Geico Motor Club has a new policy—they pay for gas. But don’t get too excited, it’s not what you think. They’re new policy requires towers to subsidize this service to their customers.
Up until a few months ago, if one of Geico’s insured ran out of gas, they would issue a purchase order for the service and the person receiving the gas would be required to pay for the two gallons the towing company brought out—now Geico pays.
So on the face this new policy sounds like a good deal, no longer will towers be required to extract payment for the gas—but wait there’s a twist. Instead of paying the dollar amount ($7 or $8) the towing company received prior to this change, Geico’s only paying for $5 worth of gas.
Now you might think…so what’s the big deal? Why don’t you just bring out the same 2 gallons of gas you normally would and require that the customer pay the balance? The “Field Rep” answer—”The customer is covered in full.”
This means you can’t ask that they pay any overage amount or you’ll be operating outside the boundaries of your contract.
But what about your profit?
Towing services are no different than any other business in that they must buy low and sell high to survive. You buy batteries from a distributor and mark them up for sale. You buy labor from your employees and sell it at a premium. And you buy gas at pump prices for the express purpose of marking it up and selling it to those who forgot to stop. All this is done to keep the lights on and the trucks rolling. If you lower your prices in any area you’re eating into your profit.
So what do you do?
There’s a couple of ways you could go about solving this problem. To comply with Geico’s new policy you must choose one of two options. Option one: require all your trucks to carry two gas cans, one with 2 gallons of gas for regular customers and a second with $5 dollars-worth of gas…for Geico customers. Of course you’ll have to purchase new cans and your drivers will need to keep a close eye on gas prices and adjust the level in the Geico-can as pump-prices fluctuate.
Or you could go with option 2.
Option two: Provide $5 worth of gas with the profit built into the price. In other words provide just enough gas to get the customer going while maintaining your previous profitability.
While this may seem like a petty solution to a trivial problem it’s not. Don’t slide down that slippery slope, your aim is to slowly increase profitability not move the other way. The clubs already limit how much money you make per call— are they now able to require that you subsidize benefits to their customers?