Explaining Prices To Customers Using Market Based Pricing | SDR #190

Welcome, everybody, to today's episode of the big show. The show for anybody that loves the quiet, peaceful smell of a service drive in the morning, you know, before nobody's there, before the doors open. Before that, like 10 minutes before the chaos happens. For anybody who loves that moment and cherishes it. This is for you. Now on the show today, we're going to talk about how to handle the rising prices of repairs with your customers. Right. We know inflation is creating an increase in prices. We also know that Covid supply and demand, maybe the war in Ukraine, all of it is creating issues with parts and labor, and customers are having that increase passed along to them. How do you address that with your customers? We have some good ideas for you on how to approach that. A couple of them might surprise you. Christian's going to talk about the news. And one thing I'm excited about in the news today is Ford, and I think Chevy will follow very, very quickly. Behind has got a way for you to update and restore that old junker in your garage in a really cool way.

And we're going to help Christian decide what his next vehicle is, car or truck. We're going to ask you for your input and your help. So that and much, much more coming on this edition of Service Drive Revolution.

So before we get to the news and the topic of the day, prices are rising, what to do about it, how to present it. We have some big news.

We do.

This set is coming down. We're moving.

It is time, isn't it? Time to get bigger and better.

So we originally thought in the new building that we were going to recreate this set. And then yesterday you weren't there. But we made a decision that we're not going to recreate this set.

So that would explain my sheer confusion over this conversation. Right. Because I had no knowledge about this until this very moment. So we're retiring the set.

Most of it, I think I don't like. I was asking if we can take the license plates and I'm sorry, if you're listening to this and you've never watched this on you.

We have a set.

We have a set. And you. We have this wall of license plates. It's really cool. It's a lot. We're moving a lot. We've been in this building for over 10 years. And so it's going to be painful.

That's an end of an error. A little bit, yeah.

But exciting because it's going to allow us to do more workshops, our leadership training that we have coming out in a really cool, kind of interactive way. So the reason why we're buying this building is so we can create our own little playground.

Yeah. And it's going to capture the imagination of everyone that comes into it. It's like a mini Disneyland for grownups.

Really?

I think so, yeah. The million dollar library is one of my favorite ideas.

You don't think it's more like an escape room?

Huh.

Ford has announced that they have the illuminator crate motors back. And this is super cool. So essentially, Ford has like a performance parts branch of their company, and they have made a retrofit electric motor that can go into like these classic trucks. So those of you that can't see my piece of paper, which is everyone but Chris, I've got a picture of a 1979, 78 F100, which looks like the 1972. Yeah. Or the 73, 74, 75, 76 or 77.

Such a cool truck, though.

It's retrofitted with an electric motor in it. And that's super cool. Just giving you an idea. This particular truck got an electric motor put in it that has 480 horsepower as opposed to the original 78F100 that had 17 horsepower. And that was if you actually did the Fred Flintstone move your feet thing. But this is really cool that you can buy.

The secondary market's going to go up for these sort of vehicles, retrofitting and buy that in a second. Like, I love that old Ford pickup. Like, my grandpa had that and I was bummed when he passed away. One of my cousins got it, but I thought about stepping in and trying to buy it because it was the coolest thing.

Yeah.

You two gas tanks. Oh, that's right.

With the two doors. You're right. Oh, that's great. I love it. So just guessing, how much do you.

Think that electric engine is installed or the part?

Just the part.

I know.

Okay. 4,100 bucks. Yeah, I think that's really, really cool now, I'm sure.

So you probably have to do something with batteries, right? You gotta install a battery in there, I would guess. And the range probably isn't very far, but for around the city, for me, it'd be great.

So fun. Yeah. So they have the. And essentially they just have a kit. You gotta get a traction inverter, a battery pack control system, like an ECM of sorts to complete the swap. But it's all really, really doable. Looking for the people that wanna spend the weekend in the garage. I think this is fascinating stuff that they found a market for this.

If anybody listening to this has an older 1970, preferably 72 or 73. Cause that's when I was born.

Ford that you want to do that on, I'm a customer.

