Providing Auto Shop Management SOFTWARE Solutions Since 2005


5 Keys to Pricing Automotive Repair Services

One of the components of marketing mix is Price or Customer Cost. Setting prices for services involves taking many factors into consideration. First and foremost prices must be set based on what the target market is willing to pay for them. They also must be set to achieve the desired level of profitability. So the cost of providing services must be known and taken into consideration. The impact on sales volume and profit margins must also be considered when setting prices. And employing the right pricing strategy and understanding the differentiating benefits of your service offering will be factors in setting prices. Following are keys to effectively setting prices for auto repair services:

  1. Price is Determined by What the Market will Bear – Whether geographical or demographical the target market of any business will set fair pricing standards. Availability and competition influence consumer decisions in purchasing. But the most important factor that determines what a customer will pay for services is their perception of value.
  2. Cost of Providing Services must be Known and Controlled – Setting the price for services must be in line with what customers will pay but also must be set to achieve the desired profit. So it’s necessary to understand the total cost of providing services including fixed and variable overhead costs, parts and labor. Maintaining costs can provide greater flexibility in setting prices.
  3. Price will Affect Demand and Sales Volume – Higher prices will result in greater profit margins but lower sales volume. Conversely lower prices will lead to increased sales but smaller margins. Prices should be set based on business conditions and objectives.
  4. Set the Right Pricing Strategy – Different pricing strategies can be employed simultaneously however the overall pricing strategy should remain consistent. There are many possible strategies including Penetration Pricing which refers to setting prices low to gain market share, Market Skimming which is employed when a new service is introduced and there is little or no competition which allows prices to be set high to recoup startup costs, and Neutral Pricing which means that prices are set comparable to competitors.
  5. Perceived Value will Influence Purchase Decisions – When making purchase decisions people evaluate what they’re buying based on certain criteria. In marketing terminology these are referred to as Reference Value and Differential Value. Reference value is the result of comparing pricing to that of similar products. Differential Value refers to the comparison of attributes to those of similar products. Competitive pricing can influence a customer to purchase but positive attributes in service offerings can have just as big of an impact.

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