In today’s marketplace, it isn’t necessarily suicide to fight to own the customer and not to partake in direct-repair programs (DRPs). But this stance certainly does require you to be prepared for a fight every day.
Some can live and often “live for” this lifestyle. Others, however, decide it’s easier (and less stressful) to develop a business model working with DRPs.
If you decide to go the non-DRP route, there are some key moves you need to learn to avoid getting knocked out in the first round. For example, you need to offer a value proposition to the customer – the vehicle owner – that others in the area don’t provide. And this is difficult to accomplish today, since volume allows shop owners to do things they couldn’t possibly do otherwise (if the business is properly managed).
But let’s not get ahead of ourselves. Before we get started, you need to understand that, just as every boxer has his own fighting style, you, too, have to decide what kind of fighting style you’re going to use in the ring if you want to successfully compete with DRP shops.
Three fighting styles that have worked for other non-DRP shops are:
- Legislation – similar to a stylist fighter.
- Specialized market niches – similar to a boxer/puncher.
- Pro-consumer choice campaigns – similar to a brawler.
Let’s take a closer look at all three and then at how you can use marketing and value propositions to win jobs.
Legislation: Want to Dance?
Just like the stylist fighters who’ve gone before you – such as Mohammed Ali, Oscar De La Hoya and even Apollo Creed (for all you “Rocky” fans) – choosing the legislation route is for those of you who like to dance. You need good footwork and have to be quick, smooth and elusive to get the job done.
Fighting this battle requires you to get people (politicians) to listen – and to assist. For example, in Massachusetts, DRPs are currently illegal (although they’re slowly becoming legal).
The most recent example of using the legislation route to diminish insurer control over the collision repair industry is the pending bill in Texas that would outlaw insurer-owned shops. This bill is having some success because its advocates have smartly turned it into a consumer issue. Their strategy is that insurer-owned shops would be bad for consumers.
But getting favorable legislation passed requires a great deal of time and money, since this arena is normally controlled by money and political power. I’ve seen many spend their lives fighting in this ring and simply getting worn out or torn to shreds. While this fight is often left up to industry associations, many repairers have decided to fight by themselves or in small groups.
For example, some say the 1963 Consent Decree provides clear protection from “steering” work at a federal level. But I have little faith in the enforceability of a 40-year-old federal decree in today’s political environment. For those who cling to this decree, I wish them well in their fight.
I think it’s also important to keep in mind that insurers are “managed” on a state-by-state basis. What’s OK in one state may not be in another. This was the tradeoff of the McCarran-Ferguson Act.
Up until 1944, insurance wasn’t considered “commerce” and wasn’t subject to federal regulation. But in United States v. South-Eastern Underwriters Association, the Supreme Court held that Congress could regulate insurance transactions that were truly interstate. Congress then enacted the McCarran-Ferguson Act, which provided that the state laws should control the insurance business, and that the Sherman Act, the Clayton Act and the Federal Trade Commission Act were applicable to the insurance business to the extent that it was unregulated by state law.
The McCarran-Ferguson Act, broadly speaking, gives states the power to regulate the insurance industry. While state insurance statutes override most federal laws, some portions of federal law (like federal tax laws) are always commanding. Therefore, when researching whether a particular law governs, a good rule of thumb is to ask whether the inquiry is related to the “business of insurance” (where state law governs), or whether it’s related to “peripherals of the industry” (labor, tax, securities – where federal law governs).
You must also understand that auto insurance policies are contracts that are regulated by state, and not federal, rules. These contracts provide for what the customer has a right to expect. And those contracts will continue to change, and the target will constantly move. For example, if you haven’t seen it in your state yet, be prepared for “Tiered Policies.” These policies will provide a choice to the customer at the time of purchase and can include whether the customer has the right to choose the repair facility, what parts will be used in a repair and the level or extent of repairs to expect.
We seem to believe that this can’t or won’t happen, but it already has – in the medical health care industry. In fact, it’s common in other countries’ collision repair industries already. In Malaysia, the largest insurer of the country requires the customer to go to their network shops (called panels) or they don’t have to pay. In Australia, one of the largest insurers requires the customer to drop off his vehicle at the claims office and pick it up there. (Sound remotely familiar?)
For those of you who still hope to change the industry through legislation, my hat goes off to you. But I’d never recommend this fighting style for my boxers.
Niches: The Old Boxer/Puncher Routine
Like the boxer/punchers who’ve gone before you – such as Evander Holyfield – you need to have the ability to dance and the strength to give and take some powerful punches in order to succeed at specialized market niches. You’ve got to be slick enough to find a niche or invent one and aggressive enough to market your shop to potential customers.
