Price Negotiations

I think this is a case of understanding your market.  If this is the type of customer you have and know this is their normal cultural behavior then you have to embrace it if you want to have them as customers.  If you were operating a grocery store, would you not stock items that your customers wanted from their culture or would you make them buy what you wanted to sell?  Let's not put them down or call names or demean them, not that anyone has so far, but if this is the way your customers have grown up interacting with merchants then perhaps this is the way you will have to do business with them. 

I am hesitant to "jack up the price" and then discount it less than the increase because this feels dishonest to me.  The “handling fee” is just a polite way of labeling overcharging the customer.

 I would be uncomfortable with negotiating individually and granting different amounts.  If Rakesh gets a brake job and you discount him 10% and then Anoop gets a similar brake job and you discount him 18% and they talk, do you think you will be the good guy?  Will Rakesh regard Anoop as the better negotiator and think, “Oh, well, I’ll have to try harder next time?”  I see your four options and the disparate application two ways,

1. You are being flexible and using whichever "tool" is right for the job.  But who is the arbiter of which is the “right tool,” and when?

or

2. You don't have any guidelines and your front office staff has little direction or guidance which can make the situation worse.  Even if are the owner and the front office staff, you still have to have rules for you to have to follow.  Otherwise it’s just chaos.

The way I would handle this is to determine what the customer demographic is.  If your customer base is predominantly from India then perhaps just raise your parts markup and labor rate and then "negotiate" down from there.  You can have a target range that works for your customers, say 10-15%.  If you start at 10% and Nikita balks you can be the “good guy” and offer her 15%.

 Then the question comes in, what do you charge your non-Indian customers, the same higher rate?  Do you “automatically” give them a discount to return them to the prior pricing level?  Where I see this as fraught, not just wrong, but WRONG is that you treat different customers differently for no other reason than their ethnicity.  I understand that you are only reacting to their cultural ideas and behaviors so that is something that you will have to reconcile yourself.  But I think, if this is the way your customer base is and no amount of “standing firm” will change that, so then you will have to decide what rules you are going to implement, stand by them hard and explain them to your front office staff.  Do not discuss your negotiating with other customers, that helps sow division, but establish a framework and guidelines and stick to them.

 I have a customer who always wants to dicker.  Just one, but I created a customer profile in my shop management program and apply it to him.  It has a higher labor rate and that gives me room to “negotiate” with him and still keep my margins.  I watch carefully and make sure he isn’t overpaying too much.  What I mean by too much is more than a few dollars.  He always wants to knock the price down to a “round number.”  Like an estimate that’s $435, “We can do that for $400, right?”  Or a $289 job, “That’s $250, right?”  Well, under normal pricing that $435 job would be around $395-$410, so sure.  That $289 would be say, $265-$280 so I will tell him no, I’ll do it for $275 or $270, depending.  Sometimes the “negotiated” price is a couple bucks more, sometimes it’s $5-$6 less.  But he’s a good customer otherwise so I’m happy.  He’s happy because he thinks he’s getting a deal.  So what if he pays $650 instead of $653.37 like a “normal” customer would?  Same with your customers.  Determine what they ultimately want in pricing, develop hard and fast guidelines and stick to them.  And of course, do all of your negotiating like you are now, in private away from other customers.  You will avoid resentment that way.  Of course you might have to evolve if your first set of guidelines aren't working.  Maybe instead of saying you'd give them 10% you tell them a dollar figure that is basically 10% off.  Like the undiscovered price is $387.51 and you offer them $350.  They won't see the 10% and try to get a higher discount %, they will see almost $40 off and see the deal.  In any regard, I would know the numbers before you start your negotiations, know what you have to charge to make your margins, know 10%, 15% or whatever your numbers are.  They will feel good, they negotiated, you will know you are still making your margins and everyone will be happy.  Maybe, maybe not.  Good luck, I really would not want to be in your shoes.

