Giving discounts at your shop: worth it or a profit killer?

Giving discounts has become almost a reflex at many auto repair shops. The customer asks for the price and, before even understanding what they are getting, the question comes: "can you do it any cheaper?". It is no surprise: a Serasa Experian study shows that millions of Brazilians are bargain hunters. But when giving in becomes routine, the shop starts undermining the very thing that sustains the business: profitability. Here is why that happens and what to do instead.

Giving discounts goes far beyond the price of the part

Before thinking about lowering prices, you need to understand that a shop's profit goes far beyond replacing parts. There are several costs that don't always show, such as:

• staff wages
• tools
• electricity
• rent
• warranty work
• taxes.

When a discount ignores these costs, the shop ends up working hard to earn little and, in the worst case, just to break even.

Frequent discounts devalue your work

One of the biggest risks of constant discounting is that it devalues technical work. When the shop always lowers the price, customers may conclude the original price was inflated. Over time, the shop stops competing on quality and starts competing on price alone. Discounting without criteria teaches customers to look only at price, not quality.

Discounting to fill the yard

Many shops fall into a dangerous pattern: cutting prices to keep the shop yard full. At first, traffic may even go up. Over time, problems appear for owners and staff. Worse: customers attracted only by price tend to be the least loyal. At the next cheaper offer, they switch shops. And not every customer wants the lowest price, especially when it comes to their car: the fear of a botched repair outweighs a small saving.

Offer value instead of discounts

There are ways to respond to customers who ask for a better price without cutting your margin:

• service packages, such as a full inspection with set items included
• a loyalty program with small gifts or extra services, such as a basic wash or a safety check
• priority scheduling for regular customers
• payment terms that fit the customer's budget.

The customer feels they got something extra, and the shop keeps the value of its service. To understand how far your margin lets you negotiate, see also discounts vs. profit.

The right customer isn't the one who pays least

Every shop needs to decide which customers it wants to serve. If its positioning is based only on low prices, there will always be someone charging less. Shops that invest in service, facilities, organization and trust build a more loyal customer base that is less price-sensitive. The result is a healthier business over the long term, with customers who trust your work.

Raise the perceived value

When discounting becomes a habit, it erodes profitability and the business's perceived value. More important than lowering prices is raising perceived value. With a repair shop management system like Onmotor, developed in Brazil, it is easier to know your costs and negotiate with confidence. Contact us or see the plans.