Filling niches is an excellent way to exempt yourself from much of the industry changes that are taking place – if a specialized niche in your area needs to be filled. For example, you might want to become a specialty shop for prestige vehicles like BMW, Mercedes, Porsche, etc. The only problem is, if there are already sufficient repairers who perform work on these vehicles in your area, you’ll have a hard time breaking into it. Also, I can think of a number of small towns in my state where a specialty facility wouldn’t necessarily be a profitable venture because there just aren’t enough prestige vehicles in that market.
To even be considered as a specialty shop for prestige vehicles, you’ll have to demonstrate as high (or higher) quality of repairs, service and even image, and have customers “require” that you be the one to repair their vehicle. Prestige vehicle owners are generally of higher stature than regular vehicle owners. And they have the power through their connections to demand more from the insurer – and very often get it.
If you’re going to specialize in this niche, you must be prepared to equip your shop with the equipment recommended by the manufacturers of the vehicles you’re going to repair. You also must be able to perform impeccable workmanship and offer the customer service these customers will expect.
One way to break into this market is to partner with the dealers that sell these vehicles. (This is how many shops started their business in the first place.) To get started, put together a company resume outlining your qualities and services.
Forming a partnership with a dealer requires you to be a very good presenter and have the image the dealer principle is looking for. And if the dealer principle is looking for “cheap,” it won’t work.
Normally, as part of the deal, you’ll be required to purchase parts from them. Pick up and delivery also may be required. It all depends on how far away your shop is from the dealer. Ordering parts from them is usually the biggest drawback because the discount usually isn’t competitive and, in some cases, it makes the deal ill-advised.
In addition, most often the dealer principle isn’t the most significant influence on your actually getting vehicles; the general manager or service manager may already have a “deal” with someone else – who may be paying (graft) or doing big favors for him. This can be very difficult to break, even if the dealer principle has made a deal with you.
A couple of other niches are also worth mentioning. There’s no doubt in my mind that the typical 0- to 5-year-old vehicle that’s involved in a collision will ultimately find itself in facilities that do a large amount of volume and have an acceptable repair level. However, once the vehicle is more than five years old, it’ll likely be suffering from scratches and rust – and there may be a niche you can fill. Market yourself as the “paint specialists.” “We’ll make your mechanically sound car look new again!”
Restoring cars is also big business in certain areas of the country.
Another niche is towing. If you expand into towing and are successful at getting on the city/county list for police and accident runs, you’ll have a better chance of selling the customer. Why? Because you get to talk to the customer first. In many cases with DRPs, non-DRP shops never get an opportunity to talk to the customer. Having the vehicle gives your shop the ability to follow up on how the vehicle owner is (physically) and then to get him to want your shop to do the work. (Unfortunately, many of the shops with the towing contracts are low-life scum that sometimes extort the customer, pay the police and perform poor repairs.)
There’s another niche I’ve thought about for a number of years now – a niche that hasn’t been exploited yet on any large scale (although independent mechanics had to deal with it a few decades ago). Today, you see highly profitable mechanical work being specialized into franchises and specialty shops.
I can still remember the days when you went to the local mechanic to have the oil changed, buy tires, and get wheel alignments, brakes and mufflers. Today, however, there are a record number of franchises for each of these services as a specialty business. So why not collision repair?
We talk about fast lanes and moving vehicles through the facility quicker, but why not a total business devoted to such services? Just think about a national hookup and a building in an assembly-line configuration that can do light damage repair, paintless dent repair, scratch repair and glass work?
For more ideas on how to increase revenues, see the box, “Profit Centers to Consider.”
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Pro-Consumer: An In-Your-Face Brawler
If you choose the pro-consumer choice campaign, you need to like to get hit – and like to hit. The brawler boxer – such as Joe Frazier, Mike Tyson and Rocky Balboa – is a straightforward, in-your-face kind of fighter who appears fearless. If you’re not comfortable with this fighting style, you won’t be comfortable running a pro-consumer campaign.
It’s a simple concept really: Promote the fact that the consumer has the right to choose where his car gets repaired. Sounds like Marketing 101 – but with a twist.
Even if you are successful at becoming a niche by the type of repairs you do, your customers still have to select you. And this isn’t an easy task. The customer may not be thinking perfectly clearly when he makes the decision, so he may be easily persuaded to utilize a preferred shop.
It really boils down to this: The customer often doesn’t care where the car gets repaired. He just wants it back as soon as possible. We can’t blame him. We’d want the same thing. The mistake many shop owners make is that they believe customers are loyal. One of the most important rules of marketing is that customers forget fast.
Because years will pass before the average driver has another accident, consumers aren’t sensitized to the claims process like we are. They don’t think about collision repair on a regular basis. This is why, when the accident occurs, they often rely on the agent or insurer to assist them.
The insurer or agent will always have the most authoritative input in the minds of most consumers. And the script that’s carefully used by insurers nationwide has been scrutinized by the legal departments many times over – so what they actually say will most likely be legal. However, what the customer thought he heard may not be.
