The Great Diagno$tic Giveaway
I was on the phone in my office with a vendor, placing a stock order, when out of the corner of my eye I saw my service adviser silently waving his arms like he was trying to start the Daytona 500. I wrapped up with the vendor so I could find out what was going on. “Bob”, he begins before the phone is solidly in the cradle, “Mr. Watkins does not want to pay his bill”! He says that all we did was replace a sensor and the bill is $479. All he wants to pay for is the 1 hour of diagnostic time he authorized and the new sensor. He insists on talking to you right now! This kind of thing has happened to all of us, and probably way too often. One thing to think about is why did it happen? Everyone makes mistakes from time to time, but you must consider if the problem is systemic. Is there is a problem with the way your shop typically handles the process of selling diagnostic time?
Most shops struggle to get paid properly for diagnostics. There are many reasons that diagnostics are such a challenge. The fact that this type of repair is open ended means we must think about it differently and present it to our customer in a format that ensures we get paid when everything is said and done. Develop a written policy that addresses the challenges of diagnostics for the technician and the service advisor. This is so important because diagnostics typically requires your best paid top technician using your most expensive equipment. Many shops have $20,000 or more invested in diagnostic equipment and another $2,500 + per year to keep everything updated and serviceable. This includes scanners, laptops, online services, constant training, annual subscriptions, and pass-thru devices, just to name a few. The return on this level of investment should be, and can be, excellent.
With all the expense of performing diagnostics and typically no associated parts profit, it should be sold in a way that makes sense. There is typically $.80 of parts associated with every labor dollar sold. In order to replace the missing parts profit and have clarity of expectations, I recommend developing some diagnostic packages.
· $139 – Basic diagnostic test: One system affected. The problem is constant and easily duplicated
· $229 – Advanced diagnostic test: More than one system affected. The problem is intermittent
· $289 – Extended diagnostics test: Several systems affected. Hard to duplicate the symptoms
These packages are sold as a starting point with the understanding that the customer will be updated after testing and we will re-evaluate the situation at that time. Never refer to the amount of time each package represents. Explain the process of retrieving codes, following diagnostic trouble trees, individual component testing, and electrical circuit testing. Call your customer back after the diagnostics are complete and update them on what tests were performed, the results of those tests, and what is recommended next.
The basic test is about 1 hour, the advanced test is about 1.5 hours, and the extended test is about 2 hours. The labor time information is for internal shop use and is not part of the sales presentation. The prices represent approximately the same amount of profit you would get on a regular repair that took the same amount of time, using a $90/hour labor rate and adding in the missing parts profit, usually associated with that labor. Basically 1.5 x your labor rate.
It is very important to educate your customers on a few things so that they understand the process and to make them more comfortable. Make it part of your written policy to cover the following ideas. The big box parts store down the street does not diagnose anything, they simply retrieve trouble codes. Retrieving trouble codes is just the beginning of the professional diagnostic process. The service advisor should ask as many open ended questions as necessary to get a great problem statement. This is the key to a profitable and efficient diagnostic process. Finally, train your service advisor to use words and phrases that add quality and value in the customer’s mind and avoid ones that diminish the process.
Use – We will perform a series of OEM prescribed test procedures. Diagnostics save money by pin-pointing the exact problem. This ensures only needed parts and repairs are done.
Avoid – We will just pull codes, this gets expensive, and we will just take a look at it.
Perception is always reality in this business. But it is especially true in the case of diagnostics. Given the investment in equipment and talent, diagnostics should be more profitable than other repairs. Properly managed, customers will get great value from your diagnostic service and your shop will benefit as well.
Too many owners and managers automatically discount invoices for certain customers. I have seen this done for friends, golf buddies, their neighbors, and a host of other acquaintances. Sometimes this is done at the customer’s urging and I have also seen it done arbitrarily. Two things happen in either case. One is, you have undermined the value of your services. Two, you have taught your customer that the price of your service is only the starting point of negotiation. These things damage your business immediately and in the future. There is no other business that I know of where customers think they can negotiate the price after services are performed. You may think you are creating some kind of goodwill down the road, but I assure you that this is not the case. You are creating many problems today and in the future.
There are several things you can do to put an end to this cycle of discounting, or any request for a price concession.
Explain that when the vehicle was dropped off, we got a complete problem statement about your concern.
Recap with the customer what the cause of the problem was and what we recommended as the repair.
Review the authorization amount, how and when the amount was authorized.
Cover the fact that the vehicle was ready on or before the agreed time, and it was done at or under the estimate.
Finally, tell your customer this, “I can appreciate that you want a better price, don’t we all?” We always give our customers the best price possible. But, just like in your profession, our primary focus is always on delivering value first.
You have to develop policies and procedures that work and follow them every day. Always be fair, firm, and consistent with your staff, customers, and everyone else that you deal with throughout the day. You will add value and integrity to your business and most of all you can avoid The Great Diagnostic Give Away!