Unethical business practice? or sound business model?

[InfidelSerf]

Ahh Sunday  normally my day off, I look forward to sleeping in to 9am and enjoying a lazy morning.
Today was a little different, I woke up at 6am and thought damn it's friggin COLD in here.
I'll get up take a leak and turn the furnace up a few degrees and go back to bed for a few hours.
I stumble out of the bedroom down the hall and open the bathroom door, turn the light on and look back on the wall in the hallway at the thermostat.. 69 not too col...wait is that a 4?  64 Brrrrr hmm it's set to 70
I turn it off and back on I hear it doing all it's whines moans and groans only to hear it shut off a minute later.
I'm guessing the ignitor is out. Looks like my plans to sleep in late are gone, oh well 6am is sleeping in compared to my normal wake up call.
So I place a call to the service company, the one that happens to have it's number on the thermostat, and the one that spends lots of ad dollars on my local radio station.  TRUSTED source for your service needs.
They answer and have a tech on his way to my house within 30 minutes.
He calls and informs me that the service call will be $99 with a $50 additional fee for emercency call.
I'm thinking $150 to prevent chattering teeth and cat cicles.  Sounds like a good deal to me.
He's about 30 minutes away, shows up and is a very nice guy.

Sure enough he gets into it and it's the ignitor.  He informs me that it's  $211 part.
"Do you still want me to replace it.?"
The whole time telling me details about how if I would have had one of their 3 tier service plans this would have only cost me $60 for the call and part.
I'm thinking, no I want to pay $150 for you to come out here and leave and still sitting in the cold.
Oh did I mention we just got hit with a freak snow storm overnight.

I suspect the price for the part is high, but hey they have to make some money somewhere, I understand mark ups.
And I'm willing to pay $360 to enjoy the rest of my day off in warmth.

So he's gone and he left me with the failed ignitor as memento of my $211 driving away with him and his white van.

I'm looking over their brochure on their service plans reading about all the addon costs and what they do and don't do for $574 a year just to be a member.

I know that $211 is a bit high for that part, so a quick search reveals that the going rate for a Norton 41-412 or equivalent replacement is in the $30 range


Wait what?  700% markup? that's ridiculous.
And know the bill did not break down the $211 to be labor and the part. It stated the part was $211

Any consideration I had to do any further business with these people was just tossed out of the window,
They could have at least said the part was $75 and the labor to install the part was $125
Still ridiculous but I'd feel better about it.  Instead I am left with the feeling that I was just overcharged 700% on a part that I could have changed out myself.
In fact I just ordered a spare ignitor that I will keep on hand.
And I will perform my own service call in the future.

Am I wrong to think that they are out of line to charge such an exorbitant mark up on such a common part to fail?

</rant>

[mtnbkr]

Same thing happened to us in 2003 during our first snow, just 3 months after the birth of our first child.  I get up at 6am to get ready for work, notice it's a bit cold, and also notice the furnace trying to start.  I wake the wife, explain what's going on, get ready for work, and do my research there.  In the end, I spent about what you did. 

While you might get it cheaper online, I understand it's a fragile part and easy to damage while installing.  Our repair guy did break the first one and had to put a 2nd one in.  We only got charged for the one that worked.  I also learned from all this that replacing the igniter in our furnace is tedious and difficult. 

Chris

[CNYCacher]

The furnace quit on one of my tenants about a year and a half ago, in November.  Guy came by and hit the gas valve with a pipe wrench and it came back on.  Told me it was an obsolete part (20-yo furnace) and hard to find.  $600 for a new one.  I told him for $600 I'll probably get a new furnace and install it myself.  He left, called back later said he had a used one "laying around the shop" he would sell me for $250 + $50 labor.  I told him to do it.
I called the tenant later that evening and she said he had come over, installed the part and it wasn't working right.  He told her she might need to flip the reset switch a few times occasionally and if that didn't work here's how to take the service panel off and just hit his thing with a hammer!    Then he just left and the furnace wasn't even working!  Didn't even bother to call me and tell me what had happened.

I go over there and the part he put in looks like he dug it out of a junkyard, and it was sticking closed.  I looked up the part online and found you can buy them NEW for $90 all over the place.

He sent a bill for $300, didn't send a second one and I never paid him.

[Marnoot]

This is why I try to replace/repair/fix stuff on my own as much as possible. The internet makes it possible to get a lot of stuff figured out that would have been pretty hard to do on your own before. Example, my furnace started making a loud unholy noise when running. Popped the front panel off, determined it was a blower-looking thing at the beginning of the furnace exhaust that was making the noise.

This being my first high-efficiency furnace, I had no idea what the part was called. Some quick Googling netted the name (induced draft blower) and what it does. Then googled the part number, and after a couple $250 ones for sale, found several of the same thing for $75. I have no doubt that had I called a service company, in addition to the $100 fee to come out, the part cost to me would have been closer to the $250 mark than the $75.

