Four ways independent auto shops can compete with dealerships

Introduction

Attracting and retaining new customers is never easy in the auto repair business. But for shops that are ready and prepared, the competitive landscape is changing in three crucial ways. 

First, more Americans are driving older cars that require more maintenance and repairs. The average car on U.S. roads is now more than 11 years old, the oldest average age on record, according to IHS Automotive. 

Second, as many Americans put off investing in new cars, they will have more money to spend on the cars they currently have. The Gallup U.S. Daily Survey, which tracks overall consumer spending to estimate a monthly daily spending average, found that Americans’ spending steadily increased from just $59 in March 2009 to $86 in March 2015, suggesting that Americans are feeling more economically stable and more willing to spend money when necessary. 

Third, as more Americans drive older cars, the number of vehicles no longer under warranty increases, meaning customers who previously preferred dealerships for maintenance and repairs due to warranty guidelines may be exploring new service options.

Independent repair shop owners who want to make the most of these opportunities must set themselves apart from the competition. While that can be difficult, particularly when competing with large dealerships that have economies of scale and marketing budgets, several factors are working in the independent shops’ favor: they just need to know how to take advantage of the opportunity. Here are four ways independent shops can get potential customers to notice them, come in, and keep coming back.

HERE ARE FOUR WAYS INDEPENDENT SHOPS CAN GET POTENTIAL CUSTOMERS TO NOTICE THEM, COME IN, AND KEEP COMING BACK.

Chapter 1: Improve customer service & marketing

Dealerships have a natural advantage over independent shops because of the amount of advertising and marketing they can do. While smaller shops don’t have the financial means to invest in wide-scale marketing campaigns, they can market themselves another way: by providing great customer service and getting happy customers to do their marketing for them. If customers believe that your shop provides professional, fair, quality service, they are going to tell their friends, family, and coworkers about it. A 2013 survey on auto repair conducted by AutoMD.com found that independent repair shops already have a solid foundation when it comes to making customers happy. The survey found that:

• Consumers trust independent shops over dealerships two to one 
• 80% of consumers feel they have been overcharged for a repair at a dealership 
• Most consumers believe they have better relationships with mechanics at independent shops

To successfully stand out as an independent shop worthy of consumers’ dollars, you must continue to retain and build on this image of a trustworthy, relationship-oriented auto repair service provider. Here’s how:

Improve the customer experience

Often, since customers aren’t familiar with the technical aspects of auto repair, they will judge your shop based on the experience you provide. Everything counts, from the way you answer the phone to the attitude of your employees to the appearance of your shop. The most successful independent shops are spotless — not only in their waiting rooms but in their service bays, bathrooms, and behind the counter.

 And while customers may not judge you harshly if you aren’t using technology in your shop, they are going to recognize if you are. The more your shop uses technology, the more innovative and professional it will look.

Some shops, for example, use digital customer profiles into which customers can input their vehicle information, their contact information, and their preferences, such as what time of day they prefer to be contacted and by what method, such as a phone call, text, or email.

Others are using digital invoices that reside on a tablet at the front desk. When customers check out, they can review their invoice on the tablet, and then the shop can offer to email the invoice directly to customers, who are grateful to have a record of their service that they can easily retrieve, if needed, without having to rifle through their glove box (If this sounds like the Apple Store experience, it is).

As an added bonus, customer information stored electronically is easy for shop owners to sort through the information and use in the future for customer follow-up and tracking.

Show customers they are your priority

A great customer experience also comes from how easy it is for them to use your shop. Make it clear that you prioritize their needs by allowing them to schedule appointments online and by offering flexible hours. Also, offer various payment options, such as payment by credit card or payment by installments.

Customers will judge your shop based on the experience you provide. Everything counts, from the way you answer the phone to the cleanliness of your waiting room to the attitude of your employees.

Market to your core audience 

Since much of your success will come from whether your current customers make referrals to you, think carefully about your typical customer profile and what they are looking for in an auto repair shop.

