Matrix pricing in service

[djs]

HI again. Still looking at how to improve my service department. How many of you use a matrix price for service? My understanding of this is the higher the hours the higher the labor price. My concern is in the engine overhaul, trans, intake type repairs that anyone can do would be more competitive and not conducive for a matrix. Any examples out there that you have used and is effective in raising $ per RO? COUld you send me some examples please? Also anyone useing a 4/10 work schedule in service I am looking at that as well. Need some ideas there too.

[jazdale]

I've seen several scenarios.

The most typical starts below warranty rate for competitive rates then around 4 hours starts hitting 20-30 dollars over warr rate. The idea here, is that jobs over 4 hours are highly skilled/trained/compensated technicians that cannot be found in a no-name garage.

In some cases, at around 8 hours, the rate starts coming down - so if you graph the rate, it becomes a bell at around 5-7 hours
To do this, you MUST teach your people how to sell the job with an out-the-door price.
Getting all explainy with a variable price just doesn't sit right with the customer.

Profit is good, greed is bad.
Start with a moderate grid and adjust according to your market's reaction.

Gene White had an interesting take on this when he spoke on the free 4 hour seminar a couple weeks ago.

[GMFXDOPSMGR]

Most DMS systems have the capability to use Matrix - Grid. I am on Rey Rey and it is pretty simple. set your base door rate, set an escalation rate and let the system set you up. I set the times below 1.0 hrs at competitive rates, 1.0 is the door rate, escalate up to 8.0 hrs and start falling back down to the door rate at 14.0 hrs. These rates are for single jobs only and are not for combinations..several lines. Tranny job may work out at 115.00, but a water pump on a 5.3L v-8 may be at 98.50. combined RO rate would then be 106.75. Matrix-grid offsets the highly discounted jobs..LOF, rotates, FE align, flushes.
helps hold your gross on the overall service department. Be careful to not let it run after your peak hour. You may have to manually bring it back down as the repair hours on a single job exceed your top hour.

[Tyler Robbins]

Matrix Labor/Grid Labor/Variable Labor are all great, but unfortunately the simple "escalation" grids dont have much of an affect either way.

Both replies thus far discuss the BELL GRID - an old standard created about 20 years ago.

The challenge with a BELL GRID or the ORIGINAL SCALE UP FOREVER GRIDS is that the assumption is that you perform each 10th interval an equal number of times over a time period.

EXAMPLE:

Assume an AGGRESSIVE ESCALATION on each hour:

1.0 hour is $100 labor dollars ($100 ELR)
2.0 hours is $210 labor dollars ($105 ELR)
3.0 hours is $330 labor dollars ($110 ELR)
4.0 hours is $460 labor dollars ($115 ELR)
5.0 hours is $600 labor dollars ($120 ELR)

If you performed 5 job lines (a 1hr, 2hr, 3hr, 4hr and 5hr)once each then in TOTAL:
$1700 Labor Dollars / 15 Hrs = $113.33 ELR

Sounds great right?

HOWEVER... in the real world of EVERY SHOP, there are considerably more jobs performed than this, and MOST of them are less than 3.0 hrs (this is a per line number), so for the "grid" to escalate up forever or even to "peak" at the 7.5-8.0 mark, you have to accept that you don't realize much of the HIGH ELR you would have at 8.0 hrs simply because you dont have that much "FREQUENCY" of repairs at that flat rate interval.

If you were able to run a FRH Frequency Report (google it) you will discover that in most shops, and likely yours too, 90% of the "GRIDABLE" work you perform is less than 3.0 hrs, which means, unless you're grid is aggressive at those "lower" flat rate intervals... you wont reap many benefits from your Old-Fashioned Grid.

These Old-Fashioned Grids are effectively just reversed versions of the old-fashioned Parts Matrix structures - if you REALLY are serious about affecting change to your Gross Profit with Labor Grids - You need to look at what will work TODAY in a Service Dept.

If you want some help - contact me!

[This message has been edited by Tyler Robbins (edited 01-07-2009).]