Sometimes it's not possible to do it yourself but it's usually worth the bother if you can, for me anyway.

[mtnbkr]

I'm the same way, but in my case, I needed it fixed "right now" because of the weather and having an infant at home.

Chris

[Racehorse]

I think a lot of these companies are so bad at running a business that they have to charge that much just to make a profit. Not to make a profit on an individual job or part, but an overall profit for the business. They piss away money in so many other areas, don't keep track of expenses, and leave a trail of dissatisfied customers. Then, it becomes "necessary" to rape the customers they do have so the business can turn a profit.

Although there are exceptions (probably a lot), I don't think most companies set out to rip off customers. It's more the end product of poor management.

[Leatherneck]

Small business is bleeding right now, thanks to the economy. They're in danger of failing. Any wonder they're charging all the traffic will bear?

If the nice service guy was at all empowered, you might have negotiated a bit. But a situation like this:

but in my case, I needed it fixed "right now" because of the weather and having an infant at home.

Leaves you at their mercy. They get all thay can get.

TC

[Mabs2]

The way my uncle marks stuff up a part that cost him $30 would cost you $50 or $60.
His hourly charges are much cheaper too.
Could be why he's not making much money...too nice. =\

[cassandra and sara's daddy]

i'm like your uncle.  i can tell i suck at buisness when clients pay more than i ask for  sometimes a bunch more.

[Hawkmoon]

The way my uncle marks stuff up a part that cost him $30 would cost you $50 or $60.

Any way you slice it, a final price of $60 on a part that costs $30 is a 100 percent profit. If that's "reasonable," I'm definitely in the wrong profession. I regard a 50 percent profit margin as highway robbery.

[Jocassee]

The way my uncle marks stuff up a part that cost him $30 would cost you $50 or $60.
His hourly charges are much cheaper too.
Could be why he's not making much money...too nice. =\

Don't know if it matters to ya, but there comes a point in many businesses where if you're charging too much less than the competition it drives customers away thinking there must be "something funny/suspicious."

[InfidelSerf]

I regard a 50 percent profit margin as highway robbery.

I'm not there,   I think $75 for the $30 part would have been acceptable.
Not pleasant but acceptable considering the bind I was in at 6am on a cold sunday morning.

In my line of work I typically apply a 45% retail profit margin to everything I sell.
(not cost times 45% but cost divided by .55) 

That's what is expected of me to bring in enough to cover labor costs, packaging, and all the other costs involved in
maintaining a 75000 sq foot retail establishment.

However I have also developed a reasonable mark up sense.
If I pay $10/lb for fresh #2 ahi tuna I should charge $18-19/lb to make my margin.
But I know the local market would not pay that for it.  So I take a lower margin just to get the product sold.

[MillCreek]

Restaurants typically mark up a bottle of wine 200-300%.  A friend of mine in the jewelry business tells me that markups of 100-300%, depending on the piece, are common.

[go_bang]

This all reminds me of a story that has been floating around the computer business for years.

A company's computer fails, so tThey call in their repair guy.  He comes over, inserts a small screwdriver into a hole, turns it a little, and the computer comes back up.  They ask him what the charge is and he tells them it will be $1000.  They tell him that they will need an itemized invoice, so he makes them one:

Turning a screw: $5.00

Knowing which screw to turn: $995.00

[cassandra and sara's daddy]

there a story an]bout jack kent cook and edward bennet williams.
cook sent him a complex legal question lots of documentation and after a while he got his answer a one word telegram that said "yes" and a bill for 5000 bucks   cook was livid about the bill sent him a letter asking if bennet thought 5 k was a bit steep for a one word answer.  he got another telegram "no" and a bill for another 5 k

[Mabs2]

$70 an hour for two hours and $60 for a part (marked up from the $30) is what it may cost you.
But what does being in business cost the tech?
The gauges?  $200
The recovery unit to recover the freon because of the law?  $700
The vacuum pump?  $400
The micron gauge to make sure you really DO have a good vacuum? $260
The scale to measure the freon?  $130
All the many hand tools? 
A cordless drill. $150
Wrenches, screwdrivers, etc.
Not to mention the initial investment of buying all these common parts and stocking them on the van/truck and the amount of money it costs to keep that vehicle running while hauling all this weight.
And then there's all that money poured into school, books and other learning.


So please don't think that 100% mark up is trying to rip you off.
There's a lot more to it than showing up and putting the part in.  A lot more to it than buying and selling like running a store.

[Ron]

I've never seen a $200+ igniter in 20 years of commercial HVAC-R service and installation.

Ignition modules? That could happen depending on the unit.

Just saying...

