DealersEdge Professional Forums

CAN ANYONE LET ME KNOW IF SUCH A THING AS STANDARD MATRIX CHART EXISTS? IF SO PLEASE FOWARD IT TO ME

I assume you are referring to a "pricing matrix." If so, this tool should be devised based on competitive positioning, your market place, customer type, and the products themsleves.

If you would like to discuss this further you can e-mail me or call me at (570) 824-1528.

Gary J. Naples
GNA

TO MY KNOWLEDGE, NO "STANDARD" MATRIX EXISTS. CONSIDER CAREFULLY SOME OF THE FOLLOWING CRITERIA BEFORE MONKEYING WITH YOUR PRICING:
1. DO YOU HAVE A CLEAR UNDERSTANDING OF THE AVG. MARGIN AFFORDED YOU BY THE LIST PRICE FROM YOUR MANUFACTURER?
2.DO YOU HAVE A SOLID GRASP OF HOW YOUR G.P. IS DRIVEN I.E. %WARR,%CP,%INT,%WHSL ETC.? TO WHICH CATEGORY(S) DO YOU FEEL ITS NECESSARY AND WHY? WHAT CATEGORY DO YOU THINK IS FAULTERING AND WHY? IF YOU CAN REMEDY ROOT CAUSE OF THE LACK LUSTER G.P. THE MATRIX IS ICING ON THE CAKE!
3.DOES YOUR STORE HAVE MENU PRICING? IF SO, SOURCING MENU DEPENDENT PARTS DIFFERENTLY MUST BE CONSIDERED.
4.WHAT CAN YOUR MARKET SUPPORT. IF IN AN AFFLUENT AREA YOU CAN HIT A LITTLE HARDER, AND YOU CAN ALSO DO SO ON YOUR CAPTIVE PARTS, BUT BE CAREFUL ABOUT HOW YOU HANDLE THE FAST MOVING TUNE UP STUFF.

YOU KNOW THE WHOLE POINT IS TO TO TRY AND BUMP THE LOWER END STUFF THAT USUALLY DOESN'T STAND OUT AND CAUSE THE CUSTOMER TO SHOP ESLEWHERE. MAYBE,FIRST DECIDE AT WHAT POINT YOU SHOULD TRANSITION BACK TO LIST. IF YOU ARE A BMW STORE THAT MAY BE AS HIGH AS $500, BUT FOR A CHEVY/GEO STORE THAT MAY BE MUCH LOWER. THEN, KNOW YOUR BREAKEVEN POINT!! YOU DONT WANT TO PUT IN EFFECT A "COST+" MATRIX AND LATER FIND THE MARGINS WERE BETTER ON A BUNCH OF STUFF IF LEFT AT LIST.
NEXT, MAKE THE BREAKS SMALL ENOUGH. SET UP AS MANY AS 10-15 BREAKS. YOU DONT WANT THE $5 ITEM IN THE $1-$5 BREAK TO END UP MORE EXPENSIVE THAN THE $7 ITEM IN THE $5-$10 BREAK. START WITH COST+300% ON 0-.99 AND WORK YOUR WAY UP. MICRO-MANAGE THE MATRIX FOR A COUPLE OF MONTHS, MONITORING ITS EFFECT AND MAKE ADJUSTMENTS AS YOU SEE FIT.
WHATEVER SYSTEM YOU ARE ON, BE CAREFULL TO UNDERSTAND THE ENTIRE!!! SET-UP ON THE PARTS,SERVICE AND ACCOUNTING SIDES!!ADP IS A DEFINITE "CLUSTER" WHEN IT COMES TO PRICING. THERE IS PART, SOURCE AND MATRIX PRICING WHICH WILL COMPOUND ON ONE ANOTHER IF YOUR NOT CAREFULL!!
BOTTOM LINE...DO A LITTLE RESEARCH, FIX THE FUNDAMENTAL PROBLEMS DRIVING YOUR G.P. THEN IMPLEMENT YOUR MATRIX AND ENJOY THE GRAVY.

GOOD LUCK

Hi,
Maybe you could give the few of us, who are not as fluent with the Matrix, an example on how and why a Matrix works or fails. We work with some sort of Matrix which is as high as 189% how could we get our margins up to 300% without ruining turnovers? What should a Matrix look like?
Everybodys help is appreciatet.

