Determining Discounts

Customers love lower prices. Shop owners? Well, not so much. Offering discounts is a heated topic among industry leaders, as shop owners often struggle to balance a healthy bottom line with keeping customers happy.

Ratchet+Wrench talked with Becky Witt—owner of George Witt Service Inc., in Lincoln, Neb., and an Automotive Management Institute–certified instructor—about the merits of offering discounts to customers.

There is no hard and fast rule, but the main thing is you have to know your niche: where you are, what your market is, who your customers are. You don’t see the Marriot leading with discounts, do you? Nope, but you see Super 8 lead with discounts all the time, because that’s their niche. You have to define your niche, and that’s going to determine whether or not—and how much—you discount.

Discounting can work effectively if it’s done correctly. We all have peaks and valleys in our business. There’s a time and a place to use discounts to take a little of that peak and scoop it over into the valley and level it.

There needs to be a specific goal to your discounts. We have to understand that there are three primary buying motives: quality, price and motive. Everybody wants to feel like they are getting a good deal. If they can clip that coupon or get a little off an oil change and feel like they’re getting a good deal, well, that’s the objective.

There’s a wonderful restaurant here in Lincoln that’s premium everything; everything they do is good, quality stuff, and it’s not cheap. It is packed every single day for lunch. It used to be that the people across the street hd three hamburgers for a buck, but there was no one there. The burgers weren’t even worth the three for a buck. It isn’t always about money. It’s about value for the money.

Be careful what you discount, because it can have a negative effect. We saw the car makers go through this with incentives. They kept offering more and more incentives, going bigger and deeper, and pretty soon people aren’t going to pay sticker any more. They assume it isn’t worth what you’re asking.

Always say no when people ask for lower prices. Once you call them and once you give them an estimate and once you agree on it, that’s it.