The Financial Perils of Not Knowing Your Customers

Too many independent service shops don’t know enough about their customers to become profitable or to recognize new opportunities for growth.

“(Shop owners) have done what they swore they would never do: that they would never be a dealership,” said David Meunier, president of the Edmonton, Alta.-based Total Automotive Consulting and Training Inc. (TACT), a provider of service shop management training and consulting across Canada. TACT’s programs include ProShop Manager and NAPA’s Performance Groups training programs. “What made independent service shops across Canada famous was their relationships with customers. But now, too many independent shops have become confused with price and have come to believe that the consumer is interested only in price . . . and are now not building those (customer) relationships.”

Meunier added this neglect of the customer has resulted in too many independent shops seeing their bottom line and profits evaporate. Any service shop can focus on price, offering low-cost oil changes and tune-ups. But every shop owner knows there is always another shop out there that will go lower on price in order to get the customer. And by competing on the lowest cost alone, a service shop will only get customers focused on price and who will only come to the shop once. The question must be for any shop: is this the kind of customer you want to have?

To get customers who are not focused on price and instead are focused on developing long-term, maintenance relationships with the service shop, the first thing a service shop owner must start doing is putting effective service writers in front of the customers, and making sure there are enough of them. For example, if a service shop has two technicians working in the bays, TACT recommends the shop should have one service writer. If the shop has three service technicians then there should be two service writers.

“So today we have a very upside down relationship (in the shop),” Menuier said. “Today, you often have one service writer taking care of five technicians, and in many smaller shops, there is no service writer at all, only a technician who happens to be free at that moment.”

Meunier believes that the service writer is the key to developing customer relationships, ones that become profitable for the service shop. The service writer will come to know the customer, understand the issues with the vehicle and communicate the problems clearly to the technician; and conversely, the service writer will communicate what the technician has found wrong with the vehicle and what work needs to be done. An effective service writer also uses customer information and shop management technologies to get the customer on a maintenance program with the service shop and to sell not on price, but on the quality of the work done and the knowledge that the shop has about the customer’s vehicle and the skills of the technicians.

“Once you have that relationship, you can start finding out about the customer and things will change from everything being about price, to things being about value,” Meunier added.

Knowing the customer and focusing on value, a service shop will avoid the trap of falling into competing on price. A customer will willingly pay a higher price, one that generates profit, for quality work and for knowing the service shop and its employees truly understands them.

D.K. (Doug) Decksheimer, vice-president of marketing with Rifco Inc. in Red Deer, Alta., agreed that knowing the customer better will make selling repairs and maintenance service easier, especially if the service shop can offer some means of paying for them.

Rifco Inc. provides Canadian independent service shops with monthly repair payment plan services that can be offer directly to customers to help them pay for automotive service and repair work.

Decksheimer said many service shop owners and managers fail to understand that many people turn down maintenance or repair work because they lack the funds for the work. Too often, the assumption is people have readily disposable income that can be put towards a repair bill or have budgeted for maintenance work on a vehicle.

“We need to recognize that no one ever saves for car repairs,” Decksheimer said. “People will save for vacations, for weddings and for household items. But when it comes to automotive repairs, it will always seem to them to be coming at the wrong time or it is too expensive. So when you have a customer hesitating and telling you ‘I need to talk to my wife,’ those are indications that the person is not debating the seriousness of the repair or service work to be done, but is looking for an excuse not to do the job because they lack the funds.”

By recognizing such hesitations and equivocations for what they may truly be, a good service shop owner should be able to find ways to help either to get the financing needed for a necessary, if expensive repair, or to help budget for some needed maintenance work in the future.

“Too often we assume that if someone puts a Visa or MasterCard on the table, that there is plenty of ‘room’ on those cards for a major car repair,” Decksheimer said. “But when you are talking about a $1,300 repair, the customer will start hedging. That is because that person is an average Canadian trying to balance a budget.”

According to the Canadian Bankers Association and Statistics Canada, the average Canadian Visa/MasterCard sale in 2003 was $102. In 1983, it was $49.88.

Decksheimer believes that because many service providers don’t understand the financial constraints their customers work under, and lack a means for alleviating that burden, they miss out on doing profitable maintenance work.

Wm. “Mac” McGovern, director of training and marketing with KYB America in Addison, Ill. said there is some $2 billion in unsold maintenance service work lost each year across Canada by service providers. He believes service providers must do a better job of understanding their customers in order to take advantage of the untapped work that is out there.

According to McGovern, too many shops are focused on repairs, replacing parts that have failed instead of selling on maintenance. He is adamant that service writers and technicians be better trained to recognize profitable maintenance and to be able to sell that to the customer. Without knowing the customer and training staff to use that knowledge to help sell maintenance instead of repairs, independent service shops will always be struggling to stay in business.