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I am going to post things I learned going, "BACKWARDS". For those of you who don't know, I spent 6 years working for an auto repair managment company that you all know fairly well. I then purchased my own shop in 2003 and purchased the land my business is on in 2005. I implemented all the things we "taught" in our management classes and found out the hard way what works, what doesn't, and what can really hurt you if you are not careful. There are many things to share but I will start with marketing since that seems to be a hot topic. I can't cover everything in one post so I will summarize a lot and then add more detail as you respond with your comments and thoughts.

 

What I have learned the hard way is there are three things people will consider to choose your repair shop, I don't care how great you are at marketing it boils down to these three things. The first, is your reputation, the second is your pricing, and the third is how you communicate/treat them. You can advertise all you want but you will not get the results you are looking for until you really understand these three things. Here is what I have done for the three things:

 

1. I first had to think through how customers are going to discover my reputation. It happens through word of mouth referral, but that alone isn't enough. It happens through affiliations like the Better Business Bureau, the AAA, and other affiliations customer's are comfortable with. But, here is where you need to think differently than a typical shop owner. Most of my customers are clueless as to what ASE is, they only want to know if you are certified. They don't understand what a Bosch Service Center or a NAPA auto care center is from their perspective. They do understand the AAA, the BBB, and.....review sites, such as Yelp to name one. I found you don't need/want to advertise on these review sites because those people that are reviewing are not necessarily the customers you want coming in. I found most of these customer's don't have money and have too much time on their hands to post reviews. They are usually college age or younger or unemployed. However, you need to understand that customers will go there for some additional validation once they are comfortable enough with their other sources. I don't have time on this post to go into great detail but this is very important to understand and work it your advantage to keep your reputation in good standing. I had to really look at things differently and break my way of thinking on this one.

 

2. Pricing is an area I feel I really made a mistake on listening to too many auto repair management consultants who have been too far removed from the auto repair industry for too long to really understand the changes that have happened to our industry in the past five years. Can you charge more than dealer list price for parts, yes. Will it come back to bite you, good chance yes. The internet in all its search abilities have given customer's more education. This trend will continue and it will get tougher and tougher especially with the economy like it is. You need to be careful here. I used to charge more than dealer list price (I still do but not as aggressively and I pay attention to it more) and we started to get a reputation as an expensive shop, good, but expensive. This is okay but as soon as the economy hits get ready for the crickets to chirp with this philosophy. Even your good customers will decided to not bother you unless they feel it is like a really tough repair issue, because they don't want to "bother" you or to pay top dollar for what they think is "smaller" stuff. One key area to all of this is your diagnostic charge. This seems to set the whole process into motion. I completely changed my philosophy and procedures regarding what we were/are charging for diagnostics and it has solved a lot of problems. Diagnostics have almost become lost leaders like anything else but that philosophy has worked tremendously for me. It is easier now to get customers in the door and I get a lot less of "shopping" and "comparing" me when it is an easier process for the customer to say "yes". We have actually increased in sales and profits following this procedure. So, charge what you need to but be careful and understand that no matter what your reputation your pricing needs to be in line and reasonable.

 

Oh, and one other thing that the auto repair management consultants taught that I found out the hard way can bite you is charging more than the dealer. Be careful here because most customer's will not understand how a smaller shop like you needs to charge more than the dealer when the customer looks at the massive dealership and common sense tells them the overhead is way higher. I went down this road with "longer warrantys" (which I still offer) but it is still a hard pill for the customer to swallow, no matter how good you are. Customer's don't want to feel like they have been taken advantage of. The dealers are offering many good deals these days so have a battle plan ready. My battle plan is on the front page of my website and on my "specials" page. You can read at www.robertsautoservice.com and you will see how I compete with the dealer, make a profit, and make a customer feel good about choosing us.

 

3. Once customer's are comfortable with your reputation and feel your pricing is reasonable, how you treat them will make all the difference in the world. We have had countless customers tell us we were either a little more or a little less than another shop but how we communicated with them was night and day difference so they were choosing us. Customers talk to their friends, family, and coworkers about their auto repair problem. You can imagine the horror stories they get told. When they finally do call, you need to slow down and talk to them like you would a friend at first, not like a doctor/patient, that will come later. I don't care how busy you are. Once the customer feels the difference in the communication they will then start to tie in your reputation with it feel good about you. Then when you ease into the pricing/diagnosis, call them with authorization, you can become more doctor/patient like. Then when they pick the car up it goes from doctor/patient back to friend again. This ties everything together and not only gets the customer to come to you and then authorize the repairs, it turns them into marketing horsepower for you where they will tell others and write great reviews.

