Tom Franklin (117)
In the 1940s, in the Spring the Missouri River, in the vicinity of Kansas City, would overflow from heavy Winter snows and Spring rains. The result was serious flooding of the surrounding land. One factor that made the flooding worse was the meandering nature of the river, and one of the worst meanders was locally called “Jackass Bend” where severe flooding was nearly an annual event. To resolve this situation, the U.S. Corps of Engineers dug a straight new channel several miles South of the old one called the Liberty Bend cutoff, and dammed up the old channel. And they built a new bridge across the new channel called the Liberty Bridge.
I’ve noticed that a number of shops put their customers through a few “Jackass Bends” just to get their vehicle repaired. Forms must be filled in and a customer may have to wait for an estimator and then wait for a rental car. The popular buzzword of the day is “Lean Procedures,” with a focus on eliminating unnecessary steps and delays. Much of the emphasis is placed on lean production, but lean customer processing is equally important. Many shops thrive on customer referrals and a customer subjected to a series of “Jackass Bends” is not likely to go out of the way to refer the shop.
I recently learned that a shop owner in my area had dropped a couple of DRPs, including Farmers and 21st Century (which had been absorbed by AIG). I heard that he had decided that between his Toyota and BMW dealership relationships plus his many-year prior customers, he no longer needed the hassle of increasingly onerous demands and low profits from the insurance companies.
Naturally I applaud his courage in seeking to prosper without the insurance connections, but I had to wonder if he adequately considered the long-term ramifications of his decision. Over the years I’ve observed that body shop relationships with dealerships are often similar to marriages. Many end in divorce.
By the time this shop owner realized he was under attack, it was almost too late to do anything about it. He should have been maintaining a competition conscious posture in his area. A business can’t afford to operate as though they exist in a vacuum. It can be fatal to ignore the activities of one’s competitors. An on-going marketing strategy should be in place to evaluate competitor’s strengths and weaknesses and to capitalize on any perceived “hole” in their approach to getting new business.
Keeping a simple file on each major competitor, enumerating which of the ten major business sources each one focuses on, is a start. For example, the shop owner should have known that his aggressive competitor had lost one authorized dealership position when that dealer went out of business. This should have raised an “alert flag” to strengthen and sweeten his own dealership position, knowing his competitor’s predatory nature.
Another competitor nearby picked up a major DRP relationship lost by a shop that changed hands. Not keeping track of other shop’s marketing efforts probably cost him any opportunity to compete for that DRP status. In his defense, tracking one’s competitor’s activities can be time-consuming for one competitor, let alone dozens of competitors. The best sources of shop gossip and private information are the vendors, adjusters, jobbers, delivery guys, and various sublet service people. Taking a little time to ask key questions of a few of these people who jump from shop to shop could alert a shop owner to possible opportunities (or consequences).
While it’s extremely valuable to get a heads up on a pending business threat, it may be even more valuable to spot the hole in one’s competitor’s marketing arsenal. I’ve spoken to many shop owners who avoid commercial vehicle accounts. They say they always have to discount prices and going after that kind of business is too time-consuming. They’d rather have jobs sent to them by dealerships or DRPs. If this is a hole in most of a shop’s competitor’s business mix, it could be an excellent opportunity to fill the need.
This tendency to sit and have jobs sent to a shop may allow one to get the jump on the competition and seize the direct marketing business falling through those competitor’s holes. Many shops are not willing to expend the time and effort to distribute direct literature or write business-card size estimates on vehicles in parking lots and local streets. This is an easy hole to fill.
When one’s competitors are enjoying sufficient DRP or dealership business to avoid harder marketing targets, this may also open up an opportunity to go after fleet work. Getting local government fleets, a GSA account, or national fleet services like C.E.I. and Fleet Response can take a lot of time and effort. Governments require endless paperwork and getting the attention of many fleet services can also be very time-consuming, but ultimately very profitable.
While these more difficult targets are often “holes” in a shop’s competitor’s marketing mix, the juicier finds like DRPs and dealerships may show up as available targets. Creating a list of the DRP relationships at one’s dozen or so main competitors shouldn’t be that difficult. Most shops list their DRP relationships in their literature. Going over those lists should show at a glance that those DRPs are unlikely to add another shop locally. But these days there are dozens of insurance companies with one form of direct repair or another. If there are companies not represented in your area, this may be a hole you should find it relatively easy to fill. Who would have thought your competitors could be so valuable in helping you expand your marketing efforts?
