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Leverage is an intriguing prospect. If you own or operate a business, it’s something you want.
But what will you do once you’ve attained it? Will you abuse it? Or, will you be disciplined in applying it, always mindful of being fair and responsible, firm yet moderate? The American Heritage College Dictionary defines leverage as “positional advantage; power to act effectively.”
There are many entities within our industry that have leverage, and that’s a good thing. Competition among equals creates (or should create) a fair and balanced marketplace. However, if you listen closely, many in our industry believe all of the leverage rests with insurance providers. But how can this be when they have so much competition among themselves and are severely outnumbered by shops? The answer is simple, and anyone reading this column knows it: buying power. In this case, leverage (or buying power) was attained by pooling the resources of millions of motorists/car owners.
Yes, there’s been government assistance (seemingly every law that could favor the insurance industry has passed, while those that could undermine its leverage has failed), but the insurance companies’ ability to attract and organize millions of car owners into a few powerful buying entities has forever changed this industry.
Shops provide a service, period. A valuable service to be sure, but a service nonetheless. Vehicle owners used to purchase these services on an individual basis, but are now able to pool their collective purchases of the service and achieve much greater negotiating power by virtue of their support of insurance companies. Thus, millions of individual car owners have been able to organize themselves (for a fee) into smaller, more manageable and much more powerful groups and, in doing so, have obtained great leverage over thousands of individual shops.
I walk you through this explanation for one reason: to help you define who the customer is. This debate rages on, seemingly with no agreement in sight. Thus, your inability to find common ground on this subject and numerous others works to splinter the
fabric of your community. As a result, you lose leverage to car owners
who have found common ground through their relationship with insurance providers.
So, who is your customer? It seems simple to me. Your customer is the vehicle owner that belongs to the large buying consortium. By virtue of their ability to come together on common ground, working through their insurance providers, individual vehicle owners now have the power to act effectively (more effectively than you) in obtaining your service. Simply put, they have more leverage than you.
Shop owners need more leverage. The industry is imbalanced. But, are you willing to make the necessary sacrifices and compromises necessary to find common ground and act as a collective group? Whether you agree with my definition of “who the customer is” doesn’t matter. I’m simply trying to illustrate the major hurdles you must overcome if you have any hope of regaining some leverage. Without it, you’re in a position of perpetual disadvantage and powerless to act effectively against the buying consortiums that cause you so much frustration today.
As we begin a series of articles in the coming months in hopes of helping you come together, find common ground and earn back the leverage you need to succeed, we hope the tough medicine doesn’t dissuade you from the rehab work that lies ahead.