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Tips for Price Parts in Your Automotive Business

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Setting prices is an essential step for any new business. But in the automotive industry in particular, prices can often be difficult. Manufacturers and large companies often set prices or recommendations that small businesses can not or should not compete with. Thus, in order to determine the price of parts that will allow a small business to operate in a sustainable manner, it can be helpful to have an expert view.

Frank Leutz is the owner of Desert Car Care in Chandler, Arizona, and is the host of Wrench Nation, an upscale radio podcast. Over the years spent managing his award-winning business and interacting with other store owners, he developed a pricing strategy that allowed his business to succeed and achieve its profitability goals. Here are some tips to help you do the same.

Tips on the Pricing of Auto Parts

Consider your profitability goals

Before offering prices, it may be helpful to backtrack. Calculate your expenses and consider the amount of profits you want to make. From there, you can roughly determine the range of your profit margins so that you can support all your operations while growing your business.

Do not use manufacturer's prices only

One mistake that Leutz quite often sees is that car stores simply go with the prices recommended by the manufacturer, rather than considering their own costs, customers and goals. He says store owners should not just assume that customers will not pay higher prices and will try to compete with dealers and other auto companies for the price alone.

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Creating a price matrix

Instead of going with these recommendations, the Leutz company has a pricing matrix that the team uses for each part. The matrix generates a profit margin of between 54 and 52% for each item. Items over $ 500 have the lowest profit margin, while the cheapest products have a slightly higher margin.

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Simplify it for your team

While it may seem tempting to have different pricing models for each type of product, Leutz says that discipline with prices is very important. In addition to allowing you to stay true to your profit goals, it can also make it easier for your team to set prices.

Leutz adds, "Our matrix is ​​designed to be" put and forgotten ", so we do not really distance ourselves from it."

Creating a sustainable strategy

When you look at the profit margins of each party, you also have to consider the potential growth. Do you need to hire additional team members? Do your marketing costs increase? Consider future costs and your goals when determining the profit margin you need to include in your pricing strategy.

Help on the quality of values ​​

Another thing to consider in the long run, according to Leutz, is the hiring of quality talent for your business. If you can employ employees who specialize in the automotive industry and your customers, it can help your clients gain value for their investment and support your operations in the years to come.

Communicating Value

Rather than trying to lower your prices to please customers, Leutz recommends setting your prices so that your business can operate successfully and make a profit. Then you have to find ways to add value that really pleases customers.

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He says, "The most important thing you can do is communicate the value you offer. This could include a warranty, a long distance warranty, a tow truck service, rental car brokerage, no matter what that is. "

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Focus on convenience

One of the best things you can do to get customers to understand the value you offer when installing parts or providing other products or services is 39, draw attention to the convenience you offer. For a particular automotive business, it is convenient to install parts so that customers do not have to buy the item from a manufacturer and install it themselves. same. But you can also suggest additional options or aspects that enhance the experience and make it even easier for them.

Leutz says, "Time and again in the studies, consumers have said that they want convenience and they are willing to pay for it."

Responsibility for the supply

In addition, consumers tend to appreciate when companies take responsibility for the work that they do. If you are responsible for some sort of warranty or satisfaction guarantee, your customers may feel more comfortable that the room and service will hold and that you will take care if something goes wrong.

Luetz says, "Like any other service, there is a liability factor that gives consumers peace of mind. So part of the mark-up margin is there to pay all the profit to which the garage is entitled. "

Train your team

At the end of service, you must also make sure your team members are equipped and ready to communicate this value to incoming customers. If a customer knows that he can get a piece at a lower price elsewhere, then every customer should have your team members adequately prepared to explain why they should continue to do business with your company.

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Photo via Shutterstock

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