After a while we become so accustomed to that spot or tear on the sofa that we don’t notice it anymore. Perhaps we’ve had that old poster on the wall so long that we haven’t noticed that it’s hopelessly out of date and no longer a complementary decoration for our waiting area. Once we begin looking at some aspects of our shop from someone else’s point of view, we may realize that some additional resolutions to change things for the better should have been on that list.
Since more than half of our customers these days may be women, that could be a useful point of view to start with. Most of the men I know only occasionally buy new clothes or pay much attention to what other men are wearing. Women, on the other hand, are generally very aware of what other women are wearing and often ask where someone bought that purse or shoes or jacket. They have a keen eye for appearance and for detail. If clothing retail merchants had to depend on men’s shopping habits, few would have survived this recession. Shops with tasteful uniforms for employees will have a definite advantage with the clothing-conscious ladies.
Some collision shop owners and managers make it over to the SEMA Show, but I’m always amazed at how few seem to grasp the enormous profit potential for their shops. I’ve written about this before, but let me refresh you on a few details.
SEMA says their specialty automotive industry is now about $31.85 billion with 7,144 member companies. Retail sales of these products increased more than twice as fast as the general economy. One dealership body shop manager told me they did $25,000/month in accessory sales and installations. I don’t know the exact numbers, but even with our diminished economy, automotive accessories are still selling well.
One of the greatest competitive advantages is marketing data. Marketing research companies go to great lengths to acquire demographic information, and they collect sizeable revenue from client companies. Collision repair facilities have all of the marketing information right at their fingertips, but few have adequate personnel to collect it. A well-designed customer information form asks for customer and spouse’s name and anniversary, number of children and all family birthdays and additional family vehicles. Naturally it asks for the exact referral source, insurance company or agent, dealership, commercial enterprise, family or friend, and maybe even contact phone numbers. A superior form should also ask for the customer’s business or employer plus vehicles owned by the business along with some contact numbers.
In a busy shop with only one front desk person and an estimator or two, the odds of collecting this data are nearly zero. Only a shop with a trained and dedicated data collection person will have any chance of collecting this information. Few shops would even bother collecting this data, because it is so unlikely they would have anyone on hand to use this marketing data to make the follow-up calls, e-mails and proposals.
Someone selling automobile information would see this data as a potential gold mine and jump on it with great eagerness! Here would be an opportunity to sell a policy to other family members, to insure additional family and friend vehicles, and to possibly even sell some auto policies to the car owner’s employer or employees if he or she owns a business. That same opportunity exists for the shop to invite in any of these vehicles for anything from a detail to a major collision repair. There just must be a person dedicated to the task.
The KEY to the big shop advantage is personnel! With several people on the front desk, when several customers all come in at once, complete information can be collected. Multiple phone calls can all be handled at once. A person or two can be dedicated to keeping customers informed and making follow-up calls on estimates that didn’t immediately turn into jobs. Customer satisfaction survey calls that get more real responses can be made by shop personnel instead of being farmed out to a CSI company. Referral sources like agents, brokers, dealerships and local businesses can be called and thanked and, when appropriate, sent thank you theatre tickets or restaurant meal tickets.
All of these simple administrative procedures when added together produce increased business volume making the big shop even bigger. How can the smaller, independent shop owner hope to compete with this personnel advantage? Employees are costly and few small shops can afford even a fraction of the employees big shops employ.
The first step is to realize that more administrative personnel do give a shop a competitive advantage when trained and focused effectively. Now all a shop owner has to do is work out a way to get more admin people without dramatically increasing payroll. Fortunately the present job situation makes this unexpectedly easy. Many college graduates are failing to find work and may accept part-time or even training positions. High school kids with a strong interest in cars may easily be attracted to part-time entry level car-washing and repair prep, but the others, with an interest in computers, bookkeeping, or other administrative skills, may be just as willing to have a chance to apply what they’ve learned in a collision shop office either after school or on a part time basis.
