Sell Diagnostics the Right Way
For many consumers, charging for diagnostic time still remains one of the most misunderstood topics in the auto service industry.
“One of the things I get into when it comes to selling diagnostic service—especially if someone calls with a check engine light—if I said, ‘It’s an hour to diagnose this and $115,’ I don’t want to put that in a way that the customer thinks, ‘If that’s just the diagnosis, how much is the repair going to be?’” says Rob Campbell, analyst at the Mironov Group, an industry consultant group. “I think in a lot of ways, we have to move beyond that and try to sell the value of what we need to do.”
The fact is, not charging for diagnostics—or not charging enough—can hurt your gross profit dollars, effective labor rate, and, ultimately, your bottom line. That should be obvious, Campbell says, but this might not be: Proper diagnostic practices present your service facility as an expert source for vehicle-related problems, it demonstrates your quality of work and care, and in the end, improves customer satisfaction and retention.
Campbell explains how to develop a proper diagnostic system and how it builds your facility’s reputation as a go-to source for diagnostics in its market, improving customer retention, overall brand awareness and profit margins.
Before you can successfully charge for diagnostics, you need to understand the “why.” It’s important that you are reimbursed for diagnostic time. You have the tools, equipment and training, so it doesn’t make sense to get paid the least on testing. Plus, with vehicles becoming increasingly complex, the investment in equipment is becoming larger. The investment into getting the correct answer is big and there needs to be a return on that investment.
Start by getting your technicians and service advisors—who may be afraid to charge—to understand the value and necessity in charging for this time before trying to get them to consistently sell diagnostic work.
There’s no hard and fast rule for how much you should charge or how you should approach selling diagnostic work. You need to figure out what’s right for your service center, which could take some trial and error. You should shoot for between 70 and 75 percent gross profit on labor.
I typically go a little low and recommend right around an hour for charged labor time on diagnostics. Some consultants recommend going as high as 1.5 times or even double your hourly rate, but it really depends on your brand and the amount of time it takes. You need to have a target for gross profit per hour and adjust your labor charges accordingly, keeping in mind that when you sell diagnostics, there is no parts gross profit contributing to that gross profit on the work—it’s all labor.
Finally, while it typically takes much less time than that to diagnose an issue because technicians are used to looking at the same vehicle issues, you also want to keep an eye on managing the technician's time.
Another aspect to keep in mind when you’re having conversations with customers and marketing is your franchise. Competitively, there are less people that can pull codes from a BMW or Mercedes than from a Chevrolet. If you’re a less competitive franchise, you can really focus on selling the value because you have specialized knowledge of those makes that other people don’t have. When you get into Toyota and Hyundai, it’s a little bit more difficult. In that case, I want to get the customer in the shop. Encourage them to bring it in. Explain that your team will take a look at it and if it’s something more than just pulling a code, you’ll get it back to a tech and have a conversation after he spends an hour on it.
Although you can charge as much as you want for diagnostics, doing so doesn’t make any difference if you can’t sell the time. The most important step is communicating the process and managing customers’ expectations. If I’m working on a BMW, I might say something like, “It could be as simple as something being unplugged, all the way up to a $1,000 part. I don’t want to throw $1,000 parts on your car and I don’t think you want that either. So let’s have the tech spend some time with the car so we can evaluate exactly what the car needs and save you as much money as possible.”
As long as everybody understands what the process looks like, it seems to negate that lack of perception of perceived value:
- Explain the process. Don’t get too technical but do use layman’s terms to outline what your technician will do, why you need to charge and the value for the customer.
- Keep the customer updated. Get the customer involved in the process and update them after 30–60 minutes with the results of the diagnosis.
- Use the right language. One of the most common customer objections is the high price of diagnosis, but you can’t plant that objection yourself. You need to use value words instead, which allows you to charge the amount you need to maintain margins. If customers don’t understand it, they’re not going to buy it. Explain that experienced technicians will run a series of tests and procedures to drill down into the issue and then educate the customer on how to proceed.