Why you need to get emotion out of pricing

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A business that doesn’t follow a price matrix means the owner is emotionally invested in price. That means they will be more willing to give discounts — reducing their margins and reducing profit.

As inflation continues to impact everything, it’s important for shops to adjust their pricing. There are some areas that may be more flexible for higher markups than others. Take lug nuts, for example, said Cecil Bullard, chief executive officer of the Institute for Automotive Business Excellence. This can be charged at a higher rate because no customer will challenge the cost of a lug nut.

In fact, this was a point of discussion with a shop owner recently. Bullard questioned the shop owner about why they wouldn’t raise their prices for that part.

“He said, ‘I can’t mark lug nuts up to that.’ And I said, ‘Well, how many people have ever questioned [you] about what lug nuts cost?’ And after talking to him for a while, he was like, ‘You know, Cecil, that’s right.’”

Indeed, in the forthcoming Jobber News Annual Shop Survey, respondents said customers are not questioning price increases.

“Our clientele is aware of this, so not too much complaining,” one said.

“It’s almost normal now for customers [to] expect a price increase from worldly situations,” noted another.

He’s had similar discussions with other shop owners about similar types of parts. There’s no reason not to charge more for something simple to help maintain your margins.

“We all have these different, little things that we do, where we go, ‘Wow, that’s really expensive,” Bullard said during the webinar Best Advice for Running a Successful Auto Repair Business, hosted by AutoLeap.

And that’s the emotion talking. That’s why Bullard likes a price matrix so much.

“I can tell my employees, ‘Look, follow the matrix.’ And I don’t have to be emotional about it; I don’t want them to be emotional about it,” he said.

He used the example of egg prices in the U.S. They saw a significant price increase at the start of 2023. Grocery stores are charging more. Operators aren’t getting emotional about the price of eggs to the customer.

“The cost of eggs has gone up and they have to make their profit. We need to be better at that. So if my margin is lower then I didn’t charge quite as much. And so my cost goes up as a percentage of that sale,” Bullard explained.