Is Your Shop Discounting Properly?
Giving discounts properly in your auto shop is essential for attracting and retaining customers, building a positive reputation, and managing finances. Every shop management software system has a procedure to reduce customer repair order totals or, in other words, apply discounts. How we discount in those SMS systems can give us much-needed data or mask problems away from our eyes. In ATI’s portal data, tracking discount dollars is an intentional entry with much value.
Track Your Discounts in the System
We should track the dollars we take off invoices driven by marketing ploys via email, social media, or mailers. Track the marketing discounts separately to distinguish a company directive from in-house adjustments. As a side note, when extending marketing discounts through different mediums, track the return rates of the various campaigns so you know where to adjust for items with a great return on investment versus those that fall flat.
It’s vital to track discounts not tied to marketing and ensure repair orders reflect the adjustment. Let your parts matrix do its job, post billed labor dollars, and discount as you see fit — but make sure they all appear plain as day on the repair order. Why? First, the customer wants to see what was applied and how. Our value becomes immeasurable if an item is under warranty and a line item or complete invoice zeros out. Second, we need our SMS system to tell us at the end of the week how much revenue we intentionally removed. If we don’t post a warrantied part that uses our in-house matrix, and the labor has billed hours but no dollars attached, we cannot track the discounts we gave, how often we warrantied items, or if there were part or technician issues.
Research What Your Discounts Cost Over Time
Monitor the impact of discounts you give and regularly review your sales and profit reports to assess the effect of discounts on your business. Look for sales and profit margin trends and compare the results to previous periods to determine if discounts are helping or hurting your business. Based on your analysis, adjust your discount policy as needed. For example, consider tweaking eligibility criteria, changing the discount amount, or adjusting the promotion duration to improve its impact on your business.
Don’t Discount Internally
Some people make the mistake of discounting “internally” or reducing the part or labor revenue collected by modifying the sale price without applying a discount line. Unfortunately, we can’t track discounts with this method, and if we want to know how much we discounted last week, last quarter, or last year, our reports won’t be accurate. As a result, we may be unable to tell if our advisors are taking liberties they weren’t allowed to.
The invoice must reflect the discount if we have a friends and family discount program. At the end of the year, we may find that the program costs you thousands of dollars in lost revenue, giving us less money to pay the bills. By the way, if anyone understands discounting isn’t good for your business, it’s friends and family. Specific SMS systems can lock pricing to discourage you and your advisors from amending pricing internally.
This isn’t the economy to make concessions and reduce the perceived value we bring to our customers. But when we do, tracking is imperative. It may be a shock when we accurately report discounts and discover what it costs us over time. We may think, “What could we have paid for if we didn’t discount this much?” It could be employee benefits, a much-needed piece of equipment, or the top trim level on the RV we wanted. So, let’s get to business the right way every day.
Non-ATI Members: Want to learn more about today’s best practices for marketing, selling, improving profit, and growing your bottom line? Start with a shop owner event at www.atievent.com. We offer virtual and in-person events, fee-based and free, for both auto repair and collision repair shop owners. Find one near you today!