So Ford Model E is the name of the new branch of Ford that will only produce electric cars. So I'm sure that a lot of you have seen the lightning and then they've got that Mustang Mach E that is like a little suv. It looks like the Tesla Model X. All that stuff's going to come under one badge of the Ford Model E. And, and then the original ICE engines are gonna be under the Ford blue.

So essentially combustion engines are gonna be under blue.

That's right. So very interesting stuff. And just remembering that the Ford Model E company does not have franchise agreements with any dealers in any state. Yeah.

So we've said this, and I've been saying this for a long, long time and it's been unpopular, but I actually sat in a meeting.

And they were talking about how the, you know, the third, fourth generation dealers are impossible to deal with. They won't train their people, they won't invest, etc. Etc. And this is either going to be huge leverage to get dealers to do what they want them to do or it's going to be their way to go to start going direct to consumer. Even though they're saying they're not it. Every time we get a little step closer.

Yeah, it seems that way. So and what department does that make more focus on then service?

Because the one thing they can go direct to consumer but they, they're not going to be able to roll out service centers and staff them. That's just not going to happen. And so they're going to need, they're going to need service.

That's right.

They're going to break. They're going to need warranty.

Yeah, that's, it's the one zone where I feel like the manufacturer needs the dealer more than the dealer needs the manufacturer. And that particular part is the, is the fixing of the vehicles.

Yeah. Okay. So we, we're under massive inflation. Prices are going up. So let's just kind of go through the range of what we have seen in the, in the field lately. Because one that surprised you was when you were in, was it North Dakota?

North Dakota.

And what was the labor rate that you saw in North Dakota?

So Diesel labor rate. $240 an hour. Yeah.

So you might, you might see 240 in like San Francisco. Bigger, bigger markets. But for it to be in North Dakota it's, that's pretty high. And we're seeing that trend across the country that, you know, in the middle part of America.

It, it's getting a little, a little high. It seems like the, the labor, it's. And I don't, I don't know that we've found the ceiling of where it is, but it definitely is increasing the price of repairs, maintenance services, that sort of thing. So kind of, we've had this question a couple times and we kind of wanted to talk about this in the sense of, you know, what, what is the best approach for this when it comes to presenting it to consumers and talking about it. Right. So I think like, with, with anything.

The, the first thing that you want to think about when you're presenting prices is you have to detach yourself in your feelings and your beliefs from the fact that you're providing a service and you're not selling a price, you're selling a solution. And you've got to put the focus on the solution. And so we talk about this in our, in our advisor training, and it's something that we've known for a long time, and it's almost scientific in a sense that if you present things in the, in the form of it being a solution.

Versus presenting them as an item and a price. Right. So let's say, for example, I, I tell a customer about their brakes, I present what the brakes are at, why they need them, how soon they need them, that sort of thing.

I'm going to be more apt to be able to convince the customer to do that with us. Then if I come out and I say, you need breaks, it's $350.

Right.

And so detaching the actual solution from the price, in a sense. And in our advisor training, we have different techniques for this. There's one main technique that we teach, which is the table of contents on kind of how, how to present that. But understanding that as an advisor or anybody in our industry, when you're presenting things, your context, if you believe that 354 breaks is too much or you believe prices are going up too fast, you're going to project that on the customer and you're going to make it all about the price. So the first thing you have to understand is we're not in the business of price. We're exchanging a solution for a problem for money. Right? So all business out there is about solving a problem for a customer. Restaurants, right. So restaurant down the street here is solving the problem for me that I don't have a farm. And I. I can't grow my own food, and I don't have a herd of cattle. So when I'm hungry, I can go to a restaurant and get a cheeseburger without having a farm. A bunch of farm hands, I don't know, 100 acres, whatever it is. Right. So all businesses is about solving a problem for a consumer in exchange for money.

Yeah.

That's what business is, in a sense. So in service, we're solving a couple different problems for customers. One is we're helping them maintain their vehicles, and we're also helping them prevent unforeseen surprises or breakdowns, in a sense. And also, you could say we're helping them protect their investment.

