Insights reveal that aftermarket shops often charge more than dealers, especially for services such as oil changes
Las Vegas—In the highly competitive automotive industry, pricing plays a pivotal role in shaping customer perceptions and driving business success. Yet, many dealership general managers harbor a series of misconceptions that could be hindering their fixed ops profitability, according to a new analysis.
Dynatron Software delved into three common misconceptions that GMs often grapple with, shedding light on how they impact pricing strategies and customer retention.
- Dealerships have Higher Prices than Aftermarket Shops
Dynatron’s Mystery Shopping insights reveal that aftermarket shops often charge more than dealers, especially for services such as oil changes. The key is for dealers to build value with every service, as customers are more focused on convenience and recognize the value of dealership services.
GMs need to understand who the true competition is in the market as well as what services are visible to the consumer. Most fluid and filter services are not visible to the customer because they are performed in conjunction with a repair or other mileage service and are not stand-alone services on the work orders.
Due to this these important maintenance items can be priced slightly more aggressively due to not being a service trigger or highly priced shopped service by the consumer.
2. Lowering Prices will Attract more Business
GMs often believe that maintenance offerings, mostly oil change and tire rotation, must be priced cheaper than the competitors in order to retain customers. Also, these items must be priced as such in order to prospect inactive customers. This, however, is not true.
Customers tend to be more focused on convenience and oftentimes do not expect the dealership to be the least expensive provider. Because of this, they typically will continue to do business when they identify that the dealership is not the most expensive provider.
They understand the value in having their vehicle serviced by the dealership. Dynatron reports it has consistently found that retention grows when the dealership focuses on value and convenience, and maintains market average pricing.
3. The Service Department Should Make All the Pricing Adjustments
There is a common misconception regarding which department should adjust the pricing of competitive items, and most often it is labor that is discounted. However, further research generally reveals that the parts department applies a pricing strategy in which fast-moving parts carry a margin higher than skilled repair parts.
This in turn forces labor to be discounted even more. What is important for a GM to understand is that the opportunity that lies with integrating both departments when pricing labor operations.
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