Should you charge environmental fees?
It's all in the presentation
Auto repair shops spend big bucks to dispose of waste generated from repairing vehicles and it is only fair business practise to pass this expense on to the customer. However shops need to be careful how the expense is presented to their customers. Using a separate environmental fee on invoices can have a serious negative impact on the shop's reputation. Instead of highlighting your shops concern for the environment, itemized fees may make your customers feel like they're being gouged.
Photo by Just Taken Pics
Golden rule of business: No Piss-offs
A question sent to the Boston Globe's Consumer Alert column highlighted an individual's displeasure with an auto dealer that added a separate Environmental Charges fee of almost 9% to his repair invoice. Granted the shop needed to charge to cover the expense of waste generated by repairing vehicles but itemizing of this normal business expense on the invoice only angered the customer.
Misinterpretation could be costly
Photo by roland
The shop justified the separate environmental fee by stating that the charges were a normal cost of doing business and that the fees were clearly disclosed to the customer on the invoice. Although this may be correct, the act of separating and bringing the expense to the customer's attention actually made the charge seem like an “extra” fee used to inflate the invoice amount.
Everyone is doing it - but should you?
The Boston Globe writer suggests that competition amongst auto repair shops pushes them to separate out normal expenses to lower the base labor rate and service package pricing. Unfortunately this deceptive marketing driven practise ignores the customer's negative interpretation of the separate fees and the resulting serious damage to the relationship between the customer and the business.
What can you do
Stop trying to compete on price. Include all costs in your labor rate. If you need to justify your rate you can use the all inclusive price as a selling feature. Use questions from customers regarding price as an opportunity to define and state the true value of your service. Have a look at my previous article about being a pricing leader and not undervaluing your services.
You can also post a list of expenses which contribute to your labor rate. You don't need to post your financial statements but a simple 'Where your labor dollar goes' type of sign can help people understand why you charge what you do.
The best approach is to be straight forward with your pricing so there are no surprises when the customer gets their bill. If you want to improve auto repair customer retention and increase auto repair customer referrals you want EVERYONE who leaves your business to FEEL like they were treated fairly.
P.S. I'll be writing a future article titled 'Pricing: racing each other to the bottom' that will discuss why competing on price alone is bad business practice.