It's Not Easy Sticking to Your QuoteBy Richard R. Rogoski
Article Date: 04-01-2010
Copyright(C) 2010 Associated Equipment Distributors. All Rights Reserved.
Unless they can see through steel, dealers cannot always diagnose repairs perfectly, but some are tough enough to eat the difference between their quote and actual cost to keep customer relationships and trust intact.
When a vital piece of construction equipment is tied up in the shop for repairs, the owner not only has to deal with downtime, but also with the uncertainty of repair costs.
And if the final cost exceeds what he thinks is fair, he may decide to take his business elsewhere.
Aware that many customers — especially during this economic downturn – are shopping price, a growing number of dealers are providing hard quotes for most repair and maintenance work.
“Customers have become more sophisticated. They’re expecting more transparency,” said Steve Uible, owner of Time Service Consulting Inc., a Cincinnati, Ohio-based training and consulting firm. “In the old days there were personal relationships. Now it’s purely a business relationship.”
A New Business Model
The standard way of doing business in the past was for the customer to drop off his piece of machinery, submit a repair request, then wait to be notified when the work was done. When he came back to pick up the repaired equipment, he was given a bill, which the dealer expected to be paid, regardless of the amount.
But sometimes that bill was a lot more than the customer expected, says Gary Bridwell, owner of Edmond, Okla.-based Ditch Witch of Oklahoma. “When he came back, he thought he’d get a $100 bill, but it was $2,000.”
Being able to provide a customer with a fixed price or – even an estimate – for parts and labor has taken time. And the process is still evolving.
Lee Bruemmer of Cincinnati remembers when some dealers began changing their pricing strategies. Having worked for a site development company for 35 years before retiring, this former service manager says customers had no choice but to pay what the dealer billed. “If you’re going to keep that piece of equipment, you’re going to have it fixed,” he said.
Sometimes, if the mechanic encountered an unforeseen problem, he would call the customer and give him an estimate. “That worked out okay,” Bruemmer said. “They would fix it, but their estimates would usually run high.”
However, depending on the dealership and how much extra work or new parts were actually needed to complete the job, getting a higher estimate would often benefit the customer. “If you tell him it’s going to cost $75,000 and it comes out to only $60,000, that’s going to make the customer happy,” Bruemmer says.
Uible, on the other hand, says that even if a service manager discusses a higher price with the customer after giving him a hard quote, it could be problematic in today’s economic environment. “If you have a service manager who is overly concerned with profit, he’ll go high. Too high, and he’ll lose a customer.”
As to what jobs can be hard quoted and what jobs may need to be estimated, Uible explains. “Simple jobs, like changing buckets or changing tires, are easy to quote. But engine work and transmission work – that’s when it gets difficult.
“There are times when you say, ‘I have no idea what I’m getting into,’” he continued.
For example, if a hydraulic pump explodes, the chances are great that metal fragments have gotten into the system. But you won’t know the full extent of the damage until you start taking things apart, he says.
Brian Schulz, vice president of product support for Michigan CAT in Novi, Mich., agrees. “You can’t see through steel, so when the repair is after-failure, you need to have disclaimers and just give your best estimate.”
Other examples where hard quoting may be difficult include machinery damaged by fire or vandals, Uible says.
But Uible also makes a clear distinction between a hard or fixed quote and an estimate. “An estimate says, ‘Don’t hold me to it.’”
Since labor costs make up a large part of any repair bill, knowing how long a particular job should take is crucial to hard quoting.
Most manufacturers publish a labor/time guide. But even if no guide is available, figuring out basic labor costs is easy once the problem is isolated. “Do the diagnosis first, then tell the customer what it will cost,” Uible says. “A good technician should know how to estimate how much time it will take based on the diagnosis.”
Construction Equipment Distribution (CED)magazine recently conducted a nationwide survey of dealership owners and service managers. Of 46 respondents who answered the question, “Does your dealership routinely hard quote on all service work for customers?” 35 (76.09 percent) answered “yes.” Only 11, (23.91 percent) answered “no.”
But even those who routinely hard quote leave some wiggle room in case unforeseen problems arise or the job takes longer than expected. “We do [hard quoting] as much as we can,” said Mike Murphy, vice president of product support for Industrial Tractor Company Inc. in Jacksonville, Fla. “Customers seem to expect it.”
“We quote our diagnostics, then quote the repair,” he adds.