------------------
George Schmitz

RPMGEORGE:
GROSS TURN=COST OF SALES/INVENTORY VALUE
TRUE TURN=STOCK ORDER PURCHASES/INVENTORY VALUE
BY THE STRICK FORMULAS, GROSS SALES(OR THE SALE PRICES) OF PARTS IS NOT A FACTOR IN YOUR TURN, HOW AND WHAT YOU PURCHASE AND SELL DETERMINES THAT.
AS FOR AN EXAMPLE MATRIX. HERE YOU GO WITH SOME OF THE BASIC IDEAS BEHIND IT.
1. IT IS A FACT THAT, RELATIVELY SPEAKING, A PROPORTIONATELY SMALL NUMBER OF PART NUMBERS DRIVES THE GREATEST AMOUNT OF DOLLAR SALES AND TURNS(OR MOVEMENT) IN YOUR INVENTORY. IF YOU EXAMINE THESE PARTS YOU SHOULD FIND THEY ALSO(ON AVG.) HAVE A RELATIVELY LOW COST. TAKE A LOOK AT YOUR XYZ(SHELF RANKING) AND COST RANKING REPORTS TO FAMILIARIZE YOURSELF WITH WHAT HESE PARTS ARE.
2. CAREFULLY CONSIDER HOW OR IF YOU ARE GONNA APPLY THE PRICING MATRIX TO CAPITIVE, FASTMOVING/COMPETIVE, AND WHOLESALE COMPONENTS. I PERSONALLY THINK YOU CAN GET INTO TROUBLE WITH THE LAST 2. PERHAPS ISOLATE THE CAPTIVE STUFF 1ST. EVERY DEALER AND REGION ARE DIFFERENT, ONLY YOU CAN DETERMINE AT WHAT POINT YOU THINK YOUR CUSTOMERS ARE GOING TO START SHOPING.
3.THE MATRIX: MOST MAJOR SYSTEMS(I.E.REYNOLDS AND ADP) HAVE PROGRAMS THAT WILL AUTOMATICALLY IMPOSE A USER DEFINED FORMULA TO CALCULATE THE SALE PRICE. I AM MOST FAMILIAR WITH ADP. YOU SIMPLY GO INTO PBE(PRICE BREAK ESCALATOR) DEFINE THE PRICE FIELD YOU WANT TO APPLY THE MATRIX TO(I.E. PRICE6, THEN THE BASIS FOR YOUR BREAKS(I.E. COST) AND INPUT THE FORMULAS. BE SURE TO GO INTO OMN4(I THINK) AND DEFINE YOUR NEW PRICE6 A PRICING CODE TO CONNECT WITH SERVICE.
4.THE FORMULAS: DEPEND ON WHAT YOUR SITUATION CAN TOLERATE, BUT FOR EXAMPLE ONLY!
0-.99 COST+300% (COSTX4)
1-4.99 COST+250%
5-9.99 COST+200% (COSTX3)
10-19.99 COST+150%
20-49.99 COST+100% (COSTX2) ETC.
YOU CAN DEFINE IT ANY WAY YOU FIND WORKS FOR YOU. THE SMALLER THE BREAKS THE BETTER, AND YOU GO AS HIGH AS YOU MARKET CAN TOLERATE BEFORE SHOPPING. YOU CAN PRETTY WELL BET THAT STUFF UNDER $35-$40 WON'T TYPICALLY CAUSE SOMEONE TO SHOP, BUT ONLY YOU KNOW YOUR SPECIFICS.
THE UPSIDE OF THE MATRIX IS OF COURSE A BETTER MARGIN ON THE STUFF YOU HANDLE MOST AND THUS INCREASE TOTAL G.P..ONCE SET-UP AND FINE TUNED, IT REQUIRES VERY LITTLE ATTENTION.
THE DOWNSIDE...IF TO HOT OR AGGRESSIVE FOR YOUR MARKET YOU WILL DRIVE CUSTOMERS AWAY AND DEFEAT YOURSELF.
P.S. YOU CAN USUALLY BUILD A MATRIX OFF OF ANY FUNDAMENTAL PRICE(I.E. COST, LIST, WHATEVER.) IT IS GENERALLY CONSIDERED NOT A GREAT IDEA TO BASE PRICING OFF ON LIST AS THE MANUFACTURES MARGINS SOMETIMES FLUCTUATE WIDELY..
I HOPE THIS HELPS!!
GODD LUCK
_________________
FARF

For what its worth, MNI has gone on record with a big CAUTION in using any matrix with the exception of totally proprietary parts and where you have little or no competition. In the past many of us who advise dealers and Parts managers made a lot of money designing a matrix. But with the advent of the internet and the availability of prices from virtually every manufacturer of cars and trucks, and their parts cost prices on the internet, it is an idea whose time has passed. Better to find the paths to increased efficiency and productivity than to add to the over all price of a part that might 1) make you noncompetitive and 2) gender a lot of hostility in the marketplace. While there still is a limited application for any pricing matrix, whose goal is to layer more gross profit (and hence net profit) to the sale, it must be used with caution. You might consider limiting your matrix to lower priced items and to those which might be fully proprietary and not available anywhere else.
Mike Nicholes (miknik@aol.com)