Retail Observer

RETAILOBSERVER.COM FEBRUARY 2024 54 E ffective negotiation skills and the ability to stand your ground when needed are valuable assets in all aspects of business that will help you secure mutually beneficial agreements and achieve long-term success. So before you walk away from an OEM's service contract offer, try negotiating. Here's how to prepare: Know the cost of a truck roll. Like anything you sell, you must know what it costs before you set the selling price – and warranty service rates are no exception, so you must know the cost of running a truck. The simple method is: take the total expenses for the service department and divide them by the number of truck rolls run in that period. The result is your cost per trip. Next, compute how many first-call completes you had, and how many return trips you had. This will gives you a clearer understanding of what warranty reimbursement rates you need to charge to maintain a profitable business. If the cost to run a trip is $100, and warranty calls take an average of 1.5 visits, you must be reimbursed $150 per warranty call. Know your market. Know your service area and the distances you drive for warranty service calls. With increasing fuel costs, you should have a mileage clause in every service agreement. Geographic regions will vary, but a 20-mile radius around your shop is an excellent place to start. Any service calls beyond 20 miles will incur a mileage charge on top of the negotiated warranty rate per call. Check the going rate per mile, and decide what number you will accept. The 2022 IRS-allowed rate for business travel is up 2.5 cents to 58.5 cents per mile driven for work. I would start higher and come down as necessary. Once you have a mileage clause in your contract, use it on every warranty call with no exception for calls beyond your radius. Take a power advantage. Self-servicing retail dealers have an advantage that independent service providers don't have – they sell the product. Don't be afraid to use your sales department to your advantage while negotiating warranty rates. Have your sales manager and the manufacturer's sales rep sit in when possible. How much you sell for each brand can have significant leverage in your negotiations. Some manufacturers' sales reps have access to discretionary marketing funds that can often supplement low warranty rates when the service manager can't move to the amount you need. Know what it costs by brand. Understand the actual cost versus the warranty rate. Consider the cost of servicing that brand, along with profitability. Consider such factors as the ease of business, shipping and freight, co-op and back-end funds, rebates, and return policies. Check out the alternatives. If the manufacturer uses the argument of a preferred service provider in your market, check how often they visit and how long your customer will have to wait for service. Anything over a week for a non-functioning product is unacceptable. It is good to know who the other servicers are in your market. If Brand X has no other options but you, your negotiating stance gets much stronger. Remember, though, if you can't negotiate a good deal, it's not worth doing warranty service for that brand, and it's time to say a final no. Push those calls back onto the manufacturer and spend your time on more profitable COD calls. Paul MacDonald Appliance Service Trends RO Paul MacDonald is senior lead of ServiceSource, the exclusive AVB BrandSource initiative that helps servicing members run their repair operations more efficiently and profitably. Paul previously headed his own 38-tech service business. He has served as president of the UASA and currently operates The Expert Service Program. You can reach Paul at (647) 500-7785 or at Paul.m.Macdonald@brandsource.com KNOW THY SERVICE COSTS How to prepare for a warranty contract negotiation

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