Market surveys are a key tool in determining appropriate labor rates for maintenance and repair work. Dealerships can hire a marketing firm or have employees "mystery shop" by phone to determine the going rates, he says.
"I recommend doing a market survey every six months," Wegley says. "That doesn't mean you need to change prices every six months, but you need to know what the market is doing."
If a survey shows a dealership is charging significantly less than competitors, prices can be raised incrementally or exponentially.
"If you're nervous about ripping off the Band-Aid, then do it incrementally," he suggests.
But Wegley warns that increasing the labor rate for repairs won't boost profit margins as dramatically as increasing the labor rate for maintenance items, such as oil changes, tire rotations and wheel alignments. That's because service departments sell many more hours of maintenance work than repair work, he explains
"I'm not saying it isn't impactful, but it's probably not the best place to start," he says.
Dealerships also should better educate service advisers about the factors that go into developing prices. Understanding these dynamics makes it easier for them to believe in price structures and confidently counter price objections from customers, Wegley says.
If service advisers can't break a long-ingrained discounting habit, Wegley notes that some more robust DMS platforms allow service managers to prevent discounts and price overrides.
If that technology isn't available, it's time for what Wegley calls accountability management. That means setting clear goals and expectations for service advisers and setting a firm timetable for showing improvement, he says.
In many instances, customers will need training, too. Reshaping their expectations about discounts will take time and there could be pushback, he says.
On the positive side, Wegley says he knows advisers who stopped handing out coupons — and customers rarely said anything about it.
Wegley also cites one service department that didn't change its price for oil changes for 12 years. The department does about 5,000 oil changes a month, and when prices finally were raised, only five customers complained.
"It's all about having a conversation — providing context for customers," Wegley says. "But you need to keep track of complaints, too. If you're encountering a lot of customer dissatisfaction and losing business, it's time to reconsider if the price really is right."