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Material Handling Wholesaler Cover
November 2017
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Is your service undervalued?

When you undervalue what you charge your customers you also undervalue what you do for your customers! Equipment dealers continue to have a tendency to undervalue the services they perform on the equipment they sell. All too often dealers fail to realize that the equipment the customers buy determines their livelihood and business success. Most all of your customers cannot afford downtime and in particular they cannot afford what we refer to as “unexpected downtime”.

Surveys have concluded time and time again that one of the most important things customers expect from an equipment dealer is “to have their equipment serviced right the first time, on time!” Your customers’ most important requirement is the assurance that your dealership will take care of them after the sale. If your shop fails to generate a reasonable profit then how can you perform the jobs mentioned above for any, let alone all of your customers?

The service department in any equipment dealership is: 1) the most labor intensive and 2) expense intensive department within the dealership. It includes some very specific expenses which increase yearly (sometimes more often) and there are also expenses over which the dealership has little or no control: fuel prices, wage compensation programs, liability, etc. If dealers fail to keep up with these increased costs and ignore them when considering increased labor rates, then the department will be doomed to failure. If properly managed, it is a department that can provide a steady cash flow, increased sales and increased customer satisfaction indexes.

Your dealership needs to establish a strong and balanced price base before the dealership can begin working on service quality issues. How do dealers establish their labor rates? Unfortunately, most dealers run a check on all of the local dealers and independents in their own market and settle on a labor rate based upon what other dealers in the area charge. Strange as it seems, many manufacturers advise their dealers to practice this particular procedure. The practice of checking other dealers and independents’ labor rates is a practice of assuming that those others have some reasonable method to what they are doing, but that is not generally the case. The most important question to ask yourself is, “How much do you have to charge to enable your dealership to hire, train and retain excellent technicians, along with providing working facilities, tools, transportation, etc.?” In other words, your labor rate probably has more relevance to your cost of labor than it does to your retail competition.

Ask ten of your top customers what your labor rate is and chances are they will have absolutely no idea. Ask the same customers what they expect of your shop and they will probably reply: “We want the job done right the first time and on time, we want fast response time, we want someone to be in position to assist us when we have a problem, in other words we want to know that you are available to take care of us after the sale at a fair and competitive price.

In answer to these comments you might well mention the fact that your dealership has less than 1% of your total service sales that are re-do work (if that is a true statement), and that if for some reason you make a mistake, there will be no charge for doing the job over. You might also mention that you have someone on call 24 hours a day, 7 days a week and 365 days a year to handle their service requests. But for this the customer must be willing to pay the additional cost.

Equipment today is becoming more and more sophisticated. According to most dealers, finding qualified technicians to work on this equipment is becoming an impossible task. It is a “seller’s market”, and this becomes a “chicken and egg scenario.” If you don’t charge higher labor rates, how can you afford to hire and keep experienced and qualified technicians to satisfy the customers’ wants and needs?


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