Now that you have calculated accurate and fair service rates, how do you convince Mrs. Customer?
By Dick Glass, CET
Don't Defend Unfair Pricing
If your service rates ARE unfair, you should feel guilty as you collect for them.
For example, suppose you made out a bill for six or seven expensive components, a major diagnosis charge, parts installation fees, and other charges totaling $225. But, in truth you had installed nothing but one 27-cent AC plug! You didn't even remove the back to check for intermittent joints, weak tubes, or a heeded vertical adjustment.
Because parts were charged for, but not installed, and the customer was deceived into believing work had been done, when it was not, the repair bill was "unfair." Also, you committed several crimes, such as theft, deception, and fraud. You are guilty, and should feel guilty.
What's more, your guilt will reflect on the entire servicing fraternity.
Well, most of us agree that such a repair and pricing would be totally and completely unfair. Next, we'll go to the other extreme.
Super-Fair Pricing
In contrast to the bad example, imagine you repaired one routine defect, inspected the chassis for borderline problems, touched-up a couple of adjustments, and air-checked for two hours before charging the customer your usual "minor" labor fee. Let's say the total bill was between $20 and $40, although we all know there is no agreement about a specific charge.
If that repair charge has been calculated to reflect your proper costs of performing the service (as all of your charges should be), is the total charge fair? Should you feel guilty when presenting the bill? Almost everyone answers "Yes" to the first and "No" to the second question. You NEVER have reason to feel guilty about charging a fair price for good service. Neither should you feel guilty about raising your service rates, if your efficiency is average or better, and those higher prices are essential for permitting you to provide the good-quality service your customers demand.
(Editor's Note: Dick Glass operates a consulting and accounting service for electronic businesses, and this gives him access to actual first-hand information about typical prices, profits, and costs of doing business. He reports that probably thousands of you are "giving away" your labor because you are afraid of customer displeasure if you increase your rates to a profitable level. If this is true of you and your business, we strongly recommend that you study again the previous eight installments, and then take the actions needed for your financial improvement.)
Figure 1--Small, cheap, and simple are words that describe these "feed-store" service
forms. However, such inexpensive forms invite doubt and questions about
your pricing. In the long view, they can cost much more than the detailed
forms.
Ordeal of Presenting the Bill
Even when they KNOW their charges are perfectly fair, it's true that many (perhaps most) service technicians and dealers feel anxiety about presenting each bill. They know the customer will not (and cannot) appreciate the technical expertise required to overcome the problems. Also, they suspect each customer is well-acquainted with the many expose's and accusations leveled in our direction. In fact, most customers seem to believe every service job is another rip-off, such as the bad example described at the beginning.
Yes, the task of collecting fair service charges often is a distasteful one!
Heart Of The Problem
If you have done everything recommended in this series, including the calculation of service rates based on actual costs plus a reasonable profit, you should know without any question that your rates are fair. Therefore, your most imperative need is to convince the set-owning customers that your rates ARE fair.
Unfortunately, this important area has been ignored by our industry.
We desperately need methods and aids to help with this acute problem. The following 6-step plan will detail some valuable methods.
Create Better Attitude and Image
Preventing customer complaints about pricing involves many items, such as: belief by your entire organization that the rates ARE fair; the professional appearance of your employees, shop, and office; showing customers some of the electronic complexities; effective estimating practices, detailed and attractive invoices; an "outside authority" pricing system; well-lettered pricing signs in the shop; and a positive attitude reflected by everyone on your staff.
Step 1--Calculate fair rates Use the methods given in previous articles to calculate the return you need on the money and goods invested in the business, and to calculate the salary you and your employees should have. Don't use prices from any outside source as a guide. If you do, you'll destroy the immense value of KNOWING with out any doubts or questions what prices are fair.
We can't overstate the absolute necessity of this step. Calculate your proper rates before you begin to do the other steps.
