CRA Pricing & Business Profitability Explored
When was the last time you reviewed your pricing, is it time to stop discounting and start charging because everything is going up? Now might be the right time to consider raising your rates.
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How much value is absurd customer service and exceptional quality workmanship worth to consumers? It could be priceless!
Want to raise your rates? The first thing quality-oriented collision repairers should consider is raising the bar on their services. If you’re one of those who believe they’re doing everything right, I would very much like to speak with you. If you’re among those who know they could do better, I would like to speak with you as well.
A Hit to the Economy
The economy has taken a substantial hit, and I fear we haven’t seen the worst of it yet.
I just had the wooden deck and metal roof of my house replaced and learned that everything – wood, metal, screws and labor – has risen sharply since COVID-19. Elevated pricing is likely due to:
- Loss of opportunity to manufacture due to the shutdowns
- Loss of manpower due to shutdowns
- The need to find other work
- Reliance upon unemployment (and people’s lack of desire to go back to work and take a loss)
Due to these factors, there has been a trickledown effect to where the supply chain has now been depleted and the reserves used up, so shortages now exist.
A prime example of this is building lumber. The loggers quit cutting, the truckers stopped trucking the trees to the sawmills, the sawmills quit cutting and stopped supplying the lumberyards (Lowes, Home Depot, 84 Lumber, etc.) and the costs and pricing have continually risen – in my area, over 300%! I should know, because my roofer advised that if I needed plywood sheeting to repair any rot, it would be $90 per sheet! Before, a sheet of the same wood was $18 or so. Thankfully, they found no rot and I dodged a bullet.
As for labor rates and hourly pay, they too have risen and will continue to rise to what may become the new normal. Lots of good jobs are available in many areas where the states have relaxed COVID restrictions, but the unemployment rates being paid are high enough to keep people from looking for work as they would get a pay cut if they took a job. This has caused a labor shortage, which has forced retail, hospitality and service industries to pay more to attract workers. As a result, these companies will need to raise their prices. And for me and millions of other consumers across the country, costs will likely continue to rise.
Time to Raise Prices
So why am I writing about this, you ask? Because repairers should reconsider their position and pricing as well. Your costs to operate are no doubt increasing, whether you’re aware of it or not. Add to COVID the shutting down of the oil pipeline and the curtailing of fracking, our oil reserves have become depleted and – as you have likely found out – the price of petroleum products has dramatically risen. Materials from masking tape to body fillers, clears, pigments, reducers, gun wash solvents and pretty much everything used in dent repair and refinishing are petroleum-based and therefore will also undergo price increases as a result. So the question is, how will you and your company react?
The first thing I would ask myself is, when did we make the last pricing review and increase? Was it last year, before the pandemic? Was it several years ago when the economy was doing so well? Or was it even longer ago? Perhaps you’re one of those who wait for the insurance industry to give you a raise. And I’d have to ask you, how has that worked out for you and your staff?
My suggestion is to do a little research. Find out the most recent consumer pricing index and see what increases have been reported. I would also check to see what the rate of inflation has been since your last labor and material rate revision. Ask your paint supplier how their pricing has been affected over the past year and at what rate per year they’ve adjusted their pricing for their goods. What information do they base their increases on, the price of crude oil, the price index or…? Rest assured that paint manufacturers stay on top of such data on a regular basis. Now is not the time to reduce your pricing by any means, but you may be able to give your company a raise by finding ways to cut your costs – which will raise your profitability or help offset anticipated increases.
One effective way I found to do this is to contact your parts suppliers and negotiate a better discount. Right now, competition and a stagnant economy may be your friend in this regard. If you’re in a larger metropolitan area, you may have more than one dealer of the same brand who is seeking more customers to get more business due to the struggling economy and workforce.
If you’re in a smaller town where you’re forced to order from a distance, there is likely more than one dealer that serves your geographic area. In either case, they may offer you a better deal to stay, while others may offer attractive discounts to gain your business. Loyalty works both ways, but you’ll never know until you try.
Just Say No
Stop allowing insurers to whittle away at your pricing. When you provide an estimate of repair (blueprint) to your customer, you’re rendering your professional and expert opinion as to what is required for a proper and through repair. I advise my shop clients to “Write it right and do it right.” If you have a quality, service-driven shop, your customers didn’t choose your shop to allow the insurer to dictate how to repair their vehicle, any more than they would allow an insurer to dictate their medical care. Imagine if your loved one needed surgery and your surgeon took advice from your insurer on how to perform it. Would you be okay with that? I know I wouldn’t stand for it, and neither should you or your customers when it comes to their family’s personal safety and economic well-being.
When an insurer wants you to do something that is improper or incorrect, you owe it to your customer to inform them and seek direction from them as to how they wish to have their vehicle repaired. If you’re scared the insurance company will get mad at you, well my friend, you need to get into another line of work where your customers cannot be physically and financially harmed by your lack of courage and action.
If you’re a customer-oriented repairer, good for you! Now you need to show your customer that selecting you to repair their vehicle was a great idea.
Adam Smith, who is often referred to as the “Father of Capitalism,” wrote a book titled, “Wealth of Nations.” In it, he wrote about the invisible hand of the market that constantly seeks out the best value.
So, ask yourself, in your market area, what can you provide to your customers that they will perceive as enhanced service? The first thing they need is interaction with other service providers so they have something to compare you to.
Once thing I encourage all my repairer clients to do is take notes of the damages along with other things when providing an estimate or consultation. I encourage them to ask the prospective customer questions like:
- How did the accident occur? (Was the vehicle moving, stopped, occupied, etc.)
- If it was an operation loss, how many people were in the vehicle at the time?
- Where were they seated, and was each occupant wearing their seat/shoulder belts?
Frequently, you’ll get a quizzical look and they may ask why you’re asking all these questions. My response would be: “At ABC Collision, we care about each customer’s vehicle, as well as each customer and their family’s safety. Oftentimes, the vehicle’s manufacturer calls for inspection of the seatbelts after a collision, and we follow the manufacturer’s recommendations to the letter. This allows us and our customers to sleep well at night.”
They’ll usually respond, “Hmmm. I’ve been to a couple shops, and I went to the insurance office so they could see my car, and none of them mentioned anything about the seatbelts.” You can then reply: “Perhaps they didn’t know about it. Don’t worry, we’ll print out the manufacturer’s recommendations on this and other recommended procedures so they will have them. We’ll provide the same documents to you as well.”
Now ask yourself, do you think the prospective customer will see value in your services? Will it set you apart from others they’ve visited? Do you think it may earn their trust and confidence, as well as their signature on the repair authorization/contract? Remember what Albert Einstein said: “If you can’t explain it to a six-year-old, you don’t understand it yourself.”
Education is the easiest way to explain value. In the collision repair industry, we not only restore vehicles, we also need to restore the customer’s peace of mind.
When you explain to the customer about alternative parts and OEM procedures and the necessity of restoring the safety, reliability, performance and value of their vehicle to the best of reasonable human ability, you’re educating them on issues that are important to them. They may not have known before what was involved or important, but they will after you educate them. And when you do, they’ll value you for caring about them and become a viable referral source in the years to come.
I encourage quality-oriented repairers to step up and out of the box that has been built around you and take charge of your business and your future. You got this!
Article Credit to BodyShop Business.
Do you think that using absurd customer service and exceptional quality workmanship as unique selling points will justify increasing your rates? Do you think customers will pay more for absurd customer service and exceptional quality workmanship? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.