Value Based vs Priced and Commodity Based
One of the best parts of my job is I get to help auto repair shop owners MAKE MORE MONEY! I also get to go door to door visiting many auto repair shops and get insights on how they operate. I have seen many different types of operations. Price and commodity-based businesses are more prominent because they are easier. We all think that the clients will only care about price. What if you marketed your auto repair shop as a value-based service? Over the years of running and operating a shop also I have actually done both! There is a fine line into being reasonably priced but offering tremendous value that others don’t that truly gives us the leading edge and allows us to stand out as a professional auto repair shop.
I’ve heard it before and I am sure I will hear it again.. “500$ for a brake job.. are you nuts?!” Yes, we might be but we need to be able to explain to our clients why we are 500$ instead of reducing the price to match another quote. WOW, you’re clients. Add so much perceived value that they might not even ask the price next time. YES Not even ask the price because now trust is established.
Let me give you an example I had with a client just a few years ago.
Diane came in for a safety inspection on one of her new used vehicle, a 2008 Subaru Impreza. We inspected the vehicle from top to bottom and found regular issues common with the age and mileage of the vehicle. After the inspection, our technician noted that the vehicle required front and rear brakes, ball joints, and front struts. Yes, a large estimate on a new / used vehicle that was just purchased.
I received a note from one of our service advisors letting me know that she had declined this work. I was surprised but I wanted to investigate. Diane and her family had been going to our auto repair shop for over 20 years. So after looking into the estimate and the technician inspection, I did not notice anything out of the ordinary or anything quoted overpriced. Later that day after closing the shop I decided to give her a call and see what happened. I was asking myself, did we do something wrong? Was it the price?
“Diane, I heard you declined the work on your Subaru?” Diane replies “Yes Brian, I just can’t pay your prices anymore” I was surprised about the price mention. I thanked her for all her loyal years as a client and said if ever you need anything we are one phone call away.
My brain just starts rifling through ideas of what could’ve happened. Was it the price? Did we become too comfortable with our existing clients? Did we lose any more clients for the same reasons? Is our sales process no longer relevant? Whichever it was, Diane was no longer seeing the value in our services.
The balance, you, of course, shouldn’t be overcharging for services. You need to find a balance between profitability and staying competitive in the marketplace. But what you need to do is take a minute to think about how are my clients perceiving the value. When clients see the value that is when they buy. Just look at Starbucks for a minute. 5$ coffee?! Why would someone pay 5$ for a coffee right? It is the perceived value that the brand has worked tremendously on.
Leading with the price is just a bad strategy.
I see this ALL the time. “Hi Julia, your car needs front brakes” Julia Replies “How Much?” Service Advisor Replies “500$” Julia Replies “Ouch is that the best you can do?” This is the most prominent sales strategy we see in the auto repair shops. This is what is considered price-based selling.
Think and listen to your advisors and analyze your sales process.
Something great happened years later. Diane called me back. She wanted to give us another shot. She had mentioned noises and the famous engine light. She mentioned to me on the phone that she had been to another shop 3 times for the same issues.
I sat back and my chair and was excited for the opportunity to go full loco on value-based. I started by listening to her concerns. I then proceeded to explain that we would like to perform a complete inspection due to not having seen the vehicle for several years. I then continued with our diagnostic process. We had to perform a diagnostic on the engine light and the noise. Then did an overview of the inspection costs.
Almost 290$ In Inspections. She authorized and we proceeded to schedule the appointment.
Upon our inspection, Diane received a complete breakdown of everything the vehicle needed. The noise was caused by a timing belt idler. The engine light was diagnosed to required an air/fuel ratio sensor. Not only that but during the inspection, we had found many other issues. Rear calipers were seized and the brakes were in terrible condition. The right front wheel bearing was very noisy. We sent her the digital inspection then she calls. She was blown away that her vehicle required so much work and that no other auto repair shop had noticed these issues. With the inspection in front of her, we start to prioritize and try to offer to do it in smaller pieces. The total quote was over 3000$! She authorized the complete amount and continues to be a client today.
When she arrived to pick up the vehicle, I made sure to be there to see how she felt and make sure she was comfortable and understood all the work we performed. She seemed happy and grateful.
Then 2 days go by and she calls me back. The old me would be worried about a comeback call due to not taking the time to fully inspect the vehicle and note all the issues the vehicle had. I answer the phone, here is Diane expressing her gratitude to us and our services. She was very happy with her vehicle and now felt safe driving the vehicle. We continue to service this vehicle and she now has her whole family coming in for auto repair and we continue to focus on value and not price. This has made our lives easier and our clients happier.
Just remember, price isn’t everything. Perceived Value is!