Step 2--Believe in your rates You can't believe your rates are fair unless you have calculated them. In addition, you must know that your shop is not inefficient, unlucky, or undercapitalized, and does not have excessive expenses or poorly-trained employees.
To acquire this knowledge, you must compare your operation against others in the same field. It's likely you are doing an outstanding job of managing an efficient business in an industry where that is difficult to do. One way to find out is to join one of the national service associations, talk to other shop managers, and attend several management schools.
Only after you know (both intellectually and emotionally) that your service rates are fair to both you and your customers, should you try to convince your employees of these truths.
Call a meeting (on company time) and explain the relationship be tween your prices and their wages.
If necessary, reveal the cost percentages. Prove to the employees that there is no magic way of making money; it must come from the prices charged to customers.
Remember: the attitudes of your employees will show through them to the customers. Therefore, unless both you and your employees believe in the fairness of the rates, the other aids for preventing pricing complaints can't be totally successful.
Step 3--Professional appearance Perhaps we all suffer somewhat from the delusion that the value of our technical expertise is obvious, thus entitling us to perform service work in dirty, smelly bib--overalls without any adverse effect on the amount we can collect without resentment. Not true! If you dress as a professional should; if you look like an educated person who attended a technical school; if you radiate the assurance of competence; and if you don't act sheepish about the charges, then the customers will pay your rates without question.
On the other hand, if you seem apprehensive when presenting the bill, and if your clothing appears to be from a rummage sale, it's likely your customer will not be satisfied with the price, even if it is so low that you are losing money.
You can test the value of a good appearance without much cost or trouble. Try wearing a new shirt with tie, a blazer, shined clean shoes, and the latest kind of slacks.
Make sure you have a fresh haircut and are well-groomed. Paint or clean up your truck, and make certain the signs are readable and attractive. At first, your regular customers might tease you about a possible new girl friend, but when they learn your improved professional appearance is not a one-day event, you will hear less complaining about prices.
Figure 2--The Tech Service form by Tech Spray is printed in blue and
yellow. It has many categories for analysis, adjustments, and parts
replacements that are rated in "units". The total labor is
determined by the units multiplied by the hourly rate. (Courtesy of
Tech Spray, Inc.)
Step 4--Reveal technical complexity
Customers are vaguely aware that electronic equipment is mysterious and complex, but a few unobtrusive demonstrations will prove to them that you are performing service work which few people can do.
It's not necessary to lecture in electronic slang, or to do anything obvious. Just let them see you use some of your fancy equipment, especially those devices that look as though they came out of Star Wars.
Of course, it's easier to make a home service call without taking in a tube checker, a dot-bar generator, a digital meter, or a module caddy. But, if you want to earn maximum respect for your knowledge, haul such items of equipment into each home, and operate them.
Once I knew a shop-owner/technician who usually entered homes during calls with only a universal handle and a few screwdriver/nut driver blades hidden in his hip pocket. I've often wondered what his customers thought about a technician who apparently started a service call without any tools or equipment. Of course, he had the usual equipment in the truck; but first impressions are important.
In the shop, let your customers see you from a distance as you use those mysterious space-age gadgets on their machines. After the repairs are finished, you can elevate your technical image by making a casual remark, such as, "Your flyback checked fine on the sweep-circuit tester." Or, "My video analyzer proves your TV needs a complete IF alignment." Who would question modern science or the value of equipment which provides a precise diagnosis? Contrast that customer's reaction with another who watched a "technician" use one worn-out screw driver to pound on the insides of his TV, in the midst of a cluttered bench without any visible test equipment. You can bet the second customer is going to be suspicious of ANY price he is charged!
Step 5--Invoices and pricing systems Experience indicates that about half of the nation's 50,000 service businesses could increase their dollar incomes about 20%, while reducing pricing complaints by about 50%. How? By throwing away all of their cheap unimpressive service tickets, and buying new professional invoices.