A shop can also take advantage of youth training and apprenticeship programs like those offered by the Chamber of Commerce, I-CAR, ASE, vocational schools and other programs. As unemployment grows, we’re also likely to see more federal and state assistance programs, summer programs, matching dollar programs and grants.
The KEY is to go beyond collision repair tech trainees. Very few administrative job seekers may ever think of the collision industry as a possible place for an administrative vocation, but once introduced to this friendly industry, many may stay. And with a focus on data collection that few usual people in shops possess, these administrative-oriented people may take advantage of that valuable marketing data that each and every customer can provide for the shop.
I talked with an insurance agent this past week who told me “These days everyone is shopping around for a lower price.” He tries to emphasize the quality of his company’s service as being worth a somewhat higher price, but it’s not a persuasive argument in this tight economy. He’s losing long-standing customers and new ones are harder than ever to find.
A similar phenomenon is hitting collision repair shops. Several shop owners have told me they get far fewer repairs of small dents, dings and scratches these days. People are simply driving without fixing the minor damage that used to help cash flow at many shops. During a financial downturn like this, ads and promotions offering lower pricing for quick turnaround self-pay repairs may finally be effective.
I recently spoke to an insurance agent who said that in this tough economy they have had to shift their strategy. He said during normal years they had about a 15 percent attrition of customers, but they were generally able to attract at least 15-to-20 percent new customers to make up the difference. Now, he said, attracting new customers seems all but impossible, but fortunately the attrition rate is way down and by stepping up service they have almost been able to retain all of their existing customers.
To read Tom Franklin's column in PDF format, with photos, click here
Unlike people in the collision industry, I've noticed that insurance agents seem to spend 90 percent of their time on the phone. Except for keeping current customers informed on the status of a vehicle being repaired, few collision repair shops do any calling of prior customers. Granted this would be a fairly extreme way to bring back prior customers. Postcards, letters and e-mails are much more natural and time efficient ways to keep in contact with them, but when extreme downturns occur, extreme measures may be in order.
Part of the problem is due to the very nature of collision repair. Unlike mechanical shops that enjoy returning customer business for oil changes, brake-jobs and tune-ups, collision repair is not normally a recurring need.
I often compare the difference between mechanical shops and body shops to the difference between family physicians and surgeons. People go to their family doctor for regular checkups and minor conditions like a cough or flu. They only go to a surgeon when in need of major surgery. And they don't select a surgeon out of the phone book or from an ad on the radio, TV or local newspaper. Unfortunately collision repair shop customers are like the surgeon's. Body shops are only sought out when auto body damage requires special attention, and like surgeons, customers mainly look for family, friend or professional referrals rather than considering advertisements.
A shop owner would be well advised to copy a surgeon's approach to getting clients. They belong to many professional associations and maintain close ties to general practice physicians who refer patients when they need surgery. Many shop owners do maintain relationships with local mechanical shop owners who they do rely on for referrals when collision repair is needed. But from what I've been able to see, this link is often undervalued. Surgeons cultivate a relationship with a large number of physicians, since they realize that patients will only occasionally be in need of surgery. Similarly, a collision shop owner should cultivate as many automotive repair relationships as possible to ensure having sufficient sources to bring in the volume of business needed.
And so we come back to the issue of phone solicitations. Unlike surgeons who generally thrive on major surgeries, body shops do get a fair amount of minor business to repair small dents, dings, scratches, plus theft and glass damage. During tough times, many vehicle owners will drive with minor damage rather than paying to have it repaired. These are prime prospects for a sales effort offering special discounts and add-on services. Postcards, letters and e-mails may do the job. But if employees are standing around during slow times, it couldn't hurt to follow the insurance agent's example and get them on the phone to check on the status of prior customer's vehicles. And of course it would also be appropriate to ask about other family member's vehicles as well.
This may also be a time when some selective customer education could bring in added business. Many shops have alignment equipment, but few people think of a collision repair shop when they're in need of wheel alignment. Most are also unaware that minor frame damage may be why their vehicle keeps going out of alignment. A sales effort emphasizing more complete structural alignment would be appropriate. Another point of emphasis could be auto glass. Today's typical vehicle has far more glass than vehicles fifteen or twenty years ago. Adding an auto glass specialty can give a shop another point of emphasis when contacting a prior customer.
