In the highly competitive automotive industry, pricing plays a pivotal role in shaping customer perceptions and driving business success. Yet, many General Managers (GMs) harbor a series of misconceptions that could be hindering their Fixed Ops profitability. In this blog, we delve into these common misconceptions that GMs often grapple with, shedding light on how they impact pricing strategies and customer retention.
Misconception 1: Dealerships have Higher Prices than Aftermarket Shops
Dynatron’s Mystery Shopping insights actually reveal that aftermarket shops often charge more than dealers, especially for services like oil changes. The key is for dealers to build value with every service, as customers are more focused on convenience and recognize the value of dealership services.
General Managers need to understand who the true competition is in the market as well as what services are visible to the consumer. Most fluid and filter services are not visible to the customer because they are performed in conjunction with a repair or other mileage service and are not stand-alone services on the work orders. Due to this these important maintenance items can be priced slightly more aggressively due to not being a service trigger or highly priced shopped service by the consumer.
Misconception 2: Lowering Prices will Attract more Business
General managers often believe that maintenance offerings, mostly oil change and tire rotation, must be priced cheaper than the competitors in order to retain customers. Also, these items must be priced as such in order to prospect inactive customers. This, however, is not true.
Customers tend to be more focused on convenience and oftentimes do not expect the dealership to be the least expensive provider. Because of this, they typically will continue to do business when they identify that the dealership is not the most expensive provider. They understand the value in having their vehicle serviced by the dealership. At Dynatron, we have consistently found that retention grows when the dealership focuses on value and convenience, and maintains market average pricing.
Misconception 3: The Service Department Should make all the Pricing Adjustments
There is a common misconception regarding which department should adjust the pricing of competitive items, and most often it is labor that is discounted. Our research generally reveals that the parts department also applies a pricing strategy – in which fast-moving parts carry a margin higher than skilled repair parts – when these two department’s pricing strategies are not in sync, one might undercut the other.
How Can Dynatron Software Help?
Understanding these misconceptions is crucial for GMs to optimize Fixed Ops profitability, enhance customer retention, and ultimately succeed in a rapidly evolving market. By dispelling these misconceptions, GMs can make informed decisions that benefit both their dealership and their valued customers, ensuring long-term success.
Dynatron Software makes running your Fixed Operations easier and more profitable. Our PriceSmart solution digests DMS data making it actionable for optimizing price, maximizing ELR, and improving profitability. Typical dealers see a 5x-15x ROI generating an average of $200K in additional annualized revenue each year. For more information visit dynatronsoftware.com or call 866-888-3962.