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Charging Premium Prices

Updated: Oct 3, 2022

As a shop owner considering charging premium prices, you’ve likely realized that in order to charge a premium price, you need to provide a premium service. But what does premium even mean? How is it defined when there are other shops marketing premium services but all delivering different levels of service? And how do you stand out from the crowd?

That’s the thing about premium. Premium is a relative idea that does not mean the same thing to every person. How a potential customer defines and understands premium depends wholly on their perception. However, among all the differing ideas of premium, two constants have formed. For a service to be considered premium it must be two things: valuable and expensive.

The word expensive likely had you gritting your teeth. Why? Because it’s a belief among many shop owners (and business owners in general) that associating their business with the word expensive in any way will lose them customers. But having an expensive service has shown to do the opposite. When clients know they are receiving something that is valuable and provides a solution to their problems, they are willing to pay more. In fact, our brains tend to automatically relate higher prices to better quality. So, while you may not choose to use the word expensive, having higher-priced services will boost your business.

Providing value seems to be a given in offering a premium service, but how much value are you offering your customer? To get an idea of the value you’re offering, take a few minutes to write out every single step that happens during one of your usual car repairs – from the moment your clients call in/schedule an appointment to the second they drive off your lot.

Once you have a list, consider it from a value angle. Do your techs go above and beyond in diagnostics? That’s a value to your customers because it means you’ll likely catch problems before they occur. Do you use top-of-the-line equipment? Another value statement. Is your staff consistently going above and beyond with each service offered? Customer service is huge when it comes to value – your clients don’t want to be just a number to your store, they want to feel like they are a top priority.

This is also a good time to examine if there are any weak links in the value you are providing. Adding a premium price to your services will only be beneficial if you are truly providing a better solution than other shops in your area. Don’t just throw in the towel if you recognize something that wouldn’t fit into a premium service, though. Fix that weak link so it becomes one of your strongest and use it to bolster your premium pricing.

For example, what if your service advisor isn’t selling well or providing 5-star review worthy customer service? Get them in the industry’s best service advisor training and watch as your service advisor begins to sell well and provide top customer service! Now, you know you can trust them to do well behind the counter and know your clients are going to appreciate (and share!) the amazing experience.

Another way to strengthen your value may be sharing the high-tech tools and any “green” options you have. Reports have found that many millennials and boomers are willing to pay more for experiences involving better tech and environmentally friendly options. If you don’t already offer these things, this is a great time to look into it. But that doesn’t mean you have to hold off from charging premium prices until your shop is in its “best” shape. Your shop will never reach that – because your shop should always be growing and working to adapt to industry changes and needs.

Now that you know the value your shop is offering to its clientele, it’s time to raise your prices. If you’re still digging your heels in at the thought, why? Are you worried about losing customers that only pay for the least expensive services? Or do you think your lower priced competitors will end up shining? Both of those worries have some truth to them, but the bigger picture shows why you should embrace the idea of pricing your services higher.

You will likely lose some customers – but it will be the ones who only pay for the cheapest of options, still try to get discounts, and overall end up being more work than what the minimal profits are worth. Instead, you’ll keep the customers who see the value and are willing to pay for your service as well as attract premium clients. These premium clients are ones who know that they are getting better service by paying more and are not afraid to do so. Which means you’re going to see larger profits, with less work. That sounds more like a win than a downside to me.

And yes, your lower priced competitor will likely gain those clients that left you because they were looking for the cheapest price. But consider the amount of work they are doing to not only keep those clients, but retain them with further discounting, tireless marketing, and by basically devaluing their own services. You won’t be working nearly as much because you’ve differentiated yourself as a premium shop that offers services at prices for a specific set of clients. A set of clients who are willing to pay more for the better value and will share their experiences with like-minded friends. You won’t be able to just quit your marketing and acquisition efforts of course, but it will take much less work as you’ll be marketing to a smaller niche with a higher return on investment.

For those still fearful of actually raising their pricing, there are a few ways to work around the negative feedback you’re imagining (yep, I said imagining). The first is to simply showcase the higher pricing as a new offering, making sure to highlight the value it is providing instead of stating it as raising your prices. And don’t be afraid to offer different levels of pricing, each with varying items added or taken out as you see fit. Research shows that people typically like to decide on the middle package (not too cheap, but not too pricey) when presented with three prices, so consider creating a base, plus, and premier structure for each of your services. Even if you don’t have a lot of clients choose the premier structure, it will cement the idea of your shop as a premium option in potential clients’ minds.

The biggest step in deciding on premium pricing for your shop is remembering not to devalue the work your team does and the service they provide. The automotive industry – specifically the independent automotive repair sector – has been stuck in a battle of lowering prices without rising to match the economy’s inflation over the years. Let other shops fight over the customers who only want to pay $10 for an oil change and continuously request discounts. Your shop provides a premium service, it’s about time you and your team get paid the price they deserve.

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