One of the most important tools when contacting prior customers, is a database of information about that customer and his or her needs. Sadly, many shops don't collect much valuable information when customers come to their shops. Some do collect birthday and anniversary information so they can send greetings at these special times. And others ask for referral information like local mechanical shops or insurance agents so they can send a thank you for the referral. But customer information forms could also ask about employer's or employee's vehicles in order to offer discounts for fleet business.
A tactful survey call (or postcard) asking about other vehicles in a prior customer's circle of family, business and social connections could yield a wealth of new promotional targets. When the usual stream of insurance company and dealership referrals have dried up, more extreme marketing measures may be in order. And these approaches that draw on years of accumulated prior customers could sustain a shop in the toughest of times.
And then there are those who will pay anybody, any time for any job they can get.
In a tough market like the one we’re facing today, it would seem this is a topic that should be considered very carefully. In many sales companies, there is an expression: “feet on the street,” meaning the more people that can be put out selling the product, the more sales that are likely to be made. An entire industry of multi-level marketing has sprung up around this concept. A huge effort is made to recruit just about anyone who has friends and family to promote the product. Even though the percentage of profit per sale gained is often miniscule, many hundreds of people have joined the ranks of Amway, Herbalife and Mary Kay Cosmetics.
Is there a way to make this “feet on the street” concept work for body shops? And is it ethical to pay for jobs brought into the shop in this way, or even possible? It’s hard to imagine a multi-level marketing program for collision repair, but it’s not so hard to imagine people who are out of work willing to do just about anything to make ends meet. Many shops employ at least one marketing person to contact insurance companies, agents, dealerships, and more. But I have yet to see a shop that employs an entire crew of straight commission sales people.
Perhaps this is a completely wacky idea, but unusual times call for unusual approaches to solving problems. Suppose you ran an ad and offered to train people to write simple estimates for you. In an earlier article last year, I talked about a simple business card estimate that could be left on a vehicle inviting the owner to come in for a more complete estimate (call me for a reprint if needed). One shop owner devised a card with the typical top down vehicle diagram found on car rental forms, to indicate points of damage. Very little training would be needed to instruct most people on doing a simple visual inspection to indicate points of damage. The difficult part would be estimating approximate repair costs. This would require some careful creativity, but since most estimates will be for small dings and dents, some simple rules-of-thumb should be manageable. A prospective customer is always being asked to come in for a more complete estimate.
Would people really go out and look for damaged vehicles and try to get business into the shop for you? Obviously that all depends on how much you’re willing to pay. Fleet management companies almost uniformly demand ten percent of a job. If you look at the difference between your door rate and the rate you give insurance companies, the odds are pretty good you’re giving away at least ten percent there. So paying ten percent to someone willing to get out on the street to bring in business for you shouldn’t be a problem. And it seems to me that this is far more ethical than slipping money under the table to some sleazy adjuster.
You might also have fun playing the rest of the multi-level marketing game. If you’ve ever been talked into going to an Amway or similar meeting, you may have some idea of what can be done. To make up for the small size of the commissions, many dramatize the game. Large score boards in the front of the room tally up each individual’s progress. Big applause goes to the largest producers. And prizes are awarded along the way. In addition to commissions, you might also give car washes, detailing or even free minor vehicle repairs to people bringing in significant business.
From what I’ve been able to see, it’s nearly impossible to avoid paying for some jobs, in one way or another. If it has to be done, it only makes sense to go in the direction of the largest volume of jobs obtainable. Insurance companies and dealerships generally provide the best volume of vehicles, but lately they have been unreliable sources. Perhaps creating your own volume of “feet on the street” could make a real difference in jobs in the shop.
All presenters agreed that shops have been using a formula that has long been outdated and that causes them to absorb paint and body material price increases unnecessarily. It is obvious that this must be changed. Just like the parts that are resold, the materials used must be listed, invoiced, and paid for.
All three provided on-screen presentations of their products and gave the sizable audience a fairly good understanding of how the products compared to one another. The three products are quite different in many respects. Mitchell RMC can be a stand-alone product or an integrated feature with the UltraMate estimating product. PaintEx is very much a stand-alone, cost accounting product. PMCLogic can be easily integrated with any of the major estimating systems.