 

 

So, once you understand these three dynamics of reputation, pricing, and communication, and once you master them, then, and only then, will your loss leaders and marketing programs start to work and have great value. I will share these "loss leader" and "marketing" ideas with you all in a future post.

 

I would love to hear your comments.

 

Keith - Robert's Auto Service, San Diego, Ca.

 

 

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Keith, you gave us valuable information. This is what I was waiting from you. You took your background from the management consulting side, applied it to real-world and found out what works and what does not. Coming from you, it’s like an endorsement.

 

I agree with your assessments, especially on pricing and competing with the dealers. We have also changed our strategy on diagnostic labor and made changes due to economic conditions and the push from the dealers.

 

This is great stuff Keith. You came through for ASO and I thank you.

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Keith, that is really good information you posted and very similar to what I have experienced. Could you expand a little upon diagnosis and using it as a lose leader. How are you doing that? Also I want to say I really like your website. It may be the fastest loading, running site that I have ever visited. I really like that.

 

XRAC,

 

Absolutely. Many of us shop owners get stuck in small details and miss the big picture sometimes. We feel proud of ourselves (and rightly so to a degree) and feel that we should charge for diagnosis and the customer should pay. That's fine, I don't have a problem with that. When economic/marketing changes occur your business plan should be strategic enough to adapt, change, and still give you the profit you need. In other words, what you want is profitable sales and happy customers. Period. If the economy/market environment changes to keep you from charging upfront then think bigger picture.

 

We were charging 1 hour labor for check engine light or driveability diagnostics $95 and 1/2 hour for everything else. If you had a check engine light on and wanted your brakes checked you would be signing an estimate with me for $142.50. This was fine until about 2007/2008 when the economy hit. Charging to check out a vehicle became a huge hurdle for people suddenly. I started to get tons of resistance, and then, people wanted to know if we would waive the diagnostic charges if they authorized the repairs. We did this with brakes but not check engine lights. Car counts started to dip. It seemed all my competition was telling people they would waive the diagnostic charges if the customer authorized the repairs. I have a service manager who worked for a Toyota dealership for a couple of years before he came to me and he said they would waive the diagnostic charges at the dealership if a customer authorized repairs. My General Manager and technicians were adamantly against this but car counts were tankin and the vendors were a knockin!

 

I noticed when customers did come in during the 2008/2009 slow down it would only be for big repairs. I heard them tell me how they didn't want to bother me with "small" things (which they perceived were brakes, services, etc. ) because they knew we were expensive but honest, ethical and a great shop. What this told me is people knew we were the shop to go when calamity occured but not for the day to day typical stuff where everybody else ran competitive pricing. People were going to AAMCO and other "free diagnostic" places then coming to us to ask us to do the repairs saying they had them diagnosed elsewhere, all because of the cost up front. So, you can imagine how those conversations went. This wasn't just a handful of people either, it was becoming the majority of customers. By the way, my General Manager took some time off to help me because he could afford to during the economy times. After six months, he and I had a conversation where we shared this information. He told me a story about how he bumped into one of our good customers in a shopping store and they told George how they knew we were good, honest, but they had a $250 estimate just to check all the different things they wanted checked on their vehicle before they could get any answers. We agreed we needed to tweak our business plan.

 

I started offering a "check engine light" or 'diagnostic" special of $59. I found out that all the "selling diagnostic" stuff being taught by auto managment consults had many customer's choking on things. Like anything it would be easier if all competing dealerships and other auto repair shops were doing this but they weren't. In my area there were check engine light diagnostic specials everywhere, many telling people no charge. (If you think your good customers aren't interested in free don't kid yourself.) They will go there to "check it out" since its free. Once I started the check engine light special of $59 approx. 70% of the hesitation went away. Car counts started to increase and sales were rolling again. I discovered you need to make it very easy for people to get the process started. The easier and more comfortable it is for people the more likely they will say yes to what you are going to recommend when you check the car over. I only had a handful after that ask if I would waive the diagnostic charge if they authorize repair. I play that one by ear..is it a first time customer? Do they seem legit? Etc.

 

I also, discounted my minor service, intermediate service, and major service pricing. The dealerships in my area are very agressive here so I needed to be in the same ballpark as them.

 

I continue to run my $59 diagnostic special. Here is an overview of what happened, how we teaked the business plan and still make great profit and have happier customers.

 

1. Economy hits us in July of 2007. We were up 6% in sales through the end of June that year and we ended up down 8% when the year was done. We had an ARO of $475 but we took a hit in car counts.