Following this approach for about five years, Murphy says once repairs are under way, he will call the customer and give him a progress report.
When the job is finished, Murphy says a full-narrative invoice is prepared that includes the three Cs: complaint, cause and correction.
Marc Alkire, general service manager for the construction division of Raleigh, N.C.-based Gregory Poole Equipment Co., says he’s been doing some hard quoting for 12 years and that about 95 percent of his repairs are currently being hard-quoted.
But he also said, “If we get in and find a problem, we’ll call the customer, explain the problem, and give him a new quote.”
Being a Caterpillar dealer, Alkire says that his company benefits from an extensive time/labor guide. But some of the other manufacturers he deals with do not have such guides. However, with between 20,000 and 30,000 quotes already in his database, Murphy says calculating time and labor costs has become a lot easier.
Chris Jones, the service manager at Ditch Witch of Oklahoma, says he’s been hard quoting for eight years and began with the most repetitive jobs.
Now, when a customer brings in a repair request, Jones flat-rates both the diagnostics and labor, then provides an itemized parts list as part of the quote.
“Chris has taken a proactive approach,” said owner Bridwell. “He calls the customer, tells him what’s wrong and what repairs are needed.”
If he finds that more work or additional parts are needed, he’ll call the customer back, Bridwell says. “This builds confidence between the service center and the customer,” he notes.
Jones admits there are a few jobs he can’t hard quote. For those, he will offer a few quotes, giving the worst-case scenario and then let the customer decide what he wants to do. “When you do that, trust and confidence are established,” he said.
A service manager who responded to the survey but who did not want to be identified, said all of his quotes contain a disclaimer. But he added: “If it comes to $800, we charge you $800. It’s very difficult to charge people more than you quote.”
Yet he, too, admits that certain variables and the overall condition of the machinery can make any kind of quoting difficult. “If you have rust, for example, it could take you three times as long.”
In cases when it will take longer or problems arise, he says he will call the customer. “There’s a lot of communication,” he said.
And while he says hard quoting is becoming more popular, he fears that some dealerships might “shortcut the job to get it done quicker.”
Jerry Yates, service manager at Conley Lott Nichols of Texas in Irving, says he calls his quotes “estimates” even though he gives customers a total cost that includes parts and labor. “Barring anything else that we find, that’s what the customer pays,” he explained, adding, “If we send the customer an estimate, that’s what we live by. If the hours run over, I’ll eat the difference.”
Challenges versus Benefits
Yates says the biggest challenge he faces is putting everything together, such as the parts list and labor charges for each job. “It’s time consuming,” he admitted.
But in the end, it benefits the customer “because he knows exactly what it’s going to cost.” And that, according to Yates, makes for a very satisfied customer.
Gregory Poole’s Alkire agrees. “The benefits are improved customer satisfaction with billing and less room for a dissatisfied customer,” he said.
He, too, agrees that the biggest challenge is “taking the time to develop a quote – looking up parts and giving a true cost of what it’s going to take.”
Even so, increased customer satisfaction has become a marketing tool for attracting new customers to Gregory Poole based on providing them with a fixed price, Alkire said.
At Michigan CAT, Schulz says his biggest challenge is “living with the quote when you miss the mark.” But that is outweighed by the benefits he can now offer his customers.
“You do a quote and live with it – no surprises. Customers trust that they can bring you a machine without feeling like they are leaving a blank check on the seat when they drop it off!”
Although the availability of published time/labor guides remains a challenge for some, Jones at Ditch Witch of Oklahoma says he is creating his own guide based on job experience.
And because this dealership has gained a reputation for hard quoting, it has gained customer loyalty. “We’ve seen benefits in every department,” reported Bridwell. “We’ve increased our labor and parts sales. And 25 percent of our work has grown from outside Ditch Witch. Now we also get their skid loaders and backhoes.”
Service technicians also are benefiting through an incentive program, Jones said. “Our technicians get 8 to 10 percent of billed-out labor for a month. And our turnover rate is close to zero.”
As to whether hard quoting will become the industry standard, Schulz says the industry has to move in that direction because “that is what today’s customer expects.”
Uible says it’s a definite culture change that needs to start with the dealership owner and then be adopted by the service manager.
And Bridwell sees it in terms of competition. “There’s no status quo,” he said. “The dealership with the best service department will win.” He adds, “You have to view the service department as a business. It’s the foundation piece of the dealership.”
[ TOP ]