The level of your prices has a major influence on whether the work of your service department is received positively. But how do you ensure that your prices are accepted by customers?
Prices are a means of communication. Naturally, the customer is not particularly happy about negative surprises. These leave an emphatically bad impression. Positive surprises, on the other hand, are of course always welcome. Also bear in mind that different customers will react differently to your prices.
Avoid drastic ad-hoc price increases
When it comes to adjusting price functions, many Service Manager They make the mistake of increasing the prices of focus parts too much. If a part suddenly costs 5,500 euros instead of 3,000 euros, the customer is naturally very unhappy. It is therefore advisable to always plan such increases step by step over a reasonable period of time.
This may be tolerated in some cases for C-parts that are not purchased often or have a comparatively low price. However, the prices for focus parts are subject to particular scrutiny by the customer. You should therefore try not to incur any displeasure here and not change them automatically on an ad hoc basis using the price function, but adjust them manually step by step according to a defined strategy.
If you do not cover your costs or achieve the target margin in these cases, it is advisable to cross-subsidize with other sub-segments for a certain period of time until the price has reached the final target price.
Of course, there are also spare parts for which there is no competition. Nevertheless, you should not overdo it with the margin mark-up here either. A net margin of 2,500 euros should not be exceeded in any segment, regardless of the absolute price of the spare part.
Offer individual focus parts relatively cheaply
You can also use prices to influence the perception of your company. Use this opportunity to Customer loyalty to increase. Avoid being perceived as the market player that squeezes out its customers as best it can.
In order to communicate the impression of fair price management, you should deliberately keep the price of a small range of your focus parts low. However, avoid dumping prices and make sure that you cover your costs here too. The target margin for spare parts sales can then still be realized through other segments.
With this tactic, we are aiming for a halo effect, which will then impact the overall perception of your company's price level. The positive experience that customers have when purchasing the discounted parts creates a lasting positive impression that ultimately makes slightly higher prices in other parts segments appear acceptable.
The Halo–Effect (from English haloThe "halo" is a cognitive distortion known from social psychology that consists of inferring unknown characteristics from known characteristics of a person or, in this case, a company.
Discount strategies as described in the article on Enforcement of prices in the spare parts business can produce a similar halo effect.
Make prices comprehensible
In the article on the topic Pricing for spare parts It has already been mentioned that mark-up calculations can lead to very illogical prices, as it cannot always be assumed that you have properly coordinated and negotiated all prices in your purchasing department. Small discrepancies are magnified by the mark-up calculation and have a direct impact on customer prices:
- – a hose twice as long suddenly costs four times as much as the shorter version.
- - a 5mm longer screw has a price five times higher than the shorter one.
- - a component from a predecessor machine costs half as much as an identical component from a new machine.
- - A plate for the upper section of a cover hood costs almost twice as much as a cover plate of almost identical design for the lower section of the machine.
Such questionable pricing from the customer's point of view can easily be overlooked due to the sheer size of a product range. However, they do not exactly have a positive effect on the satisfaction of your buyers and should therefore be avoided. This creates a negative halo effect. The bad experiences then also affect the perception of the entire price level of your portfolio.
Therefore, make sure that prices are logical and easy to understand. Also make sure that employees can explain the pricing to customers, at least in general terms, if asked.
Adjust prices according to customer segment
Do not set the same prices for all customers. The buyers of your higher-value product lines have higher demands on the machines in terms of mileage and productivity. As a rule, they are also prepared to pay a little more for the necessary spare parts in order to operate the machines efficiently.
However, the buyers of your cheaper machines will generally not want to pay these prices and will look for alternatives if necessary. It is therefore advantageous, if possible, to separate the spare parts by product line and price them differently.
This approach is common and we also encounter it in the B2C business. For example, a new spark plug usually costs more at Porsche than at Opel, even if both parts are produced by Bosch at similar costs. A charging cable is also significantly more expensive at Apple than at Huawei.
If you pay attention to these 4 points, you can actually look forward to a positive perception of your spare parts price level. Of course, pricing is naturally limited by profitability. Nevertheless, you should also make sure that customers get a really good deal with you from time to time. This makes customers happy and in most cases they will be prepared to buy from you in the long term without having to look for alternative channels on the Internet.