 

2. 2008 continued the slump and we maintained our ARO of $475 but ended up down 5% in sales for the year. The very end of 2008 saw the big hit on the economy. Of course I downsized and made the appropriate changes but any smart business person will tell you to be careful of the downward spiral and get the ship turned around.

 

3. in 2009 I asked my General Manager to take some time off and I implemented by diagnostic special, service specials, and flush specials. I printed them out from the website and put them on my service counter and told people that during these tough economic times we are here to help. You don't have to worry about printing out a coupon, we'll make sure you get the special. Sales ended up down 5% again but guess what, car counts increase 6%. The ARO went down to $375 but we built something very positive making it easy for people to come in.

 

4. 2010 I took down the service counter signs but left the specials on the website. We are kind of splitting the difference from where we were before to where we had to go in 2009. Our business plan has changed to making it easier to get people to come in and guess what? We are up 5% this year and the ARO is back to $475.

 

You can see all my specials on my website and then beat the dealer guarantee. I have dealt with enough good customers in my area to know you can't be more than the dealer. You can try all you want and believe that all you want but no customer will understand it. They look at the huge dealership facililty then look at your facility and the customer's common sense buzzer goes off like mad when you try to do that. Customer's want Value and thanks to the internet and how it has empowered customers these days price has become more of a value to them. I'm not saying its all about price because it isn't. But the way the customer's feel they are getting a good value is to be one step ahead of the auto repair shop and our ugly reputation through the years. The internet has made this worse for us. So, I changed my business plan to make customer's feel more comfortable and at ease up front and then ease into the repairs required and other services. I found this helps customers come back to us for the "easy stuff" like brakes, etc. and at the end of the day we have profits, sales and happy customers. Isn't this what you want? So get out of the battles and win the war. Have your policies but also your strategies. Business is more like a chess game than a strict set of guidelines and policies.

 

That's what I am doing and what I have done.

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  • 2 weeks later...

Good stuff! Thanks! Your $59 is very similar to what we have done. Our basic diagnostic charge is one hour ($78) but we have been running a perpetual discount special of 40% off which makes it $46.80. This is the way we have competed with the "free diagnostic" shop. It has been effective for us.

 

How do you handle very complicated diagnositic work. The one's that you know going into that it will require a lot of time? And how are the techs reacting the reduction in labor time?

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If we get into the more complicated stuff we charge accordingly and we will sometimes ask the customer to authorize a certain amount of time upfront. Examples of where this applies is diagnostic engine tear down or chasing an electrical problem. Other times we tell them we have no idea how long it will take and we will have to charge accordingly but we will be fair. Of course our guys don't like it and gripe some but it is not a deal breaker. The way our compensation works it is not bad since our guys are paid a percentage of parts and labor with a base guarantee.

 

I am a little concerned that we may be headed down a slippery slope for smaller shops and may not be able to get back up the hill again. If I am hearing this correctly; use diag fees to maintain healthy car counts. I would agree to this, however, smaller shops may find it hard to be profitable because they are physically limited by their size. Dealerships, large franchise store and large independents (those facilities with more than 8 bays) can support a lost leader approach because it gives them the opportunity to not only fix the check engine light but to up sell other related service work they identify while the car is being repair.

 

Now let's look at a 2 or 3 bay shop: A check engine light repair can tie up the main tech for an hour or so performing the analysis leaving the other bay or 2 open for other work. The problem is there's not enough space or man power to keep a steady flow of more highly profitable work; such as brakes, steering, preventive maintenance and so on.

 

Now take a 12 bay facility; they can have performing analysis work while the other bays are performing service work, this keeps a steady flow of income which offsets lost leaders.

 

This is why and how dealers and large franchise stores take the lost leader approach.

 

I guess my fear is that smaller independents will use the lost leader approach with respect to analysis work but may not be able to recoup because their size prohibits them from capitalizing from more profitable work. Their efforts will be to get the car done and on to the next.

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Joe, that is a very good point. We have seven bays and five techs. If we give up an hour of time percentage wise that is not as great as a 1-2 mjan shop giving up an hour. In addition our labor rates and parts markup is also usually higher than the small shop which is also an advantage if using a lose leader.

To be honest, smaller shops really need to find their niche in the market place. It will be tough, but possible. They need to find their competitive advantage. Their size will only become an issue if they try to compete on the level of a new car dealer or large franchise store; for example, providing loaner cars.

 

In other words, don't bring a knife to a gun fight.

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  • 6 months later...

