Mr. 10% - Transmission Digest

Mr. 10%

That’s how his fellow service advisers introduced him to me at the seminar. His name was Steve but no one called him that. Most just called him “10” for short, as in “Hey, 10, how much did you give away today?”

Mr. 10%

It’s Your Business

Subject: Techniques for handling price objections
Essential Reading: Shop Owner, Center Manager
Author: Terry Greenhut, Transmission Digest Business Editor

It’s Your Business

  • Subject: Techniques for handling price objections
  • Essential Reading: Shop Owner, Center Manager
  • Author: Terry Greenhut, Transmission Digest Business Editor

That’s how his fellow service advisers introduced him to me at the seminar. His name was Steve but no one called him that. Most just called him “10” for short, as in “Hey, 10, how much did you give away today?”

How did he pick up this handle, “Mr. 10%”? By giving a 10% discount to any customer who challenged his price on pretty much any repair. Rather than fight for his price or use objection-handling techniques to get the customer to say yes, Steve thought it was just safer to knock 10% off and make a sure sale. Of course, every once in a while a customer would think 10% wasn’t enough of a discount. Then old Steve would really be in trouble. He couldn’t cut any more off the price or his boss would have chewed him up and spit him out. He didn’t have the skills to keep the customer from saying no, so he usually lost the sale completely or had to bring in reinforcements, like another service adviser, to finish the job for him.

In this case the problem was simply a lack of training. Until now Steve hadn’t been taught two important lessons: First, how critical it is to get the price you ask because it is the real price, the one you actually need; second, that there are several techniques for handling price objections that must be employed by anyone who is going to successfully sell service and repair without having to discount it.

Ten percent is just about the profit most automotive-repair businesses make. If you give it away you make nothing. So that’s about what Steve was doing – giving away the entire profit from the job, leaving nothing but an exchange of dollars. He understands that now.

What’s left for Steve is to memorize and employ the techniques he has just been taught for handling price objections. If he does he will lose his Mr. 10% nickname pretty quickly. If he doesn’t, then he should probably start looking for another line of work, because when the only real objection customers have is to your price and you can’t handle it, you aren’t doing the company or yourself justice by sticking around.

Price objections have been a part of our business since Henry rolled the first Ford off the line. Nobody ever wanted to pay to have a car repaired, and nobody ever will. The only thing they ever wanted to buy was the car itself. They never wanted to spend a dime more. So any price they are quoted for any repair or service they will find objectionable.

What customers want to pay should be of no concern to a good salesperson. Getting them to pay the right amount is the only goal. To do that the service adviser first must believe in the figure on the bottom line of the repair order. That means he or she has to agree that the shop’s labor rate and parts markup are valid, that they are based on real numbers, because those numbers are the multipliers used to come up with all pricing. It’s almost impossible to fight for a price in which you don’t actually believe.

If the service adviser thinks like a shade-tree mechanic who has no real understanding of the overhead involved in running a legitimate business today, of course he’ll believe the prices are too high with no real basis and many times think it’s OK to cut them. So the first step is to teach the service adviser about things like cost of goods sold, overhead and profit margins. Once that’s accomplished the focus can change to learning the right words to say to get the necessary and profitable price.

Customers will come up with several objections that, when you boil them down, all have to do with price. They may be voiced differently, but they are price objections nonetheless. The good service adviser should not only know how to handle each objection but also do so without any hesitation or misgivings. The customer must trust that the service adviser is an expert who is leading them in the right direction. Any doubt will cause the customer to fight harder for a lower price.

Some of the most-common objections are:

1) “Your price is too high” can be handled in only one way. You must ask, “What makes you feel my price is too high?” That forces them to defend their allegation that your price is too high. If you don’t ask this question you have no clue as to why they are objecting, leaving you to guess. When you guess, you will give yourself only two options: to defend your price or lower it to make the sale. Either way you would be dealing from a weak position. Asking what makes them believe the price is too high and making them defend their objection makes you strong.

2) “Wow, that’s a lot of money.” Everything is today, so the statement doesn’t really mean much. It’s more of an exclamation than an objection. The best ways to handle it are either to ignore it and go right into a closing question or to agree with it by saying, “You’re right; that is a lot of money, but it is the right amount to have your car fixed correctly, and I know that’s what you really want, isn’t it?” Then immediately close.

