Quality department and pricing in the service center

3 mart 2021

The problem of the quality of service in the service center is very urgent. It is especially difficult to control the work of employees if you have a network of service centers and these service centers are located in different parts of the city, or even in different localities. Financial performance and numbers will not be able to give you an exact answer to how your employees communicate with customers, whether they are cheating customers, and whether they are cheating on you. The numbers provide information on significant and recurring violations. It is important to keep your finger on the pulse constantly. First, it is necessary to form a quality department and an internal security department. It is expensive for a small company. Therefore, as a rule, these two departments are combined into one. If the company is small, one person can perform these functions there.

Now let's talk about how to correctly set prices for services in a service center. Most employees use this method: they look at prices from competitors and set the same price or slightly lower. In the best case, they recheck the purchase cost of the parts, and if the gap remains, then they set the same price as the competitors, or lower. And if competitors do not have a price list, then they simply add a markup to the purchase price, but adequate in relation to the cost of the device itself.


Quality department in the service center


Services that use this pricing approach have characteristic features that show up in finance. They always don't have enough money. It seems that there are a lot of orders, and the work is in full swing, and all costs have been cut, but there is no money. A recalculation begins, where you can save money, how to make the staff manage to process twice as many orders. As a result, the staff simply works less than required, and they are loaded with a large amount of work. They are implementing their plans, orders are increasing, but the employees are clearly not happy with this idea. They do not have time to process all orders. The service center is engulfed in operational chaos. And again, you need to think about how to fix the situation. There is enough money now, but something must be decided with the personnel. For example, hire more people. They hire again, a month passes, and again there is no money. We are back where we started. This situation may be familiar to many.

It is only possible to cover all costs and ensure the profit for which the service center works, if the correct calculation of the markup and added value is applied. So how do you calculate the markup correctly?

  1. What is the unit cost of fixed costs per order? That is, the amount of rent payments; utilities; internet, etc. The amount that does not depend on the number of orders and remains unchanged from month to month. We divide the received amount by the average value of the order for the month. We get an approximate figure that changes slightly.
  2. What is the unit cost of variable costs per order? That is, the amount of payments that depend on the number of orders; employee salaries; advertising costs; the average cost of one attracted client, etc. As a result, we get a certain value, for example, 30% of the order value.


Pricing in the service center


The very last and most important thing is that you must decide on a profit rate that will suit you, for example, 10% of revenue. And now we get the formula by which the trade markup is calculated:


N - the cost of repair (cost of the order)
A - the cost of the part (in monetary terms)
B - fixed costs per order (in monetary terms)
C - variable costs per order (in %)

This formula can be written in Excel and, substituting the values ​​of A (cost of the part), you will receive the cost of the repair, which needs to be announced to the client. Another question is what to do if, after applying the formula, prices are higher than those of competitors? There are two solutions here:

  • reduce the value of fixed costs (expenses),
  • maintain the price shown by the formula.

Remember, there is simply no point in making repairs cheaper for you. This is a loss for your workshop. Leave it to your competitors.


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