I’m sure if you’ve been in business for any length of time that you’ve had a relative or close friend who had his vehicle repaired by someone else. How could they? But after talking to them, you realized that they thought they had to go to one of the suggested shops.
How can you combat this? First, this battle isn’t for the weak or timid. Second, what I’m going to advise is a positive and aggressive campaign – rather than a “negative insurance” campaign. You can be pro-consumer without running a negative campaign.
Don’t get me wrong. Some have been successful taking a negative stance. Ohio shop owner Bob Juniper owns the Columbus, Ohio, collision market and has raised consumer awareness to unprecedented levels by taking a hard-line approach with insurers and spending a fortune on marketing. In return, he’s made a fortune. But this route isn’t for everyone. Smaller operations might want to think twice before burning their bridges with insurers.
If you want to run a positive, aggressive pro-consumer campaign, you and your employees need to understand “The 5 Rules of Engagement”:
- We’re a sales and education organization first – then we fix the vehicle.
- We use positive tactics and have a caring attitude toward customers and insurers.
- We provide the best service and value in the marketplace.
- We promote our organization in a positive manner in the community.
- We make a profit.
Regardless of whether you’re working with DRPs, these five basic rules go a long way in keeping you successful. They’ll always make sense, and they’ll cultivate a business that others want to do business with.
Market Yourself
To win jobs from DRPs you don’t have, you need to get the opportunity to apply your five rules. Marketing provides the opportunity, but it doesn’t close the sale. (We’ll look at closing the sale in a few minutes.)
Since you haven’t made any of the concessions to work providers in exchange for volume, you’ll need to establish a marketing budget to help bring you volume. Generally, this budget needs to be 7 to 11 percent of your sales to be effective. Yes, this actually means you need to budget this amount and effectively use it.
When I ask if they have a marketing budget, most shop owners have no response. They do spend some money on marketing, but however they decide to spend it is often based on who gets through to them on the telephone. It’s not a proactive method.
What exactly should you do with your marketing budget? Use it to promote your company in the marketplace.
I realize this sounds a bit broad, and it is, but where to do it varies a great deal from market to market. The commonalty is that it should reach as many people in the market as possible. It also should make them aware of your shop and its values to help convince them that they want to come to your shop.
In the marketing, you should educate the customer, but not just about his rights. A good idea is to be on the positive side of every issue – you’re a leading member of the community who supports community events and youth activities, holds open houses to schools, give presentations about vehicles and how repairs are no longer (should not be) done in dirty, unprofessional facilities. Saying that you’re locally owned and operated also works well, along with the number of years you’ve served the community. Promote the training and professionalism, and make sure you walk the walk and aren’t just talk.
An example of a positive, aggressive ad might sound something like this:
“Had an accident? We know what you’re going through. We can make the pain of the claims process simply go away. Let us assist you with all that’s needed to expedite your claim and to get your vehicle repaired back to pre-accident condition or better and back to you. We even arrange for your rental car.
“We’ve been here providing these services to our customers for over XX years. You deserve the best in a time of need. We offer a lifetime warranty and employ highly trained technicians.
“Quality is not something you must pay extra for. But it does make a difference who you let repair your vehicle. Come see us today …”
Cable TV ads by Jessen Productions are also very good at attracting responses. While these commercials aren’t informational in nature, they’re clever and funny – and studies show that informational commercials aren’t always effective since the introduction of the remote control and cable. People’s attention spans are too short to attempt to educate. But something that’s clever and entertaining tends to be remembered. Check out their Web site at www.Jessen.com.
Billboards, park benches, radio spots, sport facilities and even public transportation spots also can be very effective. Along with these, community groups, chamber groups and sport teams all provide avenues for your marketing dollars. The key is you must project a value proposition that’s better than the alternatives.
Once you’re marketing yourself to the community, you’ll have the chance to apply “The 5 Rules of Engagement.” Let’s take a closer look at all five.
Rule No. 1: You’re a Sales & Education Organization
I’ve written many articles on the need for all your front-office personnel to understand that they must be sales oriented and that there’s no need for their job if there are no sales.
Your personnel also needs to be able to educate the customer of his right to choose you and prepare him for what he’ll likely experience during the claims and repair processes. This can be a very positive experience for the customer – and you can do it without giving insurers a black eye.
For example, one of my scripts is:
“Now that I’ve explained the estimate, I want to give you a little information about what you’ll experience with the claims process. We’re not a direct-work provider for your insurance company, and they’ll prefer that you utilize one of their providers. In most cases, it’s price concessions their providers have agreed to that we don’t believe is in your best interest. We believe we provide a better service and value for you as our customer, and we guarantee our workmanship for the lifetime you own your vehicle.
“We’ve been here for more than XX years and provide the best service to our customers.