3) “I can get it done for less.” If the customer thinks he can get it done for less remind him that he can buy anything for less if he doesn’t mind the consequences that go along with a low price. Ask what the other prices are that he’s received. Then point out that all shops use the same time and parts guides and pretty nearly the same labor rates and parts markups. Once he agrees to those points, ask, “Then how do you think he can do it so cheap? Do you think there is anything he might have left out of the price or might leave out of the job? How upset would you be if you took your car there and halfway through the job got a call saying he didn’t realize all the extra parts or labor operations that would be needed and that the price was actually going to be much higher? You know, the sweetness of low price can be quickly replaced with the bitterness or poor quality, shoddy service and dishonesty.”

4) “I just don’t have the money.” That’s what we call a “no-money condition.” A condition is something in sales that if you can’t get around, you can’t make the sale. It’s an absolute. Once a customer makes that statement it is up to the salesperson to find out whether it truly is a no-money condition, in which case you would have to find them some money if you hope to complete the sale, or it is a price objection being masked as a no-money condition. The way to find out is with the use of a simple question: “If I can find you the money, can we go ahead with the work?” If the customer says “yes,” it is truly a no-money condition. He wants it fixed and there is no price objection.

If, on the other hand, he hesitates at all, what he’s really saying is, “I’ve got the money; I’m just not ready to turn it over to you yet.” That’s a price objection, not a no-money condition. You have to ask, “In addition to feeling that you don’t have the money, something else seems to be bothering you; may I ask what that is?”

He’ll probably come back with, “Your price seems a little high.” Now you can handle it very simply by asking, “What makes you feel my price is too high?” That brings you right back to dealing with the simplest form of price objection while eliminating the fake no-money condition.

5) “I just won’t fix it.” When they say that you have to ask, “Then what will you do for transportation?” They will have to answer by saying they will either trade it in on another used car or possibly a new one.

6) “I’ll trade it for either a used or a new one.” If they want to trade it for another used car, say, “Most people aren’t trading in cars these days unless they are having major problems just like you are. So how would you feel if you traded in your car and got very little for it because it’s broken, then spent thousands on your new used car only to find that it has as many if not more problems than you’re already having? The truth is, you know what you have; you don’t know what you’re going to get. Repairing your car can bring it back to full value, allowing you to get the maximum use from it and later be able to sell it for a decent price when you’re really ready to trade it in.

If they say they want to trade it in on a new one, ask, “Were you planning to buy a new car right now?” The answer usually will be “no” because they weren’t. Telling you they will trade it for a new one is designed to scare you into lowering your price or is simply a reaction to hearing a number higher than they thought they would have to spend. Make them realize that fixing their car is still far more economical than buying a new one. “You know, for what the first three payments would be on a new car we can have you back on the road and save you 57 payments” or “For what the sales tax and extra insurance would cost we can get you going again, and you know you don’t get anything for sales tax, do you?”

7) “I want to think it over” when brought up at the time you are trying to close the sale usually means that the customer has an issue with the price you quoted and either doesn’t want to or isn’t sure of their ability to negotiate with you. They say they want to think it over to get off the phone with you and on the phone to shop your price around town. The problem is that they can always find someone willing to undercut your price. So turning a customer loose to go shopping at this point is a dangerous exercise.

The best thing you can do is to get them to admit that it is the price they want to think over. You do this by eliminating everything else. When they say they want to think it over, you ask: What is it you wanted to think over? Is it the way our facility looks?”

  • They’ll probably say, “No, the shop looks fine.”
  • “Is it the way we’ve taken care of you so far?”
  • It’s hoped they’ll say, “No, you’ve treated me very well so far.”
  • “Is it the quality of our work?”
  • “No, I haven’t heard anything bad about your quality.”
  • “Is it the time we need to do the job?”
  • “No, the timeframe seems OK.”
  • “Is it the warranty?”
  • “No, I can live with the warranty.”
  • “Then, is it the price?”
  • “Yeah, you know, your price does seem a little high.”

Once they say that, all you have to say is, “What makes you feel my price is too high?” You have taken “I want to think it over,” which is impossible to handle, and turned it back into the price objection it was supposed to be. That’s one you can easily handle.

Armed with an understanding of the cost of doing business and the right sales tools to handle price objections, let’s hope that Steve can lose the nickname Mr. 10%.

Visit www.TerryGreenhut.com.

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