It’s Your Business
- Subject: Keeping control of the sale
- Essential Reading: Shop Owner, Center Manager
- Author: Terry Greenhut, Transmission Digest Business Editor
Customers often try to control our pricing by dropping subtle hints or making blatant displays of their mindset as to what they are willing, able or want to pay. Although we shouldn’t, many of us do let it affect the price we quote.
When a customer says, “I can’t afford to spend more than $2,000 to get my car fixed,” many of us will work really hard to make that accommodation and often wind up with little or no profit for doing it. I’ve witnessed it many times over the years and have probably been guilty of it myself once or twice (but I’ll never admit that).
Although we’ve discussed in the past our “glass ceiling” – that number we fear to go beyond – we haven’t really talked about the customer-initiated version of it. Psychologists might call it the power of suggestion, when someone plants an idea or an image in your mind. That’s exactly what a customer does when he says he can’t or won’t pay more than a certain amount. He places an artificial barrier in your subconscious. Does he know that he’s doing it? Sometimes – if he believes he can control the price by doing it, if he’s tried it in the past and it’s worked, then it’s something he might often try again.
When he gives you this number, is it real or one that came about from a feeling he had about what the job might be worth or its value as compared with that of the vehicle? Did this number emerge from other prices he received while telephone shopping, or did it come from something a friend or neighbor told him?
However the customer came up with the number really isn’t all that important; it’s what that number does to control your actions that is. If you allow it to dictate your selling price, the customer has won, or thinks he has, but something has to give somewhere. If the selling price isn’t high enough for the shop to perform the best-quality repairs with the best warranty, then it may not be the best price for the situation and the customer may not get the value he wants.
I recently overheard a sale being made on a transmission rebuild in which the customer had planted a $2,000 limit in the service adviser’s mind before the job had begun. I was interested to see how hard the adviser would work to keep from charging much more than that even though the job called for a higher price based on the damage found upon teardown and inspection.
The customer had approved the inspection service knowing that a soft-parts overhaul would cost nearly the $2,000 limit and after it was explained to him what hard parts were and the fact that if some of them were damaged it could increase the price considerably.
I came in when the service adviser was calling the customer back to report his findings and sell the rest of the job. He started by bringing the customer up to date, taking him back to the beginning: the initial phone call (which I think is an excellent idea; it sets the stage and makes the customer recall the steps that brought him to this point and all the approvals he has already given). He discussed what the original complaint was and why he invited the customer to bring the car in.
He said: “Mr. Johnson, when you first called you mentioned that you thought your transmission was slipping. That’s why I invited you in for our free preliminary diagnostic check. When you came in we went on a road test together to confirm that there was indeed slippage in the transmission. An inspection of the transmission pan followed. It showed us that there were excessive amounts of metal filings and fibrous material mixed in with the transmission fluid, indicating that there were some worn and damaged parts in the transmission. With your approval we removed the transmission from the vehicle and disassembled it to determine which parts we could save to reuse and which ones we would have to replace. Do you recall all of those steps we went through?”
The customer agreed that he did remember and had given his approval for the inspection service, so the service adviser continued: “I now have your transmission completely apart, and I’ve been able to make a list of the parts and labor operations necessary to restore it to its proper operating condition. Do you have a few minutes to go over this with me?”
Once Mr. Johnson agreed to listen the adviser proceeded: “Your transmission suffered significant damage due to clutch wear caused by a worn-out hydraulic pump, the component that pressurizes the transmission fluid to allow it to perform all of its functions, such as application of the friction devices known as clutches, lubrication of all the moving parts and cooling to keep the transmission at the proper operating temperature. When the fluid became contaminated with metal particles from the pump damage it lost its ability to cool, lubricate and pressurize properly, leading to clutch slippage and the transmission’s eventual failure. The lack of lubrication also led to the premature wear of bushings and bearings, causing one of the gear sets to fail. The contamination of the fluid in the torque converter, the sealed unit that acts as a coupling between the transmission and the engine, means that it must be replaced as well.
“Based on the damage we’ve found and the fact that you stated you wanted to keep the car for another couple of years, I’ve come up with a price to rebuild your transmission and torque converter with a two-year, 24,000-mile warranty, of $2,446.93 plus sales tax. If that’s too much I can do it for you with a one-year, 12,000-mile warranty for only $2287.46. Which would you prefer?”
The customer immediately opted for the one-year-warranty job, never saying anything about the fact that it was still almost $300 more than he said he would spend. Of course he took the one-year option; it was offered, wasn’t it? Had it not been he just might have said yes to the two-year, but in the service adviser’s fear of losing the job or going too far over the $2,000 limit he backed off before Mr. Johnson even had a chance to argue for a lower price.
Subsequently questioning the service adviser, I wanted to know:
- (A) Whether the shop made money at the price for which he ultimately sold the job
- (B) Why he immediately offered a lower-priced job without first receiving and trying to handle any objection to the first price he quoted
- (C) If he was so worried about that $2,000 figure, why he went above it at all
- (D) The most important one – if he had already broken through the customer’s glass ceiling, why did he quote a number that still wasn’t going to make the profit the shop really needed? If he was going to quote a number that had a backup figure a couple of hundred dollars lower, could he have at least tried for a number high enough so the shop could have made a profit on either amount the customer might have accepted?
The answers to my questions were:
- (A) No, the shop didn’t make any kind of a real profit on the job. All it did was exchange dollars.
- (B) Fear. As soon as he heard himself say the number it scared him into thinking the customer would say no, so in a sense he withdrew it immediately by quoting something lower.
- (C) Because his boss would have used him for a dart board if he had taken less than $2,000 for the job, and he was even more afraid of his boss than of Mr. Johnson.
- (D) Because he didn’t realize that once the glass ceiling is broken it doesn’t matter how much higher the price is. The customer is going to go for it or not on the basis of many factors but not on the mere fact that it is above the ceiling. It is, and that ends any expectation he might have had about paying less than that. In other words, it starts a whole new game.
Service advisers need to realize that when customers say, “It won’t cost more than $2,000, will it?” they’ve already allowed for spending that much in their minds. All they need to be sold is anything over the $2,000. The first two grand is a foregone conclusion. That should make the rest of the sale fairly easy. All that needs to be sold is the overage.
Terry Greenhut, Transmission Digest Business Editor. Visit www.TerryGreenhut.com.