“You have the right to select any repair facility you wish to repair your vehicle, and we’ll gladly contact the insurer for you and handle all the particulars. Having us perform the work won’t affect your rates or your insurability in any way.”
This type of education may have to be reinforced a number of times throughout the sales process, but those who are good at this know it works. I have clients who even find out who else was involved in the accident and contact them – and get that job too!
Rule No. 2: Use Positive Tactics
We don’t have to use negative tactics, just positive educational tactics. If the customer asks you why the insurance company might try to send him to another facility, just say something like, “Insurers are running a business and, like many other businesses, they have stockholders who demand profits. Reducing repair costs through preferred providers, even though it’s debatable this works, is one way they feel they can reduce expenses.”
Assure the customer that you repair vehicles for this insurer often but that you’re simply not interested in providing cost concessions to attract this insurer’s business.
Rule No. 3: Offer the Best Service & Value
This will definitely be “in the eye of the beholder” – the customer. The key to remember is what’s important to a customer. It’s certainly not your frame racks, spraybooths or paint system. It’ll be how your office communicates to the customer and if you do what you say you’re going to do, when you say you’ll do it. This sounds simple, but if you can’t get this right, then the convenience of a rental car, loaner car, or pick-up and delivery means nothing.
Your people need to be trained to respond and provide the best service. For several ideas, check out www.theBOSs-Online.com, as well as the many valuable training programs out there, including those through AEII. For more information, call (317) 290-0611 or e-mail [email protected].
You also need a distinctive value proposition. In most cases, if you don’t create a distinctive value proposition, you won’t be able to compete. This will be often the greatest challenge facing the shop owner who wishes to be pro-consumer choice. He simply doesn’t provide anything better than his competition, so he hasn’t created a distinctive value proposition the customer can experience.
Distinctive value propositions include such things as detailing before delivery, free 30-day detailing after pickup, flowers upon delivery, fixing little things for little or no charge, oil change coupons or other third-party business coupons/offers, car care clinics on how to maintain vehicles, Web site vehicle updates, pagers for status updates, pickup and delivery, and many, many more …
I’m not talking about illegal methods or payoffs here – even though some will argue that it’s a marketing cost to pay a tow truck driver, insurance adjuster or police officer a fee for cars. (I’ve seen “fees” of up to 15 percent of the total job!) This is something our industry doesn’t need or want. It only perpetuates the bad image our industry has achieved in the eyes of many.
Rule No. 4: Promote Your Organization
You need to market your organization through networking within the community. I’ve seen shop logos in the middle of ice hockey stadiums, billboards in baseball diamonds and membership in every major community organization in the market. And marketing isn’t just for the shop owner. Everyone in the shop can network.
Rule No. 5: Be Profitable
Some say being profitable is the most important of “The 5 Rules of Engagement.” I won’t argue or agree, but I will say it’s critical to survival. Since you’re not on the work provider’s DRP, it may be more difficult to get everything you feel you’re entitled to.
Just remember, you don’t get what you deserve – you get what you negotiate.
One area I’ve seen great weaknesses in is estimating skills. There’s a lot of inconsistency from estimate to estimate written by the same estimator, let alone between estimators. Dave Dunn has put on an estimating program for a number of years called the “Nuts and Bolts of Estimating,” and every time he has the class write a door skin estimate, the estimates consistently range from $400 to $1,700.
But why? Well, first and foremost, we often get busy and simply forget everything we can charge for. And then we don’t have a resource telling us what we should add. Now, however, there is a program – which I’ve reviewed – that will audit your estimates to make sure you’ve added everything that you can charge – all with a click of the mouse. It’s customizable for your local market, the systems you use and how you write your estimates. It’s pretty amazing. You can check it out on The BOSs at www.TheBOSs-Online.com. Once you’re logged in on the site, go to Search and type:
Estimating.
The second part of being profitable is understanding your costs and knowing your finances. This isn’t part of this article, but later this year, we’ll run a “Shop Doc” and benchmarking article to assist in this area.
Go the Distance
There are no guarantees in life. No one is automatically entitled to get work when he opens a business. If you’re not going to build relationships with other parties in the industry, you absolutely need to build a strong relationship with consumers by aggressively marketing to them. Going the non-DRP route isn’t the easiest fight to fight, but for many, there may be no other choice.
Just keep in mind that for every situation, there are at least two sides. A smart, aggressive marketer will find the value proposition of either side – and use it to his advantage.
Contributing Editor Tony Passwater is president of AEII, a consulting, training and system-development company. He’s been in the industry for more than 27 years; has been a collision repair facility owner, vocational educator and I-CAR International Instructor; and has taught seminars across North America, Korea and China. He can be contacted at (317) 290-0611, ext. 101, or at [email protected]. Visit his Web site at www.aeii.net for more information.