Pricing on all three systems also differs greatly. Mitchell RMC, like the other Mitchell modules, has a straightforward monthly fee of $69. PaintEx has an annual fee of $475. And PMCLogic has a one-time activation fee of $295, plus a $99 monthly fee for one workstation or $145 for a multi-user license. A closer look at the details of each system should provide a better understanding of why there is such a difference in pricing.
The Mitchell RMC SystemBrian Bragg began with an overview of their product. Features include:
● Costing for more than 8,500 paint codes from eight paint manufacturers, including four types of paint.
● Includes pricing for solvent and waterborne materials applications
● Displays and calculates refinish materials using the new Waterborne paint tables
● Automatically calculated Labor Totals include blend and overlap times
● Complies with various state requirements for itemization of refinish and body materials costs on estimates
Bragg went on to suggest their product offers the following benefits:
► Provides exact cost calculation based on the specific vehicle’s paint type and color vs. flat dollar-per-hour method.
► Automatic costing virtually eliminates math errors
► Improves cost management and material profit margins
► Calculates the true costs for each specific vehicle repair
► Works easily with any estimating system
► Clear illustrations and translations in the Paint Code Locator
►RMC is available as a value-added feature in UltraMate advanced estimating software or as a standalone reference tool.
Bragg added that RMC helps create accurate estimates by providing paint-specific materials costing according to paint code, method, color, type, and refinish labor time. He claimed that RMC also gives you instant access to the only automated, accurate, field-tested, and industry-accepted breakdown of actual costs of primers, colors, clear coats, additives, and other materials needed to restore vehicles to pre-accident condition.
While many of the same features and benefits apply to both of the other systems as well, his competitors didn’t agree with this last characterization as the “only accurate, field-tested, and industry-accepted breakdown of actual costs.”
The PaintEx SystemBob Klem’s system has apparently been on the market for the longest time — about 12 years. Unlike the other systems, it doesn’t capture customer and vehicle information from the shop’s estimating module, but rather relies on pre-set defaults and cost-accounting values that Klem says are consistent with Generally Accepted Accounting Practices. An impressive list of 80 refinish materials items appears from which a user can select the ones to be included on the invoice. With one shop’s customization, we saw a list that had been expanded to 150 items. The simplicity of just entering basic customer and vehicle information and selecting the specific materials used to generate an immediate invoice has apparently appealed to many shop owners over the years. Although not as automated as the other two systems, with its lengthy track record the PaintEx system boasts of a long list of satisfied users. Klem said a new version of the software that will address waterborne paint elements would be available within a month or so.
One Kentucky user said: “We have been using the PaintEx invoicing program for a few years now and so far it has worked every time. I just had a Geico job yesterday that was capped at $350 and had 29.0 hours of refinish on it. The price came up to $743. The adjuster kept trying to say part of the materials was included. I told him this is what was actually used no matter what is supposed to be included so this is what it costs with a markup. The last job for him they paid for everything except for razor blades and gloves. He’s the only one so far that caused any problems. Everyone else has paid right from the invoice, no questions asked.”
The PMCLogic SystemRichard Palmer told us that PMCLogic from Computer Logic is linked via CIECA standards to all of the major estimating systems. With a 24-year track record in creating paint information software for many major paint manufacturers, plus already providing a paint materials inventory package, it was a natural step to develop a paint materials calculator program. Underlying the program is a vast database of industry manufacturer’s panel specific repair prices creating hundreds of templates covering each operation. The templates are based on “industry best practices” or OEM specifications. Each template contains a list of materials that would be most likely to be used in the replace, repair and/or refinish of a specific class of vehicle. We are told that details on each panel have been benchmarked by a selected group of industry experts and are continually updated based on repairer input.
The on-screen demo showed that PMCLogic is visually oriented for ease of use. A vehicle diagram allows the user to select panels and structural items and click on as many primary and secondary impact points as necessary. Although you are given suggested quantities of each material for each operation, the user can make modifications to fit the job and also add for additional operations. The initial estimate can then become an invoice that itemizes and documents all of the paint and materials used in the repair process. A free demo CD was provided everyone at the meeting and can be obtained by going to www.computerlogic.com. [See Related Story Next Page.]
