Labor matrix - legal?

[zekensted]

In my state, we have to post our labor rate. If our labor rate is 85.00 and our grid says to charge 195.00 for 2 hours, and if a customer asks, since we also have to include labor times, how can we explain it and how can it be legal?

[skittlecar1]

Get rid of the matrix. Every matrix I have ever seen is gouging if you ask me. I won;t do it nor will I work for someone who does it.

[robc]

Depending on state rules and the posting of labor rates, most would just post their maximum rate. You really have to read or contact your state dealer association to be comfortable with the form the posting must take.

For example, does the law require that the posted rate be hourly - could you instead use tenths of an hour. Can you put something like "Up to $156/hour"? Or could you just post "Variable"? Also check the state law regarding any mention the invoice/estimate. In some states the law is only for a posted sign - and you are free to leave the estimate line blank or fill with "variable."

I am not sure I consider a matrix gouging - the idea is that low labor time stuff is likely easier/competitive services and higher hours are more difficult repairs. The point is to set the matrix so it tragets your desired effective rate at your average hours per RO. So the majority of customers get a discount and those with difficult jobs are charged more. What is the difference between that and setting a $100/hour rate and then discounting practically every small job.

[Old Irish]

heh heh

Funny. I savvy consumer wouldn't care less about labor rate. He'd be more concerned about how many hours he was being charged !

IMHO, matrix pricing isn't a gouge. A gouge is when you charge 5.0 hrs to replace a fuel pump that calls for 2.5 hours in any labor guide you have on the shelf. Meanwhile, techs, advisors, and service managers are patting each other on the back over their "high shop efficiency".

Anyhow, now that't I've vented a bit <grin> and have no clever ideas of my own, I'd consider some of the ideas Rob mentioned.


Cheers
DD

[skittlecar1]

I say its gouging when the more expensive the job the more per hour gets charged. Aren't you guys conusumers yourselves? Could you imagine being at WAL-MART in the check out line and the more you buy the pricing changes to even more expensive. This is why dealership service department lose business to indy's because of stuff like this. We have the reputation that we are there to rip people off. And using pricing matrixes doesnt help.

[Old Irish]

Your "the more you buy" analogy doesn't quite fit.

Its not the quantity of work but the *type* of work. Quick simple jobs are charged at a lower rate than more complex or difficult jobs. You could have six easier jobs on a ticket(all less than 1.0 hour, let's say) and never even enter into the part of the matrix where the "gouging" takes place. The customer will be paying less per hour than your posted "door rate", as most matrixes start *after* 1.0 hours or so. In fact, the best matrixes start tapering off after 8.0 hours or so.

Another way of looking at it:

Go to Walmart (or Safeway, or Home Depot) and there are always very good prices on some of the most popular items (Corn Flakes and Campbells' Chicken Noodle soup). On the rest they make a very tidy profit (New York strip steak and Entemanns pastries). You can buy as many boxes of corn flakes as you want and get the same bargain price. If you need New York steaks, you'll have to pony up.

Go to Hometown Chevy and there are very good prices on some of the most popular items (oil changes, wheel alignment, etc.) On the rest they make a very tidy profit (tranmission overhaul and driveability repairs). You can buy six competitive service items on a repair order and get the bargain price on all of them. If you want your tranny overhauled, you'll have to pony up

Cheers
DD

[skittlecar1]

"If you want your tranny overhauled, you'll have to pony up "

Maybe its the area that Im in....but If we raised prices on things like that....people would go somewhere else. I think we would rather make something than nothing at all.

[Old Irish]

I am big believer in that, too. "A little bit of something is better than a whole lot of nothing".

Just don't leave money on the table, and do some checking around before you assume your prices are too high a big and/or complex repair jobs

Cheers
DD

[casey97]

How many of the *indys* have the training and equipment the dealer has. The customer is paying for having the best techs and equipment on the more difficult jobs. We paid for the training and tools IMHO we should get paid for the work. I don't know of anyone matrixing there quick lube stuff.

[3760Guru]

In regards to the original question, I would definitely check with the recommendations given by robc.

I'll also give my $.02 on the concept of labor matrix pricing. I look at grids as an equilibrium for the cost of sale. The simpler jobs (oil changes, air filters, and other maintenance items) are typically more competitive, and require less skill to do. Chances are, the jobs that begin to run into the 2+ hour range are going to broach into the more skilled category. Part of a labor matrix assumption is that the more time an operation takes, the more skill is required to complete an operation. If the operation takes more skill, it typically will go to a technician with a higher cost of sale.

On the example of the deep-discount stores, consider that you can buy a Durabrand TV (Wal-Mart's private label) and a Panasonic. They both perform the same function, but you pay more for the experience and quality. IMHO, grids can work, but will depend on your individual market.