Direct “customer pay” collision repair is the only segment of the collision repair market that has shown growth for the past several years. Depending on the source of the data, customer pay now represents 20 to 25 percent of the total ROs written in collision repair shops in the U.S. annually. That’s a lot of work!
Even throughout the recent recession, customer pay work has grown. Why? Customers have high deductibles. They fear rate increases or cancellations by their insurers if they turn in claims. With the average age of today’s vehicle at a record 11 years, many people simply don’t carry comprehensive and collision coverage on their older vehicles.
Measure to Manage
Step one in the process of increasing customer pay work is to measure what percentage of your current business it comprises. Above, we noted that customer pay is running at 20 to 25 percent of total U.S. volume. What’s the percentage in your business? If 20 percent of your current business is customer pay, great job! But most shops will find that their percentage is closer to 10, which indicates an opportunity to significantly increase sales by developing a process to sell customer pay.
If you have a management system, checking how much customer pay you do should be easy. But be careful! How is “payment source” set up in your system? Are your estimators accurately recording the source of payment on every RO? Check to make sure you have accurate data going into your system.
Measure your close ratio on customer pay as well:
(Customer Pay ROs / Customer Pay Sales Opportunities x 100 = Customer Pay Close Ratio)
The number should be better than 50 percent.
No management system? Go back through 60 days of ROs and check the payment sources. If you haven’t been tracing these sources, start today and check your payment sources in 60 days. Then get a management system.
Waste Not, Want Not
I recently observed an estimator working with a customer. The estimator, considered “great” by his manager, took the time to generate an estimate, review it with the customer, then let the customer walk out the door.
I asked the “great” estimator why that one got away.
“Turns out it was just a customer pay job,” he said. “I just didn’t want to waste any more time on it.”
How sad! The estimator took the time to write an estimate and review it with the customer, but when the customer told the estimator that they would be paying for the repairs themselves, the estimator quit selling. The customer walked out the door, probably to another shop who values the customer’s money more.
Customer pay dollars are just as green as insurance company dollars. The estimator noted above was known as a “great” estimator when working with insurance repairs, especially DRP jobs. But somewhere along the line, he succumbed to a disease a friend of mine refers to as “DRP complacency.” He’s comfortable processing a DRP job, but he’s uncomfortable processing a customer pay repair. So he lets those jobs, and their dollars, walk out the door.
Processing a DRP repair and doing all the damage evaluation, parts processing, file documentation and claims administration takes a lot more time than processing a customer pay repair. Plus, there are no mandatory concessions.
Smart collision repairers understand the value of customer pay and aggressively sell it. Don’t waste the opportunity!
Types of Customer Pay
There are two types of customer pay: 1) repairs in which the customer is paying for the entire repair, and 2) additional services that can be sold to the customer when processing insurance-paid repairs (upselling). Each one of these is different and requires a different sales technique. However, both fit into a conventional sales cycle. I went over the steps of that sales cycle in a previous article (Back to Basics: Selling, BodyShop Business, December 2010): qualification, presentation, close, handle objections, close and satisfy. No matter the source of repair, each customer should go through that cycle.