Confusion on Prices Used in the SytemsThe fact that Mitchell averages suggested prices provided by the top six manufacturers while PaintEx and PMCLogic selects the highest suggested price provided by a specific manufacturer seemed confusing at first. The difference lies in the fact that the latter two systems are asking the user to specify the manufacturer of a component, so that only that company’s suggested price appears. And since these prices are only to be “reference prices,” it is still up to the shop to adjust these suggested prices to fit reality.
Many attendees were concerned with insurance acceptance of these products and willingness to pay the invoices generated by each system. It was noted that in the state of California, it would be illegal to invoice without specifying the items being charged. In fact, since these items are taxable, to not bill and collect sales tax would be a violation and could subject a shop to penalties.
Most revealing was a show of hands of how few in the room are presently using one of these refinish materials calculators. These three very comprehensive presentations showed that, when consistently and properly implemented, any one of these systems would increase the amount a shop can collect for paint and body materials used.
Similarly, a customer's first contact with a collision repair facility may very well determine that customer's view of the entire shop.
This was brought home vividly to me this past week. A local shop that was experiencing a major downturn in business was also downsizing expenses wherever possible. One approach was to cut employee hours or pay rather than letting them go. This was working well up to a point, but when an exceptionally good front desk lady quit and was replaced by a lower-paid trainee, I could see even more trouble ahead for this shop. I surmised the reason she left was a cut in pay or hours.
I've watched this lady at work for a while and I believe she was seriously undervalued. This isn't the first exceptional front desk person I've seen leave a shop. I think many shop owners fail to grasp how important it is for a new customer to feel welcomed and understood by the first person they encounter. I underscore the word “understood.” The assumption that any reasonably attractive, intelligent person can be quickly trained to understand collision repair customers and to handle the front desk of a shop, underestimates what that person can do to help capture and retain customers.
There is the belief that a new customer comes into the shop with a clean slate—no prior assumptions about what a body shop is or should be. This is a naive belief. Too many shops have given the industry a bad name in some areas. TV news people have warned prospective customers to watch out for inflated or fraudulent estimates. Some prospective customers may arrive already suspicious, just looking for a reason to move on if they sense something may be wrong. A front desk person familiar with the industry, the collision process, and the often difficult task of converting an estimate into a paying job can make a major difference in whether or not a customer leaves his or her keys and car.
This is not to undervalue the role of the estimator who has the final task of selling the job. But Prima Donna estimators may also fail to appreciate the value of the preliminary work of orienting a new customer who has been greeted, consoled, and somewhat educated by a knowledgeable front desk person. From my observations of the lady who left the aforementioned shop, I would have increased rather than decreased her pay and hours. I believe her contribution to the shop's capture rate warranted it.
While we're on the subject of “first contact,” it’s also a good time to mention the importance of upgrading all “first impression” elements. When business gets as tight and competitive as it is today, the last thing a shop should cut is the quality of first appearances. Shabby furniture, old magazines, worn carpeting or floor tiles, questionable rest room cleanliness and other waiting room elements may need upgrading. When we live with a space day in and day out, we tune out small imperfections but the new customer generally has the opposite experience. It's human nature to notice imperfections first. The otherwise beautiful face with a wart on the cheek will draw attention to that imperfection first. That's just how we are and it's urgent to correct any small waiting area and front office deficiencies at a time like this.
It would also be wise to carry that “first contact” mentality out to the parking lot. Because I've visited so many hundreds of shops and had to park my car to pay a visit, I've noticed how powerful an effect a carefully painted parking area with designated spaces can be. Blacktop and white paint is cheap. Right now, I would guess that most shops have painters with some time on their hands. The absolute “first contact” most visitors make with a shop is parking their car. To see a well-defined space with a small sign that says “visitor” or “parking for estimate” gives that prospective customer an immediate sense that this is a well-organized, customer-friendly shop.
If that comfortable experience is followed by a knowledgeable front desk person who greets, consoles and educates the prospect immediately when he or she enters a bright, clean, cheerful front office, the task of selling the job is more than half done.