Thank you for the feedback.  We're largely on the same page.  What got me worried about this initially is that we had someone that we expected to negotiate and he failed to play his part correctly.  That left him paying too much.  I didn't have a pre-made plan for this scenario.  Next time, we might find better parts pricing at a different supplier and pass the savings on to him at checkout.    Sometimes, for fun and with the right person, we negotiate to a number that they agree on, let's say $800 and end with "OK, $795 for you", but this is dicey as it could restart the negotiation.  But if it works, they feel even better and we're all very happy!  

Unfortunately, the only way I see to handle negotiation is thru cultural screening practices.  Most other folks don't negotiate and we don't need the dance to be complicated for the majority.   But if non-negotiating folks are considering a big job, then we'll look for ways to help them commit to the work, such as if you do all of this today, we'll round it down to X.   While we are doing this, I don't think it is WRONG as our goal is to charge them equally.   But negotiations are messy, so there's a good chance that they end up paying more.   We need our bottom offer to be our standard price or more.

The hard part in this whole thing is discerning the "consumers" from the customers.   I have no interest in being the lowest price merchant and let these folks leave.   Conversely, you will be treated fairly, charged fairly and hopefully leave happy.  There are crooks only a few miles away from me that will gladly start off for less.   If negotiating captures a customer, good.  If it captures a problem consumer....  Mr. Mackey says "That's baaaddd".

1 hour ago, bantar said:

The hard part in this whole thing is discerning the "consumers" from the customers. 

That's interesting that you discern that there is a difference between the two.  I have always thought that there are 3 distinct types of people that we deal with in business, consumers, customers and clients.  Yeah, yeah, they are all nice and some are warm and fuzzy terms but I define them as follows

• Consumer - In auto repair the consumer is the person with the broken car.  They will never see the value in what we do or think that our prices are fair.  They barely even trust us, if they do at all.  Remember, they have a broken car and it has to be fixed.  They think that it could have been fixed for less money and less work that what we say.  They pay what they have to, nothing more and always want the price to be less but not the quality they demand.  They are called the consumer because they will consume you if you let them.  They will consume your time, your talent, your goodwill and your coffee.  They will never truly be happy and never be loyal, if a cheaper alternative comes along, they will go there.  If you did something wrong or made a mistake, they will tell everyone.  If you did everything right, they will tell no one.
• Customer - Our customers are like consumers, they have a broken car and need it fixed.  But where they differ is they are willing to pay what they have to in order to have their car fixed.  They are happy that the money they spent got them a car that is safe and reliable again.  They will probably let you correct any mistake that was made and give you credit for "making it right."  They likely won't bad mouth you for the mistake.  They are the majority of the people who buy our services.  They have a need, we serve that need, they are willing to pay us a fair price, they believe they got a good value for that price, but that's as far as our relationship with the customer will ever go.  Their trust, if it exists at all is very tenuous and fleeting.  Not low enough to go away based on that alone but not enough to be steadfastly loyal.  They will come back if it's convenient and we did nothing wrong. But if they think they know what they need and a flashy coupon or jazzy radio ad pops up for another shop, they are tempted to try the other shop.
• Client - Or also Advocate.  This is the customer who knows you, likes you, trusts you.  If you make a mistake the client believes it was an accident and will let you make it right and still extol your virtues to anyone who will listen.  The client is the one who drops off the keys and says, "Just fix it."  And you know you can do whatever you need to do and they will pay the bill without question.  The Client, or "Advocate" will tell others and sometimes even cajole friends and co-workers to get them to use you because the client believes that you are the most honest and trustworthy shop in town and that none other should exist.  They don't care if you aren't the cheapest because they know that value is not a cheap price.  It is peace of mind, reliability, honesty and yes a properly repaired automobile.  They are happy to pay your prices because they believe that they got more than they paid for, peace of mind.  This is probably the rarest person we serve but the one who makes it all worthwhile.  And a little scared sometimes.  Because we know the value of that trust and we are terrified of doing something wrong and losing it.  We are afraid of disappointing this person more than any other.  They know that, that is why they trust us. 

At least that is how I categorize and clumsily define those who utilize our services.  Consumers you treat right because that's the proper and ethical thing to do.  Customers you take care of because they deserve it and appreciate what you did for them.  Clients you treasure and pamper with perks and "little things" like that license plate bulb that was out but you replaced it for free. 