But the biggest one really is unforeseen surprises of mind. Nobody wants to go out and their vehicle doesn't start. Nobody wants to be driving somewhere and it breaks that, you know, that isn't. That's a nightmare for everybody, including us. We don't want that to happen. Right. So we're in the business of protecting their investment and keeping. Keeping their vehicles safe and dependable in that sense. So don't lose sight of. There's a cost to that, and the cost of that might be going up, but still, the most important part of what we're doing is that we're fixing or maintaining their vehicles in the spirit of preventing something.

Right.

The best customers are the easiest ones to sell, and preventative maintenance are the ones that came in on a tow truck. Why is that? Because they just had a surprise, and they will do anything and pay anything to avoid having another surprise.

I call that the captive audience. Yeah.

So just, you know, think about that. We've all experienced that, but it's the point of their highest need. And so what we're trying to convey is that this is a solution, and then the price is secondary. Because really, if you present the solution in. In a, you know, tactful way, the price is secondary. Like if you. If you said, you know, I can prevent your. Your girlfriend from breaking down in the middle of a bad neighborhood on her way back from Orange county from work, what is that worth?

There's almost no dollar amount on it. Right. It's easy.

And so now we're not trying to scare customers. We're not saying, like, oh, tell customers, like, you're going to slide into a school bus and kill a bunch of little kids. That's not what we're saying at all. We're just saying your internal conversation, the conversation you're having with yourself when you're Presenting needs to be that I'm solving a problem or preventing a problem, not, oh my God, these prices are high.

Yeah.

Because you're going to, you're going to project that context onto the customer. And most of the time that's where advisors struggle the most, is they can't see through their own wallet. Right. We used to do that in advisor training. We'd have them hold their wallet or their purse up to their head and be like, you can't see through your own wallet because you're losing perspective. Because, you know, let's say you're an advisor coming up and you're, you're not, you're not driving the cars that you're servicing. You don't have the income of the customers that you're servicing.

Right.

So let's, let's say you're coming up and you're working in a BMW store. I mean, all the brands have high end cars pretty much. But you can't imagine spending $140,000 on a car, let alone the fact that, you know every time it breaks after it's out on warranty is going to be 2,500 bucks. You just can't even imagine. Yeah, you just can't even imagine that. So you have to separate yourself from the dollar amount and really think about the solution more than anything else. Do you, do you agree with that?

All of that? I think that there's a couple of things and it's been interesting because I've had a couple of things happen to me while, while driving lately. Like I was out with my girlfriend the other day and we stopped by this gas station and I got robbed. It was unbelievable. So I called the police. Police came down and they're like, what happened? Like, I lost all my money. And they're like, do you have any idea who it was? I'm like, yeah, it was pump number nine.

I thought you were going to say Biden.

But at any rate, it's so funny even just kind of listening to you say that. When I Learned about the $240, even I passed my own judgment onto it. But what's for us to say what's expensive and what's not the labor in, in North Dakota, Like, I don't even know why I had such a response to it. Because when you think about it, so in that particular market, it's heavy in the oil industry and think about what the cost is of a truck being down. Well, maybe it's worth 240. And then more like, who am I to say what it is, just like an advisor.

I've said this for the longest time, is that it's never the customer that has the biggest issue with prices.

Well, is it, Isn't it funny to you? Like, on a side note. Sorry, but side note, but we were talking about this yesterday. We always teach service managers to work from what their cost of doing business is up. Right? So let's figure out what does it cost us to sell an hour of labor and then what should our effective labor be on that hour? In. In a sense. And then what will happen is the market will follow you. So we've, I mean, I've been doing this for over 20 years where, you know, maybe everybody in the market's at 90 bucks, but I got to go to 100 to, to make the department profitable and do what we need to do. I go to 100. Everybody in the market goes to 100. Sometimes they go past, you know, and so it's funny, when we hear that number in North Dakota, we're doing the thing that we've always been fighting, where we're judging. Yeah, we're. We are. We are us, basically. Right. So it's so funny. Okay, so do you agree with my first point? That context is probably number one in this situation, the advisor's context when they're addressing it. Then the next thing that I would say, and this is really, really easy, is let's say a customer is mentioning, complaining about bringing up the fact that the price is high.

