Low-ball pricing will put you out of business
This article is taken from a previous issue of Professional Carwashing & Detailing®. If you would like to submit an article or topic idea for the Management Tip of the Week, please e-mail Editor Kate Carr.
Bidding wars are bad for all detailers — here’s how to keep from getting dragged into one.
Bidding wars by low-balling detailers erode already slim profits in the detail business, at least on the wholesale side. Reputable, professional detailers face detailers that low-ball prices and profits almost daily.
Fortunately, most savvy customers see the red flags with low prices – a detailer with the lowest price usually provides the lowest quality, which will hurt their sales in the long run.
You can’t rely on price alone
Selling by price alone will put a detailer out of business because there is always someone who will sell cheaper.
As a rule of thumb, a detail shop should have a profit margin of at least 20 percent. That normally works out be, after all expenses, a detailer’s salary and benefits.
Smart detailers know what it costs to run their business. Sometimes you have to step back and ask yourself if you are really making money or just looking at sales volume.
Sometimes you have to put yourself over
Detailers have a wealth of experience and knowledge – sometimes built up over years in the business – but don't realize how much customers take this expertise for granted; you need to remind them.
I'm not suggesting you 'blow your horn' every day. But continue to make customers aware of the value and expertise you bring to the table.
Unfortunately there is a severe shortage of solid, trained detailers that has lead to a reputation that many detailers are not knowledgeable.
In this industry, I would estimate that 20 percent of the detail shops do 80 percent of the business. If true, then there is room for improvement for more than two-thirds of the country’s detail businesses.
Low cost vs. low quality
As is the case with all businesses, quality emits higher costs, which is what leaves some detailers in a quandary. However, the motivation to buy quality products and offer quality service must be two-fold.
First, if equipment and chemicals do their job properly, they should help complete the job in less time, resulting in a reduction in labor costs. Lowering manpower hours, in turn, lowers price. If a detailer must apply chemical to an engine three of four times to get it clean rather than once, the chemical and pressure washer are not doing the job and they are wasting their time.
Many lower-end products you buy are based on one thing – price. You should ask a customer who inquires as to whether or not you can make a product less expensive if they want price or quality.
Dealers, who typically buy more detail services, are often assumed to want the cheapest price in town. You should meet with dealers and find out what level of quality they are looking for in their detailing. Find out what their expectations are and then discuss what you can do, then talk price. If they offer to pay less than you can do the job for, explain what you can do for that price.
Don’t assume that they always want the cheapest price and the best quality, though. If you have this mindset, then you will not go into deep enough detail when in negotiations with them.
Be the best detailer you can be
Selling services that cost a lot and have a high profit margin for you will involve expenses. As a result, a successful detailer must be able to accomplish four things:
• Create interest and trust over the phone;
• Demonstrate the needs of the vehicle in person;
• Close the sale and train the customer; and
• Suggest regular maintenance detailing.
Today's detailers are making less margin of profit than ever before, so they squeeze everyone for price or buy cheaper products. In reality, this trend will probably be a way of life.
It would be great if everyone would hold out for the same standards, but in the end, one needs to go back to the customer, whether dealers or retail customers, and work on value vs. price.
Selling detailing services involves three factors:
• Time/service; and
The customer needs to pick two; they cannot have all three. If the customer is solely looking for price and not looking for good quality, then the old adage that “you get what you pay for” will hold true.
To be truly successful, a detailer needs to balance dealer pricing and service with retail pricing and service. The detailer needs to be looking at the horizon and working into the future. It is a never-ending learning curve we all need to be on. Otherwise, we will all be reduced to being a back-alley detail operation.
R.L. “Bud” Abraham is president of Detail Plus Car Appearance Systems, Portland, OR, and a 30-year member of the car-care industry. He can be contacted at firstname.lastname@example.org