Price versus quality

Investing in a quality service comes at a cost but is it worthwhile?

Published:  20 August, 2018

The perennial question of ‘price versus quality’ surfaced at the Aftermarket Roundtable discussions earlier this year. From the business perspective, this is more interesting than the ‘price versus cost’ question, which is much easier to answer. So, what are the details behind the quality element?
    
Firstly, let’s start by understanding the definitions of what we are considering – what is price? In detail, it is ‘a value that will purchase a finite quantity, weight or other measure of a good or service’. As this is the basis for the exchange or transfer of ownership, price forms the essential basis of commercial transactions. It may be fixed by a contract, left to be determined by an agreed formula at a future date or negotiated during the course of dealings between the parties involved.

Defining price
In commerce, price is determined by what:

• The buyer is willing to pay

• The seller is willing to accept

Competitors allow a seller to charge. With the mix of product, service, promotion and marketing, it is one of the business variables over which organisations can exercise some degree of control. This is then more commonly known as the ‘market price’.
Importantly, it is a criminal offence to give a misleading indication of price, such as charging for items that are reasonably expected to be included in the advertised, listed or quoted price.

Quantifying quality
Secondly, what is quality? This, perhaps, is much more subjective but is something like ‘the non-inferiority or superiority’ of something or is an inherent or distinguishing characteristic or property. It can also be the nature or degree of the grade of excellence.
    
In manufacturing, for example, a measure of excellence or a state of being free from defects, deficiencies or significant variations. If a vehicle manufacturer reports a defect in one of their vehicles and makes a product recall, customer trust in the quality of the vehicle could be lost.
    
In your aftermarket business, how does all this apply? Actually, in just about everything you do, both internally and externally. For example, internally, your staff need to be able to provide what you need to deliver to your customers, which will include ‘quality’ elements like the work they do, the time needed to conduct the work and the competence to complete the work without faults (even if they develop in the future). This comes with a cost attached (i.e. the wages you pay) and there is probably a certain acceptance that you pay just enough to employ the level of employee needed – which I am sure will be less than a formula one team, who pay the most to get the best – obviously there is a balance.

When you start to consider more expensive elements like workshop equipment, price should not be the first consideration. Capability, reliability and longevity are just as important. These workshop items are acquired to earn you money, so they need to do the job and be reliable.

Image counts
In the direct ‘customer facing’ side of your business, the fixtures and fittings of your premises should not be the cheapest. Look after the design details of your public areas, the quality of the furniture, even something as simple as the coffee or the wi-fi you may provide, should be subject to the price versus quality. It might be provided free of charge but the quality still needs to be acceptable. The perceptions that your customers form will lead to how they perceive the overall quality of your business and, in turn, how your business will treat them and their car. A simple example is how much time, effort and money is spent on the detailed design of many of the vehicle manufacturer’s franchised dealers. They need to portray a certain image of quality.
    
So, externally, the same considerations should apply to your business, including signs that are clear and easy to read, parking that is safe and clean, well lit public areas and the list goes on.
    
When it comes down to the service that you provide to your customers, recent research from the Institute of the Motor Industry (The IMI) showed that although cost remains high on the agenda, with 52% citing it as a key factor, quality of work came in a close second at 44% and rising to 51% amongst women. This was further reinforced by 66% of all respondents and 71% of women feeling that a recognised quality standard was very important when selecting a service provider.

Memorable experience
Customers are also worried about the quality of work but a good overall customer experience will also have a knock-on effect to your business’s reputation and affect how your business is promoted via word of mouth. The value of good customer service is appreciated by most but can be difficult to quantify. Avoid cutting costs if this diminishes the quality of the service you can provide.
    
What are some other key aspects which support the perception of price versus quality from your customer’s perspective? One of the most important will be the price of the work you are charging against the quality of the service you provide. This is not just your hourly rate or the cost of the work but is the complete ‘package’ of what the customer experiences. This will normally include the work being completed correctly and on time but, will also include the choice of parts, the way that the booking-in and final invoice are handled (i.e. a clear explanation of what will be/has been done), also any additional items that are included. These can be additional costs, such as the environmental disposal requirements, or additional items included free of charge, like a check of DTC’s, washer fluid top-up or even cleaning the vehicle before it is returned.
    
As long as all of these customer experiences reinforce their perception of a professional business which employs well trained and competent staff and which delivers a good quality of service, then price becomes a secondary issue. However, the higher the price, the higher the customer’s expectation of quality. The challenge is to deliver what your customers expect at the price they are willing to pay.

Want to know more?
Find out how Neil’s consultancy for garage owners can benefit you please visit xenconsultancy.com.


Aftermarket archive: December 2014 Aftermarket | www.aftermarketonline.net

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    Please visit www.thegarageinspector.com for business training courses and for more business tips.

  • Diamonds in the database  

    One of the biggest mistakes I regularly see within the aftersales garage sector is the constant advertising specifically in local press with ‘come and get me offers’ in order to attract new business. Most of these are by already established business.  
        
    Whether they are large or small, they will rarely measure the actual effectiveness of such campaigns, or analyse the type of customers they are attracting. Indeed very few of these businesses actually understand the ‘diamonds’ that already exist within their database.   
        
    Too little thought is given to how an existing customer may feel if he or she saw a deal that had never been offered to them, despite the fact that they have been loyal customers over a number of years. This could be a real kick in the teeth.

    The perils of transactional marketing
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    Assets and more diamonds
    Quite simply, customers are the organisation’s most important asset (along with staff too). Without them, it cannot exist. To survive, prosper and possibly expand the business, the independent garage owner must continue to acquire new customers but more importantly must never neglect existing customers or take them for granted.
        
    Constant database management will build-up and trust and personal knowledge with your customers, which create a far more effective customer retention tool, which in turn will find you more diamonds.





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