David Inglis
incremental profit generator

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Pricing Service & Repair Work

When Retailers price service and repair jobs, one of the difficulties they face is knowing the actual MARGIN or PROFIT in the job.

Most departments within a Retailer operate autonomously and are almost completely financially detached from one another, encouraged by the likes of DMS, Budgets and Composite.

Let me give you a real life example where a Retailer promoted a fully fitted Front Brake Pads replacement price of £89.

Kwik Fit did the same job, using non-genuine parts for £69.

Upon visiting the Retailer's Parts Department I asked how much they paid for Front Brake Pads on the particular model - they said £10.50.

Knowing it would take no longer than half an hour to fit front pads, I returned to the Service Department and asked them how much they paid their Technicians per hour - they said £14.00 per hour and so we have a cost of £7.00 for half and hours work.

So if we take the COST of the parts and labour, it only amounts to £17.50 and so you have to ask why is the Retailer displaying an uncompetitive price of £89?

Well, it's because Retailers always take the RETAIL price of the Pads and the RETAIL price of Labour and simply add them together.

Most other businesses will look at the COST and then add a 'market based' MARGIN, so COST + MARGIN.  (The Margin should take into account an appropriate overhead allowance) 

If Retailers knew their MARGIN on any particular job, they would be able to price jobs that are competitive in the market place and at the same time know exactly what their PROFIT is - this would also make it easier for the Retailer to negotiate a price with the customer.

Whilst Retailers don't need to 'price match' the likes of Kwik Fit, if they could price work which is reasonably close to the Kwik Fit price, Retailers would still make a profit and importantly improve customer retention levels.

Also, the Retailer has the advantage of being able to promote the use of OEM parts and manufacturer training technicians.

But until Retailers start pricing work at COST + REASONABLE MARGIN - the likes of Kwik Fit are rubbing their hands with glee!

How do your Retailers price jobs?

Author: David Inglis

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 Worked with:

  Urban Science
     Int. (UK)

 Castrol Business
     Services (UK)