is due for the factory minimum maintenance, based on time and mileage, to keep the vehicle’s warranty in place. It’s also the minimum requirements to ensure full dependability and longevity of your vehicle. The factory minimum fluid requirements would have two of the vital fluids exchanged — the engine oil and coolant. However, in our experience, in order to maximize your year, make and model’s dependability and peace of mind and to get it to 200,000 to 250,000 miles and still be going strong, there are three other critical vital fluids: the power steering fluid protecting the $500 to $700 power steering pump and the $900 to $1,100 power steering rack; the automatic transmission fluid protecting your $3,500 to $4,000 transmission; and rear differential fluid protecting your $1,500 to $2,500 rear differential should all be serviced today.
“The good news is we offer a ‘vital fluid exchange service’ incentive whereby you service three or more vital fluids at once, and you will realize $10 off each service when all done at the same time. As a value packaged price of $1,125 with tax included — and accounting for the vital fluid incentive saving you $50 — you also have the peace of mind that our brand of vital fluids will give you a life-time protection of up to $2,000 to $4,000 of repairs if the components mechanically fail. In light of today’s schedule, if I know now, we can have your vehicle’s vital fluid services completed this afternoon and when we are done, should I call you on the work phone or cell phone?”
Incentive Value: drives in more legitimate services in one visit and by the way, each fluid service is typically done at 150 percent efficiency, when priced correctly, so think about five 150 percent efficient services all being done at one time!
There is only one system in your business that ever faithfully turns on cash flow — your verbal interface system (value words and reasonings) with your customers. All other workflow systems manage or identify “what” was to be sold but do not give “how” to sell it. Adding incentives around value presentations creates the space for more to be purchased.
** Forward this “Aftermarket Matters Weekly” to another shop and cc Coach Dave (email below). CompuTrek will email you Coach Dave’s e-book on Value Words and Reasoning’s for free.
Next from Coach Dave in the Workflow to Cashflow Series: Part Four – Presenting what Mr. Jones actually wants to buy and Stop selling parts and labor with dollars attached to it.
Dave Schedin can be reached at 800-385-0724, firstname.lastname@example.org, and www.computreksystems.com. A complimentary 30-minute discussion is available for the asking.