Most dealerships use some type of matrix grid in the parts department because it’s needed to maintain gross profit percentages that are being lowered by selling maintenance parts at the discounts needed to stay competitive.
We have the same situation in the service department, although some service managers are fearful of using a matrix grid to offset the discounted labor for their maintenance operations.
This fear is mostly due to the manager and staff not understanding how a proper grid is constructed and implemented.
All jobs must have total prices quoted, with the detail broken down only if requested. The service advisors need to quote the needed repairs by the job, not breaking down parts, labor, and times. Customers do not care what we are paying the technicians–only what will be done, when it will be completed, what their total price will be.
Mystery shop your service department and ask what the labor rate is. The most common answer is whatever the charge is for one hour of repair. Of course, the correct answer is that we have a variable rate dependent on the operation being performed.
Is your effective rate the same as your repair rate? Of course not. Maintenance operations are almost always performed at a lower rate to stay competitive in the market.
One of the ways to offset these maintenance discounts is through the use of a service pricing grid.
There are many options available.
1. Matrix (Standard) Grid
2. Bell Curve Grid
3. 25 Hour Grid
4. Rollover Grid
5. 88 and 95 Grids
6. Flat Line Grid
7. Flat Line Step Grid
Grids may be constructed to meet any and all the dealer’s needs.
As with any process put in place we must monitor the staff’s adherence to the our pricing policies.
Properly constructed grids are a great tool to increase the effective labor rate, allowing us to be aggressive in our maintenance pricing while still holding the needed gross profit.
Many dealer computer systems will support grids being entered into the system so that they calculate automatically.
Is it right to charge a little more for the difficult repairs that we spent lots of money on paying for training and specialized equipment? Of course it is.
Many dealers now use several different grids for cars and light trucks, medium duty trucks and even one for diesels, all at different rates and curves.
As always, the Advisors must be trained in proper grid usage (only on repairs) and the proper presentation if asked what the labor rate is.
The manager must monitor the Advisors’ compliance with the dealer’s pricing policy on a daily basis.
When a grid is properly and consistently used, it will have the effect of increasing your effective labor rate. The amount of increase will depend on the dealer’s maintenance/repair mix. This may be monitored by performing repair order surveys.
The dealer should have a written pricing policy in effect outlining grid usage maintenance vs. repair pricing, different pricing for trucks or diesels and outlining the rules for discounting repairs.
A pricing grid must be developed that meets the needs of the individual market for the location. The pricing grid can be established in a combination of styles and formats. With all of the different types, styles, or formats of application, there is a pricing grid that will fit each specific need or market.
Careful consideration during the development of the pricing structure should ensure customer-sensitive pricing that remains a mathematically viable effective rate to operate the business with a desired net profit.
It’s all in the proper construction of the grid and the training of the staff on its usage and, of course, monitoring the advisors’ adherence to the pricing policies set by the management staff.
Let’s increase our effective labor rate by using a grid to help offset the lower maintenance pricing, just like we have done for years in the parts department.
Grids just make sense in today’s competitive market environment.