I would just very simply say, yeah, inflation is crazy. Prices are up for everything.

And they, in a light bulb goes off in their head.

Yeah, because we're not any different. And you just associate that prices are up everywhere with. Why wouldn't they be up with us?

Like.

And then I would talk about, yeah, it's, you know, it's impossible now to find a plumber. It's impossible to find welders, Contractors and technicians are really hard to find. And shine the light on the fact that the technicians are the ones solving the customer's problem. And so I did this when I was an advisor, just when I was 19 or 20. I would talk about the technicians a lot with the customers. I would say, well, I'm going to, you know, I'm going to. I want to give this to a specific tech or, you know, I, I would say this a lot. I would say, I don't want to. I don't want to rush the technician.

Oh, that's a great one.

Because then the customer, like all of a sudden has to stop and think for a second like, oh, yeah, I don't want him rushing either. Like, I want them to do a good job. And you associate taking your time and being methodical and fixing something with quality. Right. So customers are all like, I need it back by to whatever it is. And I mean, I learned that out of trying to manage an impossible situation with a moron dispatcher with an open drive where, you know, we would bring in more cars than we could ever get done. By 2 o', clock, we were calling.

Customers, telling them, I know you made an appointment two weeks ago, but we can't get it in. So, you know, I, out of, you know, survival, I had to come up with these sort of things to, to say. But they're very effective because it makes the customer stop and think. So when you bring up the fact that, you know, it's harder and harder to find good quality technicians, the customer associates quality with the reliability subconsciously of their vehicle. Right. You're in, you know, phrasing things that way is going to do a lot of work behind the scenes in the customer's mind that you're, you know, you're planting seeds that everybody agrees with. Customers aren't going to want technicians to be in a hurry. They're not going to want technicians that aren't good working on their vehicle. Right. So you're just using that association to your advantage. So disassociating kind of from it and talking about, well, yeah, prices are up everywhere, inflation is crazy. We don't know where the ceiling is or when this is going to stop. But our industry is the same as plumbers, welders, construction workers. I mean, think about, for our new building that we're moving into.

We'Ve tried to have contractors like, bid on what, you know, some, some things that we would like to do and they're not even available. They're booked out a year, like not.

Even to do an estimate.

Yeah, they don't even want to do an estimate because they just don't have time, they don't care and they don't, they don't even really want the work. In a lot of situations they're like, well, the job's too small because they have so much demand. They're, you know, they're just doing bigger jobs. So everybody understands that. And so then the, probably the last thing there that, that you want to, you want to follow up with is just being quiet and listening and empathy. That's it. Like once you kind of say that, like, yeah, it's harder and harder we don't know where the ceiling is, but, you know, we're. We're focused on quality and try, you know, trying to keep a consistent experience for, for our customers.

You.

And then shut up.

Yeah, the shut up is a really important part of it.

Don't. Don't talk yourself out of what you did. That's one thing that a lot of advisors do on price or anything is they talk them. They get nervous and they can't shut up, and they talk themselves out of whatever great thing they just did.

I saw that happen probably more on the variable side than the fixed side. I would be sitting next to a salesperson that essentially they had a deal and all they had to do is just shut up. But they'd hesitate because the customer would look at the numbers, turn the paper a little bit, and then as soon as the paper turned, they started talking. And it was so interesting.

Like when I've role played with service advisors doing table of contents, that I make them call real customers in front of me. They get to the end in that part where we teach them to shut up, and they keep talking. It happens all the time. And then they'll say when they get off the phone that they were nervous because I was there. And it's like, well, if you can't do it in front of me, you probably want to practice more because I'm a pretty nice guy.

The other thing that I was thinking about with the, with the pricing thing is one, I would say that in general, I've never seen customers more understanding of price increases.

Yeah. It's like everybody's accepting it. I think, once again, I'd go back to my first point is that's in our head. Yeah, we're saying that it's a thing, but customers really aren't complaining that much about it.