On 3/25/2018 at 10:50 AM, xrac said:

That is the way to do it and be firm in dealing with them. They will respect you and be happy. 

I am the same way , I am very firm on pricing . I may however if badgered enough drop say 5% off of the parts mark up, but i am a firm believer in standing firm on the price. The reason being I believe in what I am selling you . You get what you pay for if you give in on pricing, in my mind it shows a weakness in what you think of your business , standing firm shows you believe in what you are selling.. When it all boils down most good people are looking for HONESTY even if they have to pay a few bucks more for it.. 

I was relaying what one of my old bosses did. I set a price and that is the best price we can do . Sorry but do not negotiate a price down. If I could I would have done a better price the first time. This is why I do not price match. If you can match a lower price or negotiate down you lied the first time about your best price. Just my feeling on the subject. We always put honesty first. Just my ethics. 

I have found it isn’t the amount of the discount that matters to hagglers as long as it’s something. Taking $20 off a $500 dollar bill is enough to make them smile in most cases. 

An interesting topic for sure. I used to work in Information Technology and the negotiations with people from India could be exhausting. With some I would learn to start above where we needed to be to get there and with others they'd expect something beyond what was even possible. On busy days I'd tell someone 'I get you want the price you want for your services but this is what the customer can pay. Do you want to accept this project work or wait for something better? Usually, they'd call back or find a way to make it work yet would continually ask if we could give them more...Sames as car industry - certain people enjoy the negotiation. I typically work in blanket discounts for nearly everyone so that when they ask I tell them I've already accounted for that discount of $50, see? and show them the invoice. With others who bring in online coupons after the sale has been agreed upon we will make it work for them. Rarely do we have an issue. 

I managed car dealerships for 30 years before opening my repair shop, and dealt with the habits of all ethnicities. The Indians were the hardest. With them it was mostly about building trust, which was very difficult. Interestingly, they would deal with an Indian salesperson very differently from a non-Indian. One thing is for sure, a good deal is totally a perception, not a reality. It does not matter what the real deal, or price comes out to, it's all about how the customer perceives it. Just like dealing with what our prices and labor rates are, the concept of fairness across the board is mostly in our heads, not our customers. We had an internal saying in the dealership sales departments that "customers who pay the most are the happiest" and that statement is 100% true. The guy who gets the lowest actual price thinks he left something on the table and the person who gets what they want at what they can afford (regardless of how "good" a deal it is) is the happiest. 

In you're situation, sounds like you have a handle on it. For the sake of your people it would most likely save time and build the trust of your repeat Indian customers if you had a consistent pricing model for those customers. Call it family plan, or preferred customer, or special customer, or something to justify a discount that you show on the RO. Then do the round off down a few bucks if they still say anything. At least you know that once you get the pricing worked out, you have very good and loyal customers who make lots of referrals.

I guess these are as much a question for shop owners on this topic:

To me, your door rate should be firm, but you have a quite a bit of flexibility on parts in both quality and in terms of the markup you are willing to take. When you are "negotiating" on price, do you negotiate on the price of the same parts etc., or offer other lower price/quality part options?

Also, if a customer is willing to pay cash or debit, would you consider a discount based on not having credit card fees (not suggesting no tax, just 2.5% or whatever off.)?

Looking forward to input!

On 4/16/2018 at 7:58 AM, Andrew Ross said:

Also, if a customer is willing to pay cash or debit, would you consider a discount based on not having credit card fees (not suggesting no tax, just 2.5% or whatever off.)

In many states, for me Illinois, this is illegal. You can not give a discount for cash instead of credit.

I would double check that. I believe that the confusion is it used to be true that you couldn't charge more for credit card use, so giving a discount for cash would seem to do exactly that. But at that time it was how it was presented. If your "stated" price was a cash discount price and you charged more for credit cards, that indeed was illegal. But if your stated price was for any type payment you could indeed discount it for cash. However, the laws have pretty much changed  so that you can now have a stated price and charge more for credit card use so that is a mute point. I don't believe cash discounts are illegal anywhere. And if they were, how could they prove what the discount is for?