Parts Matrix for ADP

[FARFINATAOR]

Chuck;
With regard to escalating to price7 for retail then discounting of that 20-25% for wholesale.I have done that exactly at my past 2 stores, and both times been accused by insurance adjusters of fraud. The default form for the laser printer both times had headers for list and sale. I set the output to these columns to the adjusted/escalated figures. The adjusters surveyed list prices and naturally found that ours was escalated. How have people gotten around the insurance companies challenge to these adjusted list prices?

[Chuck Hartle]

Far,

How can you be accused of fraud by escalating your "SUGGESTED" list price? You may be accused of overpricing your product but fraud is overkill and wrong. Manufacturers have a 'SUGGESTED' list price for the same reason. It is only suggested. What you do with it is up to you.

Were you bumping your sheet metal prices? Sheet metal seems to be the most common item that no one escalates because the industry(especially insurance companies) know what it is. There is no law that prohibits you from bumping your prices, even sheet metal. However, if you bump your sheet metal and competitive products be ready to lose some business. My experience has shown that anyone who attempts to bump sheet metal isn't in the body shop business.
This is why your price codes will differentiate between a independent and a body shop. You should have a completely separate price code for independents and one for body shops that do not escalate the price.
I would suggest that you shop your local competition (other dealers in your area) to see if they are indeed bumping their prices. This is how we used to see if our competition was escalating the pricing. To no one's surprise, we found every dealer in our area had a different price and not one of them had the same retail price for a product and not one dealer quoted us suggested list price as a retail customer.
As I have mentioned many times in my writings, your matrix should be well thought out and primarily used on 'captive' parts with limited competition. As you explore bumping your prices with competitive parts and/or sheet metal, you want to shop your competition on these parts also. I think you will find that applying any type of bump beyond 'captive' retail is a roll of the dice when it comes to profitability.
I apologize for not making this point earlier.

Chuck Hartle'

[This message has been edited by Chuck Hartle (edited 01-30-2001).]

[This message has been edited by Chuck Hartle (edited 01-30-2001).]

[RPMGeorge]

Hi Chuck,
Which Parts would YOU categories as competitive Parts (Except sheetmetal)?
Would you or should we price them at the same level or below the level off other competitors? I have to say that I don't believe in getting in to a price war with any competitors, this hurts every body and aint any good for the bottom line.

[Farfinator]

Chuck,
I fully appreciate the care that must be exercised in applying the matrix to captive parts. The following scenario , however has occured often enough to be an issue and I am wondering how others deal with it.
Whether it be a collision repair or better yet an extended warranty claim, these adjusters are equiped with the suggested list prices. Every advisor I've ever seen thus far has given into agreeing to the insurance company's pricing. In some instances this has pushed the parts pricing below list, like when a new price tape comes out and the insurance co's dont' yet have that data. How do others enforce the pricing structure and secure their pricing in these instances? Is it simply a matter of educating the advisors and demanding a strong stance on the issue? Don't the insurance companies have to pay "retail"? Can the insurance companies simply deny the higher fees by contending they are above "reasonable and customary" charges? You can't in good conscience or good business defer the additional expense to your customer...So, how do you get paid what you should?

[Chuck Hartle]

RPM,

I would classify competitive parts as ACDelco, Motorcraft, or EOS products based on the Big Three. Simply put, these are the oil filters, air filters, belts, hoses, spark plugs, fluids, chemicals, etc.... common maintainence parts readily available anywhere. Typically these parts are pretty easy to identify and source separately without applying an escalated matrix. Quite honestly, our experience has shown that most parts operations show no fear when it comes to applying a escalated matrix on captive parts and suggested list is used for all sheet metal and most competitive parts. In fact, many managers 'fix' the pricing on things such as oil filters and brake pads for service menu pricing.

Farfinator,
Your service department should have a labor type and price code for insurance related repairs that price at suggested list price. You aren't going to get very far in getting insurance companies to pay any type of escalated list.
It is no different than the Service Contract Sales through your manufacturer that allow a "cost plus" factor. It is ironic that if you sell a part on a "factory" service contract you aren't even allowed suggested list price while another insurance company is expected to pay anything other than suggested list at worst. These insurance companies have the resources and the knowledge to know exactly what your manufacturer 'service contract' programs pay and they expect the same if you want the business.
This is why, when you look at the table posted earlier in this thread that once you break the $50 to $100 retail price your matrix should be very light. This is where you will begin to be 'shopped' by your customer.
This is where you have to make a decision what type of business you want. Is 25% of something better than 35% of nothing? Only you can make that decision to accept the business or hold to the higher pricing.
We have written several articles over the past couple of years debating whether matrix pricing was dead! Again, dealing with hundreds of dealerships over the past several years, we see that average customer pay profit percentage on parts sales averages 42% profit. When the manufacturer suggested retail price carries a 40% profit margin, the only explanation is that matrix pricing is alive and well.
With increased competition and so much cost shifting going on, it is only prudent and smart to apply an escalated matrix on your captive items that only you can provide. I see the only way that matrixing could ever be dying would be attributed to the ease of the retail customer pulling the suggested list price for a product from the internet.
Remember, your manufacturer only has to raise the cost of a product to you to have an increase. We call this inventory appreciation. You have the ability, as an independent business person, to make logical pricing decisions on your pricing to remain profitable. If you choose to 'rip' your retial customer's head off with too high a escalated retail price than you have to be ready to reap what you sow. In short, a well thought out matrix table is not only a good business decision, it is a matter of survivial.
Look at it this way. I can go to a 7-11 and get a 64 oz. Big Gulp for $1.00. I went to Disneyland a couple of weeks ago and got a 12 oz cup of the same soda for $2.50. Did I pay it? Sure! I was thirsty and I was a captive customer. You and your dealer have spent thousands of dollars in specialized training, advertising, and time invested in building a quality image for your brand name. You should never have to apologize or skimp for have higher prices for your product. Most of your customers return to the dealership for service for one simple reason, quality they can't get anywhere else. You have a 'captive' customer who expects to pay higher labor and parts prices.

Chuck Hartle'