An adequate service invoice should tell the essential details of each repair, and break it down into functions. All parts used should be itemized and priced separately.
I believe that a detailed and attractive service-invoice form will be more important to you in making a profit than the repair job itself! It gives the impression of having nothing to hide, and this can ease the natural skepticism of many customers.
Examine the "feed store" billing form in Figure 1, and contrast it with the excellent forms by Tech-Spray and Sperry-Tech. We have shown as much of these forms as possible in Figures 2 and 3.
When listed on the "feed store" form, even the most complicated and expensive repair job appears to be minor (and thus overpriced).
The larger 8 1/2" by 11%" forms seem to be excessively bulky and complicated, compared to the 31/2" by 5 1/2" "feed store" type. But they are worth much more than the small amount of extra trouble and expense. First, they reduce customer complaints, because each component or each labor procedure is detailed. It's difficult to argue against detailed facts, and customers will visualize extensive ser vice operations because of the many listings. This brings the listings into balance with the reality of the work done.
Any reduction of callbacks and rework jobs from complaints helps you to make more profit with less work.
Of course, you should have your shop logo, business name, complete address, and phone number printed on the forms. This information is cheaper to add with a rubber stamp. Unfortunately, it also looks cheap.
One more thing: Don't delay in obtaining new service forms. After you are convinced that new forms would help your business, you might be tempted to wait until the old forms are used up. Don't do it! Throw out the old ones the same day the new forms are received.
Outside-authority pricing systems
Both Tech-Spray and Sperry-Tech offer excellent incremental-pricing systems that reduce com plaints by listing average times for specific service functions. You then determine the price per hour for your shop. These systems increase your customer's confidence in your charges by listing repair times according to a third person (outside authority). This minimizes any suspicions that you might be making up the times or prices from guesswork or whims.
These systems will be described later in detail.
Step 6--Price and policy signs
Take a few moments, while you are alone in your shop, and look at the signs in the reception area.
Most shops have one or more signs that list the various prices to be expected for certain common types of repair jobs. Look at these signs as though you have never seen them before.
Are they dirty, faded, or cracked from age? Are they little more than some barely-readable lists that you scribbled with a marker pen? Originally, were they professionally lettered, but have had some of the prices marked over until they now are an eyesore? If your signs are in any of these deplorable conditions, have new attractive ones made. And do it now. Customers don't want to see any evidence of price increases, even though they are painfully aware of inflation.
Also, hastily-drawn amateur signs, or professional ones with crude price changes lead the customers to think you have guessed at fair prices.
Attractive signs without changes or corrections help convince your customers that the prices were care fully selected and calculated; that they were established some time ago; that they fit a routine pattern after having been tried and proved; and therefore are not subject to question or debate.
Electronic repairs are not bought every week, and customers can't be expected to know whether they are getting a bargain, or being ripped off. But routine prices help to quiet many doubts. After all, prices that are paid routinely by many others just can't be very wrong.
Figure 3 A condensed version of the Sperry Tech pricing method is
included in the blue-and-pink service forms used by Sperry TV. Detailed
labor functions are rated in tenths of an hour, totaled at the end,
and then multiplied by the per-hour rate. (Courtesy of Sperry Tech,
Inc.)
Summary
The following is a summary of the suggestions given here for minimizing customer complaints about high prices:
Establish your service charges (after you have reduced waste and increased the efficiency) by using a system which you know is fair to you and to your customers.
Convince yourself and your employees that your prices are a bargain.
Dress as though you are a well-paid professional. Improve your truck and shop in the same way.
Reveal to your customers some of the technical space-age equipment and advanced knowledge you must have for today's service work.
Use large and detailed professional service invoices (the best you can find).
Take away most of the customer's pricing fears by having prominently-displayed attractive signs. Don't botch any price changes, but have them appear as old as the sign itself.
Display this condensed set of pricing suggestions near your desk, where you can see it every day, and remind you of actions you should take.