They're like, oh, yeah, everything's doubled.

Yep.

So they, they would never assume that the prices would be what they were in 2019. So that's super interesting. And I also think that there's something to the service industry in general. You guys have to understand what's happening to the marketplace with pricing and everything like that. Like, you're gonna gain customers that, you know, let's say that somebody would be in the market for a new car, and then they go in and they see that the car is somebody like you. Yeah. So, I mean, yeah, I'm a perfect example of that.

Because you're in the market for a new car.

Because I'm in the market for a new car, but I'm not gonna pay over sticker price.

I can't tell everybody what happened with that car. Car you wanted. And then what I said.

So apparently the car that I really, really like.

Which was what?

Porsche Macan. Yeah.

And what did I say?

That it is a predominantly female driven vehicle. Yeah. And so I've seen seven.

And what happened?

Well, I've seen 722 Porsche Macans and all. 720.

Weren't we just driving the other day and you were like, there's one. And then I go, I bet you it's a. It's a female.

Well, my favorite was we were on the call with the Porsche service manager and you asked and she's like, oh yeah, they're all female.

Oh yeah, you're right. From checkered flight. Yeah, that's funny. But so then what's the front runner right now?

So really, if I had my druthers. The front runner. Two. I'll give you two. A5 convertible or a C class convertible.

A5. Still kind of. I don't understand why you like these little cars.

I don't think I like. I've never liked the big boats.

You said a C class convertible. Yeah. And the BMW isn't in there.

I've had a BMW before. I just don't know. I don't like them as much as the other cars. I appreciate.

I'll tell you when you get into the convertible thing, it's hard because they're all so small. Like the back seats are worthless on all of them. Nobody really makes a good full size convertible.

No, I was thinking that you'd probably on the Mercedes side, maybe an E class might have a little bit bigger backseat, but I've never thought about it.

I think if you're in that price range, why don't you just get the Corvette? It's the same price.

Yeah. I mean it's a two seater, I guess either way, right?

Yeah, those back seats are worthless either way.

Taking suggestions on cars, by the way.

Yeah, please. In the comments on YouTube, please suggest a car for hilarious.

So we totally went off the reservation there. But my point was, is that I on the service side because of all this pricing stuff is you're going to have people that were going to get cars and not buy them and then they're gonna come in and it almost doesn't matter. They'll fix their car instead of buying a new one. And at that point does the price really matter? Cause they're thinking in their head, well, it's cheaper than spending 60 grand on a new car. So you've already got the prices and the thing. And then I also think that because people are buying cars at record prices on the new and the used side is. I do believe that we will. We will be having a society that's got a ton of negative equity, which means they'll be holding onto their cars out of requirement, not necessarily just out of want. So there's gonna be a lot of people coming in for service and repairs that weren't before. Yeah.

Cause they're buried in cars. That's the problem with the prices.

It's really tough.

Good. Good stuff. So just kind of to recap. First thing is your context. Don't create a problem that isn't there by focusing too much on price. Understand that we're in the business of solving problems for customers, and that's what they're paying us for. And, you know, in a sense, the more you pay, the better the quality. That's how it should. That's how it should be. And. And then disassociate yourself from it. If it's brought up like, yeah, it's up everywhere. It's crazy. It's nuts. Right? And then shut up and have empathy and let the customer talk. And then do your job. Like, advise them on what's important and what is it, and, you know, treat them like their family. Like, how would you tell your mom or sister or aunt or whoever, like, what they should do and guide them, you know, be. Be their. Their friend in this industry. That's. That's the key more than anything else. So great stuff. Thanks, you guys, for tuning in, and we will see you next time on Service Drive Revolution. Thanks so much for watching this episode of Service Job Revolution. We're uploading new stuff every day, so make sure you subscribe and click the bell icon so you don't miss out. If you have a question you'd like us to answer on the show, call 8333 Ask SDR and we'll answer your question on the show. That's 8333 Ask SDR. For special deals on our books and training, head over to offers.chriscollinsinc.com now that's offers dot. Chris Collins, Inc. I'm Chris Collins, and I'll see you in the next video.