Service Tech Pay Ideas

[djs]

With the slowdown in service has anyone considered lowering their labor rate? My guys are paid a flat rate hour. On my discounted services I eat the discount. My repair rate is costing me some business. I am considering lowering my rate to be competitive on repair costs. My door rate is $97 and my effective rate is $68. Without going into my poor performance reflected there, I thinking about paying my guys 30% of the labor on the work they do. That way they benefit on the expensive jobs as well as share in the jobs that would be done at a lower rate? Any thoughts? We are getting all kinds of calls asking our labor rate. Rural and mfg economy. Blue collar area. Help!

[harleygrl]

I am surprised that people are shopping your labor rate and not shopping how much the job costs. Last time I had something done (called the plumber, etc.) I wasn't quoted labor rates and hours, just a price for the job.
I have been at a store before where the techs were paid a flat percentage of the labor on the repair order. Has it's pros and cons.

You can always present it to your techs from the perspective of would you rather have a piece of the pie, or no pie at all?
Also, offer to match competitors pricing (apples to apples) when quoting jobs.

Good Luck!

[jazdale]

I'm a bit shocked that you have a $30 spread between door and effective rate.

If you lower your rate, does the warranty rate follow suit?

There's too many variables to the question "what's your door rate?". With variable labor pricing, menu pricing, multiple time-guides, shop charges, parts pricing, diagnostic time...
With your ELR, you're obviously not charging that much!!

Maybe you just need to spin your answer a bit Vs just blurting out "97 dollars".
Maybe you could say something along the lines of "It's a variable rate based on technical difficulty. Tell me what type of work you need done, and I'll be happy to give you a competitive quote".

[GENE WHITE]

On Dec 2, 2008 Dealersedge is sponsoring a free E-Summit. I will be discussing the concept of "Variable tech pay" as a way to protect gross profit and pay your high skilled technicians. Remember your effective customer pay labor rate benchmark including LOFs and specials is to be equal to or greater than your warranty labor rate.

[chrabo]

I don't agree with Gene. If you hardly offer any specials and do very few oil changes then your effective rate should be much closer to your door rate. I calculate my effective less oil changes. This way I don't do anything stupid like jack my oil change prices so high I'm not competitive.

[djs]

Appreciate the comments. We are surrounded by shops that charge a $65 door rate and then charge clock time. The customer doesn't figure it out until they pay the bill. You are right that my door rate and effective should be closer. We are paying out an average of 29 1/2 % of gross to the techs. Has anyone gone back to paying the techs a percent of the gross Sale? I am thinking of paying out 30% of the sale. So if it is an oil change or an intake or an engine overhaul they earn 30% of the sale. Then I can match labor rates of 65 to $70/hr with these other shops and be competitive on the repair work I am losing now. The tough electrical issues I don't lose for any reason since we have the equipment to fix it. Any down side to this?

[GMFXDOPSMGR]

I try to maintain a 73-78% gross on my labor. LOF and competitive jobs are performed by my low $ techs, some are clock personel. I have to maintain my labor rate structure to keep from lossing the warranty rate. Look at the structure of who is doing your competitive jobs and have them reassigned to the lower cost techs. This will help you get more competitive and you may be able to better match the prices that are costing you business. If you don't get them in the door, you can sell more work.
Our techs are flat rate, including the LOF techs. We average 350 - 400 hours labor per week with 5 line techs and 2 LOF techs and have pricing that is competitive with the independent stores across the street and next door. Our ELR is $89.43 to a door rate of $98.46. We use Grid for our customer pricing, shop the competition for similar pricing. We are not cheaper and are not the highest priced when comparing apples to apples. Our cost of training, equipment required by the Factor, building Sq. Ft. and all the factors that go into us charging what we have to does not allow us to drop to the competitions prices. Most dealers cannot afford to drop their labor rates to the chanin store prices. Customers will see that "CHEAP" is not the best.

[This message has been edited by GMFXDOPSMGR (edited 11-19-2008).]

[RKing]

djs,
I agree with jazdale, your response has to be catered to the customers question. We've been succussful in saying, "Our labor rate varies between $38.00 and $110.00 per hour based on the type of work required, what is it that you repaired?" Then we quote the job with one price that includes parts, labor,shop supplies and sales tax. We do not quote labor seperate from therest of the job.
We are also looking into a variable tech flat rate pay for 2009, similar to a body tech's variable rate based on body labor or mechanical/frame labor.

[Tyler Robbins]

In a constant effort to improve your situation, you should begin moving away from quoting labor at all, regardless of the rate.

"We've simplified the pricing here at ABC Motors, so we have one price for a service or repair - what type of service or repair did you need to know the price of?"

As long as we continue to make parts and labor distinctions, regardless of how well we learn to phrase it, we will forever be subject to these types of questions from customers.

As harleygrl stated, no other industries break it down for the customers - when I go into a restaurant for a steak, I dont ask how much is the steak itself and how much is it to cook it?

Lets collectively move away from using "labor" and "parts" at all in our communications with customers, and just use the "Total for the Service or Repair Completed" is...

[bsilcox]

Here we go again! I don't THINK it's about price! I believe that you must be competitive in your market area, But what is wrong with being at the TOP end on the market. It's no different than any other product or service you must give value for the dollar! Have your people, SLOW Down, Build Value, Sell Benefits not price. If you are in a highly competitve market area where your Customer's shop you then be different! Do things your competition is not doing!! How do you fine out what they are doing SHOP THEM. Take a vehicle into these shops and find out what they are doing. I am in a community of 155K very mixed customer base, But I am holding $117 plus in effective labor rate. All of my maintenance operations are costed at 20% cost of the labor sale amount. All of my Technicians are on flat rate with a minimun wage guarantee of $7.35 per clock hour minus their flat rate amount. Don't have to worry about overtime in my state of Colorado. My Senior Techncians get pay Senior pay for Senior work, If they work on a maintenance op they get paid the same. One thing that makes us different is we rotate tires on every visit at "No Charge" to the customer, at least we get the wheels off and take a look. We do a complete walk-a-round and inspection on every vehicle every time it comes in the shop with Customer's permission of course. We drive permission based inspections and tire rotations. We offer free top off of fluids and tire pressure check at any time to our customer base. Just drive in and ask!! Also we try and wash every vehicle in for service including oil changes.. I have totally changed the attitude in the shop about Flat Rate Hours we talk dollars. We Sell dollars not hours and we talk dollars not hours.. I hold an average of 78% customer paid labor and 46& gross on parts. Our goal when we started this program was 75% labor and 45% parts. WE average around 9%, tire pentration, 11% battery pentration, by the way we check every battery, every visit for free, and we average 9.8& in total brakes sales of retail repair orders. We are a Ford Lincoln-Mercury Store and our maintance pentration is 78%. Our retail labor sales compared to total is 67%, warranty 22% and internal 11%. Does paying the Techncians a flat dollar amount and/or a percentage work!! You Bet get it done! All it will do is make you more competitive and make more net profit!!

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Fixed Ops Rhino