Pricing Ethics

[David S]

The matrix pricing discussion has led me to another topic I would like to see some feedback on. Ethics in pricing structures.

Do you use a price matrix?

Is your matrix different between service customers and retail customers?

Do you think this is an unethical practice?


David S.

[Mike Davis]

Hi David:

We have used a matrix for many years and it is the same regardless of how a part is quoted to the customer. I am not sure if it is a ethics question as much as an integrity issue. If you get caught with seperate price structures by the customer they are going to start questioning all of the service pricing practices. In my opinion it can only get ugly thereafter. I don't have a good answer for any customer that asks about the validity of two seperate prices in the shop and at the retail counter, I think the only answer is "I had the opportunity and I took it" and that is guaranteed to insure that your relationship is going to be short term. On the other hand I don't have a problem defending matrix pricing to a customer, that is what I feel needs to be charged for the part! I have experience with managers being forced to implement matrix pricing. This has always resulted in the price being communicated with an apology, if not in words then in body language. With anything I feel that it is important to communicate to all parties why it is being done, what the desired results are, and SELL it to anyone affected by the change. Nothing like asking a counterperson to do something they don't want to do. I am sure that you have noticed that counterpeople as a whole tend to be opinionated and vocal, totally unlike ourselves . There is always an exception to this but.....Great topic for discussion.

Mike Davis

[sallen1]

We use a lower pricing structure for service customers and here's why:

I think the benefit to lower parts pricing on the service drive vs. the retail counter is the fact that parts sold on the drive includes selling some labor whereas the retail counter does not.

Therefore, I feel its wise to use a more agressive matrix for over-the-counter sales. Obviously, if its too high, we would lose retail business, however, I have not had a customer call and complain that the counter price was higher. But if I do, I'll let them know that they can get the lower price if they allow us to do the work.

scott

[This message has been edited by sallen1 (edited 10-08-1999).]

[cwalden]

the matrix should be the same for the parts
counter customer as the service department
customer. nothing causes more mistrust than
2 different prices quoted to the same customer. when they shop you not only will
you have quoted them 2 diferent prices but
more than likley bolth prices will be higher
than book list as quoted by the guy down the
road. as far as explaining the price to the
customer there is no answer that they will
be happy with. we also use an aggresive matrix and the other 2 GM dealers in town do
not so our GM counter sales are just not there. i am forced to use a matrix and think
its a double edged sword.

[This message has been edited by cwalden (edited 10-09-1999).]

[J.C. BOHL]

David,

I'm sure everyone is familiar with the disclaimer in the front of every manuf. price book " These prices are suggested list and dealers are free to set their own prices or profit margins"
Anyone that has been in this business for any length of time knows that in order to maintain 39-42% gross profit margin in the shop retail or front counter, we must increase our list price. WE are light at the bottom end, Heavy in the middle, and no mark-up at all over $150.00 Fast moving maint. items are menu'ed with the labor to be competetive and accessories are not marked-up at all. In fact we offer 10% discount on acess if the car was bought from us.
Providing a service at a reasonable profit,and reasonable is the key word here, is not unethical but rather a matter of survival. we all have a "nut" to crack and as we add people and technology, the "nut" gets bigger.
If asked why my prices are higher-I refer to the statement in the price book, ask if my service is quick and effecient, and point out that my service is better than the next guys'.
This usually ends discussion about rip-off etc. I know that each store and area is different and you must experment to get the right mix.
Good luck and good selling!