I find it easier to keep a customer then replace one. I do almost no advertisment. I send reminders to my exixting customers and just use word of mouth. I am off the beaten path so no drive by traffic. Your best advertisment is great quality and service. Who wants an ad placed with everyother shop in town? If someone moves into town is that were they find there shop? If there car needs a lof do they lok in the phone book or paper? just my .02

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I enjoyed your post I agree with with a lot of what you've talked about especially talking $ money for diagnostic fee over the phone I actually raised my prices instead lowering them or FREE I used to sell a SES or CEL diagnostic 1 hr labor $101.83 now I sell it for 05 hrs @ $121.83 all of the tech's in shop agreed to it and I never loose a phone shopper to price then once in the shop they are hooked on us:)

Thanks again for sharing your insight.

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Just food for thought:

 

According to repairpal.com Check engine light diagnosis for zip code 92109 is $90.00 - $115.00. (This should be the average charge in this area)

 

I do not support repairpal but it can be used for price shopping.

 

There is nothing wrong with using any service as a loss leader (properly done this can be effective) and I agree that diagnostic testing has become what I call menu priced.

 

We have to be competative on common service items such as LOF, alignment, brakes, fluid flushes, tire rotation, tire balance and now our initial diagnostic testing. We don't have to be the cheapest but we must be in the ballpark of most others offering these services or we may be precieved as too high. If we are too high on these menu items we may never get the chance to turn some people into customers. The thing to remember is we need to make a reasonable profit so we may have to adjust rates accordingly on other items to ofset our menu prices.

 

Pricing is an important part of business and most auto repair shops don't spend enough time planning thier pricing strategy.

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  • 2 weeks later...

Just food for thought:

 

According to repairpal.com Check engine light diagnosis for zip code 92109 is $90.00 - $115.00. (This should be the average charge in this area)

 

I do not support repairpal but it can be used for price shopping.

 

There is nothing wrong with using any service as a loss leader (properly done this can be effective) and I agree that diagnostic testing has become what I call menu priced.

 

We have to be competative on common service items such as LOF, alignment, brakes, fluid flushes, tire rotation, tire balance and now our initial diagnostic testing. We don't have to be the cheapest but we must be in the ballpark of most others offering these services or we may be precieved as too high. If we are too high on these menu items we may never get the chance to turn some people into customers. The thing to remember is we need to make a reasonable profit so we may have to adjust rates accordingly on other items to ofset our menu prices.

 

Pricing is an important part of business and most auto repair shops don't spend enough time planning thier pricing strategy.

 

 

I dont feel you should compromise the cost to complete a job just to be within the area of others. What if your overhead was way less would you be ripping ppl off? Not at all I feel prices shoud me figured due to amount you need to make a comfortable profit. I will not change my pricing on any work just to be competetive with another shop. DO they do the job exaclty the same way? Do they have insurace. Do they offer the same waranty. Will they be there if there is a need for the warranty. Is the warranty nationwide. Do they provide the same quality repair? the list goes on and on. I do not knwo what others charge and actually do not need to.

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  • 1 month later...

I dont feel you should compromise the cost to complete a job just to be within the area of others. What if your overhead was way less would you be ripping ppl off? Not at all I feel prices shoud me figured due to amount you need to make a comfortable profit. I will not change my pricing on any work just to be competetive with another shop. DO they do the job exaclty the same way? Do they have insurace. Do they offer the same waranty. Will they be there if there is a need for the warranty. Is the warranty nationwide. Do they provide the same quality repair? the list goes on and on. I do not knwo what others charge and actually do not need to.

 

I think you hit upon a great point. Different shops have different expenses and conduct business differently. This means that the cost of doing business is different and profits are determined by this. With that said, we need to understand the competition and price accordingly. The balancing act between being profitable and competetive is a tough battle. I just don't want the conusumer to start making decesions based on price alone...I feel we are headed in that direction...thanks to the "world wide web".

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  • 1 month later...

I think you hit upon a great point. Different shops have different expenses and conduct business differently. This means that the cost of doing business is different and profits are determined by this. With that said, we need to understand the competition and price accordingly. The balancing act between being profitable and competetive is a tough battle. I just don't want the conusumer to start making decesions based on price alone...I feel we are headed in that direction...thanks to the "world wide web".

 

 

We are in a digital world and no one can withstand 24/7 scrutiny.Cheaper prices are loyal to no one or no one country. Wait until your customer's hand held device apps be used to compete with another shop and scan your body/voice for Stress/fibs/greed real time.

 

Stay Real and true to the Good Fight, Happy Easter

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