Where to charge advertised discounts

[georgewheeler44]

As all of us do we do quarterly or monthly specials. We may offer a $29 LOF for $22,
or a rental car free for a major service.
In the past we have charged the discount or freebee to Advertising expense.
I feel the discounts should be in labor effecting Cust Eff Labor Rate, as the purpose of a special is upsell items at Door Rate. Rental Car?
should Parts Dept share?

[Old Irish]

Yeah, don't "charge off" discounts at all. The discounted pricing should be taken off the top, not the bottom.....although I suspect many dealers still do it that way and that's one of the reason numbers are skewed all over the board. In the end your sales figures....upon which you are probably paying commissions.... are overstated.

Parts should participate, yes. On all our specials and menu items parts are billed at cost plus 30%. Billed labor is the difference between total quoted price and total parts price.

A rental is a rental is a rental. Charge it off to your rental account...."92D" if you are a GM dealer

Just my 2-cents

Cheers
Doug

[zsmith]

We also charge it to advertising but I agree with Old Irish that it should come of the parts and labor prices on the RO. Apparently there is difficulty in getting it to show up as a discount to the customer.

[OLDPARTSGUY]

Old Irish
I agree parts should participate in any discounts as long as service does as well.They should be equal. However why should parts be limited to a 30% markup(of which service gets half)? Does service price labor for these on a 30% margin? I bet not, and I know parts does not get a piece of the labor. Being competetive is important but so is beinf fair.

[bsilcox]

We have beat this around the dealership for a long time. The one concern is the customer needs to see the discounted price and there is some areas that if you discount for a period of time and do not show it as a disount but a price that is your set price. We set up a promotion account that gets charged to parts & service and no body is paid off this adjusted amount. This way the customer sees the disounted price before he pays. At the end of the month we JV this account to cost of sales to adjust our Gp %. We charge anything that is a promotion to this account the monies not collected is not a sale because you did not collect the funds and it cost you that amount to make the sale.

[Old Irish]

"Does service price labor for these on a 30% margin? I bet not, and I know parts does not get a piece of the labor. Being competetive is important but so is beinf fair."


No, the labor is not sold on a 30% margin...every service department in the county would go broke if it were. But it IS discounted about $30/hour....or about a 30% discount from retail. A $10 air filter might carry a retail of $16.70. Cost plus 30 is is $13.00 but a 30% discount from retail....same as what service gives on labor, would bring it down to $11.69. So, which would you prefer? $11.69 or $13.00 ???

Parts Department orders, warehouses, and doles out the parts for the discounted special. Fair enough. I know it isn't quite that simple but I was a parts manager for many years....I know both sides, honest.

Service Department is repsonsible for creating and paying for the advertising to get the the customer in the door for that "coupon special" four times per year. Service pays for the shuttle and driver to take them to work and pick them up at the end of the day. Service Dept pays the service advisors to meet, write up, upsell, communicate with, and explain repairs to the customer and makes sure they are happy. If a parts fails (or is out of stock) service department takes the heat from the customer and pays for the rental. Service Dept pays for the equipment and training to install the parts. Sorry....I'm all for being fair as well but I'm not feeling guilty that I don't sell labor on a "cost plus" basis.

I've discussed this with our parts manager and offered him, several times, the opportunity to take any of these repsonsibilities and expenses off my hands in exchange for a higher mark-up on parts. He politely declined He's no fool

Cheeers

[Old Irish]

Personally I don't think the customer needs to "see" a discount. I think some of you are underestimating our customers.

The public is inundated with "service specials" everytime they go to thier mailbox, open the newpapers, or pick up the local TV Guide and I think they have a pretty good idea of what a good price is for most of the competetive jobs. If the local independents and chain-type service shops are all advertising a fuel injector service for $99.95 then you just have to make darn sure that's what the customer "sees" when he steps up to the pay window. In fact, a before-and-after price on the invoice may only give the impression that you are normally *higher priced* than everyone else....not a good thing at all. I like to advertise that our "normal everyday pricing" for such work is the same as everyone else's in town.

So, don't advertise (for example) a "Fuel Injection Service" as "regular price $129.95, coupon price $99.95". Just advertise that you'll do a fuel injector service for $99.95 and leave it at that.

The customer knows a bargain when he sees one!

Then, on your invoice, simply edit your sale amounts so they add up to $99.95, such as $42.80 for the kit and $57.15 for labor. The customer "sees" $99.95 and your sales and gross profit figures reflect what actually happened.

Just my 2-cents

Doug

[Mike Vogel]

Disocunts should come off the sale not to advertising if you need to show the customer a discount on their invoice.

[OLDPARTSGUY]

Last year I gave my service department $225,000 in parts transfer. I believe my department paid its share. That covered ALL discounts and advertising service spent thru the year. And there thanks to me is 80.00/hr to repair my parts trucks.

I know service claims they sold the parts and parts claims service needed to the parts to do the labor. My point is service pays the tech 20.00/hr charges customer 56/hr on menu item and takes 50% of the parts profit to boot.

Why should service margin be so much higher and hold parts to a 15% net on your plan?

[Old Irish]

"Why should service margin be so much higher and hold parts to a 15% net on your plan?"


No reason. That's just what we've agreed to. There's a hundred ways to skin a cat.

Hey, if you can sell oil filters, air filters, and wiper blades at the same margin we get on shop labor, more power to you. Somehow, though, I think you'd end up with an awful lot of $14 oil filters sitting on the shelf. And that wouldn't be anybody's fault....it's just a matter of what the market will bear. Just like its nobody's fault that the market will bear high labor rates more easily than high parts prices. Well, maybe we can blame $100/hour plumber who makes our $56 rate seem like a bargain

If you don't want to split the gross on competitive parts (or any parts, for that matter) with service department then work out an alternative. The parts transfer is dead anyway...technically speaking.

Cheers
Doug