Pricing: It's a Matter of Ethics Too!

Posted 9/8/2011
By Bob Cooper

I am certain that when someone comes into your shop, you do everything you can to turn him or her into a happy customer, and make a fair profit at the same time. Unfortunately, as you well know, some of those customers will put you to the test when it comes to the prices you charge. They'll tell you they can't afford the recommended services, they'll tell you they can get the same repairs done for less down the street, or they'll just need you to knock a few bucks off the price.

This is when most shop owners start to get into trouble. They tell themselves that they've already invested a good amount of time and money to get the customer to this point in the sale, so rather than letting the customer walk, they'll drop their price, and in their mind, they just saved a job. Unfortunately, what they just lost was their integrity, as well as the integrity of their pricing.

Your Integrity Is Established Through Fair Pricing

Now, before I go any further, we all know there are a number of reasons why a customer may ask you for a discount. They may very well be in a cash crunch, and, as I am sure you are aware, many cultures believe you're foolish if you don't haggle over the price. But there's another reason why people will ask you for a discount, and ironically, it's the one most shop owners and service advisers completely overlook. What those customers are doing is testing your integrity. Let me give you an example:

Let's say you hire a plumber to do a job at your house, and he quotes you a price of $800. You then ask him if that's his best price, and within a few minutes he's telling you he'll knock $50 off the price. Now, regardless of whether or not you authorize the job, you'll more than likely tell yourself that if you hadn't asked for the discount, you would have paid $50 too much. And then ask yourself this question: If you needed a plumber in the future, would you call that same plumber again? And if you did, what thought would pass through your mind when he gave you a quote on the next job he did for you? I think it's safe to say that after his first price drop, your confidence in the plumber, and the integrity of his pricing, would be gone.

I also know that many shop owners will inflate their prices when they know they are dealing with a price negotiator, and then will provide those customers with a supposed "discount." I am sure you'll agree, from an ethical point of view, that's not the right way to treat people. The prices you quote, and the prices you charge, should be the same for everyone. So rather than playing a shell game with your customers that will put you out of business, I encourage you to follow a different path when it comes to pricing and, I'm pleased to say, it's the same one I have used to grow some really successful auto repair shops.

First, in all cases, your prices need to be fair. This means you need to be competitive for the value delivered, and just because you can charge more, that doesn't mean you should charge more. Remember, the first people that have to buy the repair or service are your service advisers, and if they aren't sold on the value, then they'll have a hard time selling it to your customers.

Discounts Show Shops' Interest in Saving Customers Money

You'll also need to embrace the fact that it's perfectly OK to offer legitimate discounts, such as fleet discounts, wholesale discounts, senior discounts, emergency service discounts (police, fire department, etc.), military discounts and promotional discounts. Not only are these types of discounts appropriate, but also they'll demonstrate that you are always looking for ways to save your customers money.

You should also bear in mind that whenever a customer asks you or your advisers for a discount, you should look at the customer's request as a strong buying signal. Obviously they are already sold on you and the recommended services, otherwise they wouldn't be asking. They are now either testing you for price integrity, or they are legitimately trying to negotiate a better deal.

Since they're already sold on you, rather than lowering your price, you should look at their request as an opportunity for you to build even more interest and value in your recommended services, and to resell yourself on the services at the same time. If, for whatever reason, you find you need to make the offer more attractive to be competitive, then - rather than lowering your price - you should offer the customer something like a complimentary oil service during their next visit. By taking this approach, you won't be cheapening the value of your recommended services, and you'll be protecting the integrity of your pricing at the same time.

Now, I realize there are going to be times, for whatever reason, when you feel you have to give a concession in price. If so, you need to take something off the table in return for the price reduction. Beyond doing a fewer number of the recommended repairs and services, if it's a major repair, you may decide to reduce the warranty on the repair, or you could tell the customer you'll have your technician perform the repair when you are not quite as busy. In all cases, if the customer pays less, they should get less. There's a term for this: it's ethics.

'Create Customers, Not Income'

Lastly, I would like to say that just like you, I have a number of role models. One is the late Peter Drucker, who was considered by global industry leaders to be the most brilliant mind in the world of business. His first book (published in 1953) was titled "The Practice of Management," and when I first read the book, I discovered a statement that had a profound impact on me, and subsequently, on every business I have built. Drucker said: "The principal purpose of business is to create a customer."

I am certain the reason he didn't say the principal purpose of business is to create an "income" is because he was smart enough to know that without customers, there is no potential for income. So at this point, I can only hope you follow my lead. If you never put money ahead of people, if you never compromise your personal ethics, and if you charge prices you can be proud of, then you will quickly see the extraordinary relationship between pricing and ethics. If you apply these principles to your life and business, you will be able to sleep well at night and grow a more profitable, successful business at the same time. Even more importantly, you will become one of the role models that will influence other owners for decades to come.

Editor's Note: This article is one of several management articles that will be contributed to AutoInc. this year by Automotive Management Institute (AMI) instructors. In 2011, AMI's knowledgeable instructors will continue covering a variety of topics designed to educate and train today's service and repair professional in AutoInc. To learn more about AMI, its courses and instructors, visit www.AMIonline.org. AMI administers the distinguished Accredited Automotive Manager (AAM) program.

Bob Cooper is the president of Elite Worldwide Inc, an ethics-based company that offers shop owners industry-leading sales, marketing and employee management audio courses available for instant download; coaching and training services, as well as training webinars that can be accessed worldwide. To learn more about Elite, visit www.EliteWorldwideStore.com.