Chuck Hartle is the founder and president of PartsEdge, a powertool for New Car Dealerships Parts Operations, helping to increase DMS utilization, improves efficiency, accuracy, and profitability with solid and consistent plans for eliminating all types of idle inventory in a Parts Operations. With over 40 years in the auto industry Chuck has the know-how and love for the industry that has enabled PartsEdge to identify the biggest needs of dealerships.

Introduction

Effective pricing strategies, including the use of pricing matrices, play a crucial role for parts managers. Managing parts pricing is complex and often fraught with pitfalls. This blog post explores common challenges, offers valuable insights, and provides actionable strategies to enhance your pricing matrix.

The Evolution of Pricing Matrices

The Origins and Decline of Traditional Pricing Matrices

Pricing matrices were pivotal 25 to 30 years ago. These matrices often accounted for 25-30% of retail sales. Today, the scenario is dramatically different. Customers can easily access online price comparisons, making aggressive matrices less effective. Parts managers must update and adapt their matrices to remain competitive. Many use outdated strategies that fail to meet modern needs.

Common Pitfalls in Pricing Matrices

Lack of Updates and Realism

One major pitfall is the failure to update the matrix regularly. Often, parts managers rely on matrices that are several years old. Companies that neglect timely updates miss out on potential revenue. Regularly reviewing and adjusting the matrix can optimize profits.

Ineffective Matrix Structures

Old matrices often feature overly complex structures. These include multiple escalator categories that cause confusion. Simplifying the matrix structure can increase gross profit margins.

Strategies for an Effective Pricing Matrix

Regular Review and Adjustment

How often should matrices be reviewed? At a minimum, they should be reviewed quarterly. This allows parts managers to respond quickly to market changes. It's essential to remember you can always adjust or revert changes if they don't yield expected results.

Simplifying the Matrix Structure

Modernizing your matrix involves making it more straightforward. Instead of numerous escalator categories, consider a "soft matrix.” This could mean marking up all parts up to $150 by 10%. Simplifying matrix structures reduces the number of overrides by parts managers.

Understanding Market Thresholds

Recognizing the Limitations

You must understand your market threshold to set realistic prices. If nobody complains about your prices, you're likely far from your threshold. Raising prices incrementally helps find this limit. If customers start to complain, you can always dial it back. This strategy ensures you're not leaving money on the table.

Utilizing Technology and Data

Leveraging Tools Like RMO

Some Dealer Management Systems (DMS) offer tools that can simplify price adjustments. For example, Reynolds offers a feature called RMO (Retail Markup Override). This tool allows dealerships to incrementally add a fixed amount to each part. This method helps increase gross profits without complex matrices.

Avoiding Flat Pricing Mistakes

Flat pricing can undermine your matrix efforts. Some systems default to flat pricing, which can hurt your gross margins. Ensure flat pricing isn't inadvertently applied across all sales categories, such as warranty and retail.

Focusing on Menu Items

Importance of Adjusting Menu Items

Beyond matrices, poorly managed menu items can significantly impact gross profits. Many parts departments fail to update the prices of menu items like oil filters and air filters. Manufacturing costs can appreciate, eating into your profits. Regularly review and adjust these prices to align with manufacturing costs. This ensures you're not losing margin due to outdated pricing.

Final Thoughts

Creating a Holistic Strategy

Ultimately, an effective pricing strategy should be fluid and adaptable. Regular updates, simplified structures, and a keen understanding of market thresholds are vital. Leveraging technical tools and focusing on menu items can further optimize profits. Always remember, your pricing strategy should evolve with market trends and customer behavior.

Conclusion

Navigating the complexities of pricing matrices can be daunting. However, regular updates, simplifying structures, understanding market thresholds, and leveraging the right tools can make a significant difference. Periodically reviewing and adjusting your matrices, and focusing on the pricing of menu items, can lead to increased profitability. By adopting a dynamic and proactive approach, parts managers can stay ahead of the curve and maximize their gross profits.

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Sponsors:

This show is powered by PartsEdge: Your go-to solution for transforming dealership parts inventory into a powerhouse of profitability. Their strategies are proven to amp up parts sales by a whopping 20%, all while cutting down on idle inventory. If you’re looking to optimize your parts management, visit 🔗 www.partsedge.com.

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Takeaways

1. Update pricing regularly to protect margins.
2. Keep matrix systems clear and simple.
3. Adjust costs to match market changes.

Quote

“If you're matrixing 10 percent of your retail sales, you're doing a really good job..” -Chuck Hartle

Connect

Chuck Hartle
LinkedIn: www.linkedin.com/in/chuck-hartle-1923ab14

Website: www.partsedge.com

Kaylee Felio

LinkedIn: www.linkedin.com/in/gotopartsgirl

Website: www.partsedge