[Jim147]

I think a lot of these companies are so bad at running a business that they have to charge that much just to make a profit. Not to make a profit on an individual job or part, but an overall profit for the business. They piss away money in so many other areas, don't keep track of expenses, and leave a trail of dissatisfied customers. Then, it becomes "necessary" to rape the customers they do have so the business can turn a profit.

Although there are exceptions (probably a lot), I don't think most companies set out to rip off customers. It's more the end product of poor management.

I have dealt with a lot of the customers after these companies have had at them. It makes it hard for me to want to be in the same field. I never paid the tech's on part profit only labor.
I am one of those people that can fix just about anything. I know a lot of people that will pay whatever just to have someone fix it even if they can fix it themselves. I'm just different then most of the people I know.

You would really crap if you knew what I would pay for that ignitor.

I don't get online all the time and don't read all the post's but if you have a heating & cooling or large appliance question you can ask. I may be able to help before you shell out the big bucks.

And to answer your question. An ohm check or amp draw check would have told if it was the ignitor. Don't know your unit but I'll say five minutes to change. Unless he killed a lot of time he made (or the company made) some good money at your house. And it may have been to make up for all the money lost on the times they screwed up.

But the trip out is not all the cost. The office staff, the van, the insurance, the tools, and all the rest have to come out of that.

If nothing else it may make some of you be more self reliant.

Mabs posted while I was typing. Those are some expensive tools there. You want to buy a recovery unit, vacuum pump, ect.?

[zahc]

I regard a 50 percent profit margin as highway robbery.

When I worked retail at a popular farm supply store chain and a marina, 100% markup was common, and the rule if you weren't sure how to price something. When I worked at a popular pizza delivery chain, an extra large deluxe pizza was estimated to cost the company about $2.25 in materials, and sold for $18.99.

[doczinn]

Let's not get markup confused with profit. Depending on overhead, a huge markup could still lead to a very slim profit margin.

[zahc]

Indeed. Pizza shop profit margins are razor thin.

[T.O.M.]

I've had the furnace issues on four occassions in 9 years.  First time was a dirty flame sensor.  $120 for ther service call and for the guy to brush off a piece of metal with steel wool.  I signed up for the service plan, which also entitled me too annual inspection and cleaning.  Second time was a bad ignitor.  Cost was $50 for the service call and $120 for the ignitor.  Third time was a bad "AA" battery in my programable thermostat.  Charged $60 for the service call, and cleaned the furnace while he was there at no cost.  Fourth was a bad gas relay.  That was $250 plus the service call for $60.  Each year, I pay $250 for the service plan, and each year I've had them clean my furnace and AC at no cost.  All of the workers were polite, left the place cleaner than when they came, and did the work quickly.  None complained about me watching over their shoulders and asking questions along the way.  And, in each case, the longest I had to wait was about three hours...and that during a snow storm that left 8 inches on the ground.

I figure it this way.  If it stops working, I have no way of knowing what's wrong.  If I could figure it out, I wouldn't have paid $60 for someone to tell me to change batteries in my thermostat.

It's like the old stary about the lawyer.  Client comes in with a problem.  The lawyer writes a letter that fixes the problem, and charges $150.  Client comes in complaining about $150 for just a letter, so the lawyer writes up a new bill.  $10 for the letter, $140 for knowing what to say in the letter.  Sometimes you just have to pay someone for knowledge you don't have.

FYI, I'll give a plug for the company.  Atlas-Butler in central Ohio.

[Bigjake]

Profit is not a dirty word.

[Marnoot]

Profit is not a dirty word.

I don't think anyone's really making that assertion. If a business marks up an item 10000%, and people willingly pay it, more power to the business. My only point in this thread was that where possible, I'm going to be doing what I can myself and shopping around to buy the least marked-up/total-price item available, in my own best interest.

[Regolith]

This all reminds me of a story that has been floating around the computer business for years.

A company's computer fails, so tThey call in their repair guy.  He comes over, inserts a small screwdriver into a hole, turns it a little, and the computer comes back up.  They ask him what the charge is and he tells them it will be $1000.  They tell him that they will need an itemized invoice, so he makes them one:

Turning a screw: $5.00

Knowing which screw to turn: $995.00

I've heard that before, except it was usually in relation to some kind of complex machinery at a factory.  It didn't translate well into the computer analogy.  Mostly because even though he knew which screw to turn and they didn't have to replace any parts, it costs $15 dollars to replace a freaking case fan, and maybe $30 for a decent CPU fan.  Which means even if the guy DIDN'T know which screw to turn and simply replaced the fan, they would have saved money. 

In the factory example, having to replace the malfunctioning part would have cost them more than paying the guy for his expert knowledge, due to the cost of the part and the downtime they'd have suffered.  That's not the case in your computer example.