A study indicates car dealers price auto collision parts like they price vehicles: It varies.
Just like a vehicle price can go up and down depending on factors such as time of month, parts prices often are adjusted for various reasons.
According to the JDJS Consulting survey of 337 franchised auto dealerships, 85% using online platforms for pricing and procuring collision parts report they vary pricing to match local conditions, expand geographical market and become more competitive.
They also say they employ conquest-style pricing on more parts, even without manufacturer support programs.
Dealers who utilize flexible pricing report a “win” rate of 55% on their quotes compared with 41% for dealers who stick with fixed prices.
JDJS says the polling indicates online technology that provides real-time pricing and procurement data can help drive department competitiveness and profitability. (Mike McFall, left)
“The dealers told us it’s critical for them to look beyond the available manufacturer pricing support or conquest pricing,” says JDJS Consulting President Mike McFall. “They also told us pricing flexibility has been a most effective strategy in winning more quotes.”
The survey focused on how dealers utilize online collision-repair parts platforms (such as PartsTrader or PartsTrader integrated with OE Connection) to price competitively, increase market share and create effective pay and financial incentive plans for parts managers.
The study asked dealers why they allow discretion in pricing quotes. Their responses:
- Trying to gain market share in existing territory: 53%
- Trying to grow sales in a new territory: 43%
- New customer is ordering: 41%
- Existing customer is ordering: 38%
- OEM wholesale price decrease: 35%
- Repair shop is owned by dealership: 19%
- Inventory levels are too high: 18%
- Price quotes vary by time of year: 14%
Study results indicate about 9 of 10 dealers are compensating parts department managers based on various performance-driven formulas. The most popular by a long shot (75%) is a plan that provides financial incentives based on overall department profitability.
Other plans pay on sales increases (17%), sales volume (15%), overall dealership profitability (14%) and successful bids (3%).
“Department profitability is far and away the most popular metric for a performance-based compensation plan for collision shop managers,” McFall says. “But the respondents also told us that less-utilized compensation plans based on sales growth or sales volume increases actually resulted in better win rates.”
That suggests there is room for experimentation in identifying the best formula for compensating performance, he says, adding that dealers might consider combining various short-term bonuses and other incentive plans.
The research indicates most dealers still use a manual quoting process and say they are happy with it.
However, when asked if they would consider using software that improves quote response rates, more than one in three said possibly.