Like fixed operations managers everywhere, Doug Shipp wanted to improve the gross profit from his service department's labor.
Shipp, service and parts director at Tafel Motor Co., a Mercedes-Benz dealership in Louisville, Ky., reviewed the rate his shop charged for customer-pay work: $130 an hour for each repair job, no matter how complex.
That single rate no longer made sense. So in January, Shipp started charging $140 an hour for nonmaintenance repairs, such as suspension work.
A month later, he created a top rate of $150 an hour for highly skilled jobs, such as heavy engine work. He kept the $130 rate for routine maintenance.
The result? "The tiered rate has helped me absorb my discounts" on such items as customer oil changes, Shipp says, "and still maintain my high level of gross profits."