I recently attended an industry meeting where one of the main topics was close ratios in the collision repair industry. More specifically, the focus was how – or even if – customer pay estimates close ratios can be improved.
All in attendance had a voice, but three main schools of thought came to light: first, that customer pay work is an uncontrollable shot in the dark; second, that you can get the work but only if you compromise quality and reduce the price to the point that it is not profitable; and third, you can improve customer pay close ratios and maintain profitability all at the same time. If you have followed this column I hope you can guess where I stand on this issue.
Customer pay work is a growing reality in the collision repair industry. Vehicle owners are keeping cars longer and dropping collision and comprehensive coverage on more and more of their cars. For vehicle owners with coverage, the economic reality is higher deductibles – often $750, $1,000 or more. Add to that the higher rate of uninsured drivers, and the reasons behind the growth of customer pay repairs becomes clear. Like it or not, the trend is not likely to reverse itself for the foreseeable future. So how can you make a profit and capture those customer pay repairs?
To answer that question, I will first lay some groundwork from my past columns. Assuming your shop owns your customer from the first point of contact, be it a phone call or visit to your facility, and that you can create and sell a complete repair plan, then you have the pieces to improve customer pay close ratios.
You need to first think about how you qualify the payment source. Are you dealing with the insured, the claimant, a fleet or a customer pay situation? This categorization relates to a disturbing trend in which vehicle owners do not understand what it takes to safely restore pre-accident condition to their car. Some may even try to make a profit on the repair. Without education and building an understanding of the value, most consumers do not fully comprehend what the repair process requires or how it can compromise their safety and future vehicle value.
If you discount the theory that you can't improve your share of the customer pay market, then it would behoove you to consider what I think are the two most successful variations on the same core theme.
First, understand that you need to educate your customer the same way for customer pay work as you would for insurance work. After all, if restoring safety and quality is the same no matter the payment source, why do you approach the baseline need of your customer with a lower expectation right from the start in customer pay situations? Think "self-fulfilling prophecy."
If you are selling customer pay to the client, do not assume they just want a cheap solution. Often, without explanation, price becomes the deciding factor. When considering education and value, the customer often decides price is replaced by value as the number one deciding factor. If you understand that starting with a good complete repair plan is a must, you can give the customer options.
Both of the following sales processes will work; find the one that works best for you and your company. First, write a complete repair plan, review it with the customer and build the value as to why all of the proper steps need to be performed. Give examples of items that cannot be repaired or replaced to reduce the cost but make sure you explain the effects of not doing each item. Again, think and sell value.
In option one, you write three estimates: good, better and best. Review each thoroughly and let the customer choose. In option two, you write one complete estimate and then create negative supplements, removing value in each. Again review the good, better and best options with the customer, but this time they see more than price being removed. A negative supplement line allows you to again create value in the full repair, document what is not being done and close the job. Try both options in your shop, make the process your own and get the keys. In my experience, you will be surprised how many customers choose the best and thank you for your professionalism.