Increasingly, women are taking on the role of managing the repairs and maintenance of their household vehicles, and they often value different things in an auto service provider. For instance, a clean waiting room and bathroom is important to them, as is the cleanliness of your staff. Your staff should wear clean uniforms, their shirts should be tucked in, and they should wash up before interacting with customers and after working on vehicles.

Another critical element to consider is how your technicians and sales representatives approach women. Women want to feel respected and acknowledged in their role as decision-makers in these interactions.

Don’t just tell customers how much their repairs will cost; explain the service associated with that cost. Your customers want to feel that they are being educated about their vehicle, not that they are being sold unnecessary repairs.

Make your presence known online 

Ensure potential customers can easily find out more about your shop online. Make sure you have a website that looks professional, is easy to navigate, and includes key information such as your location and hours, photos of your shop, and customer testimonials about the positive experiences they have had with you. Also, claim your “Google My Business site,” a free Google listing that puts your business information at the top of search results when potential customers Google the name of your shop. On your Google listing, include as much information as possible. Often this listing may be the first impression potential customers receive of your business, so make sure it’s a good one.

More ways to delight customers

Here are some other ways to provide a top-notch customer experience that could result in new business:

• Create a script for how employees should answer the phone and respond to various customer service scenarios. To foster a personal connection, make sure employees share their names with customers, ask for the customers’ names, and use the customers’ names frequently during phone conversations. 
• Distribute a tablet to waiting customers and ask them to fill out a customer satisfaction survey. This will help you identify customer service areas you need to improve, and it will make it clear that you prioritize the customer experience. 
• Create checklists that your front-office employees must fill out daily, such as whether they have restocked the coffee table and cleaned the reception area.

To further ensure your current customers are sending others your way, offer an incentive for customers to make referrals, such as a free oil change or 10 percent off their next visit.

To foster a personal connection, make sure employees share their names with customers, ask for the customers’ names, and use the customers’ names frequently during phone conversations.

Chapter 2: Focus on your staff

Effective and customer-oriented employees will improve shop productivity and increase customer satisfaction, both of which will have a positive effect on your bottom line.

Here are a few things to focus on to ensure your staff is helping you retain your current customers and attract new ones: 

Hire right 

A great staff starts with finding the right people, so a strong hiring process must be your top priority. Qualified master technicians are in high demand in most areas of the country, and most of them already have jobs. That means shops are usually competing to grab each other’s master techs. Unfortunately, there’s no perfect solution to that problem. But here are some tips:

• Know how many master techs you need, if any. Master techs are necessary for diagnostics and complex repairs, but not for oil changes, fluid exchanges, brake inspections, and many other basic maintenance items. So take a hard look at your mix of services, and be sure you’re not assigning a highly trained and highly paid technician to work that could be handled by a B-level technician. Once you do this, you may find that you don’t have enough work for more than one master tech, if that.
• Prepare to pay for quality. We know money is often tight, but hiring and retaining highly qualified technicians comes with a cost. The median income for a master tech is more than $35,000 a year, but experienced techs can make as much as $60,000. Take some time to understand what master techs make on average in your area, and offer a bit more. You also need to offer the usual perks that highly skilled workers expect to earn these days, including flexible scheduling, a few weeks of paid vacation, and health benefits. Finally, master techs expect their income to be consistent. If their pay fluctuates with your car count, you can bet they’ll bolt the minute a more reliable offer comes along. Such pay and benefits do get expensive. But losing and then trying to replace a technician could cost you 20 percent of that employee’s salary, and then you’re at square one with the new person.
• Grow your own master techs. If there’s a young, ambitious B-level tech already working at your shop, consider training him or her yourself (if you can), or paying some or all of the cost of training classes. (You can find accredited programs near you here.) And because modern cars are getting ever-more technically advanced, your existing techs will need ongoing training too, so offer them continuing education opportunities. If you’re worried you might be paying to train techs to work elsewhere, consider fronting them the money as a loan that they pay back in installments via small deductions to their future paychecks (You’ll want to make sure you consult an attorney to set up a program like that).

Evaluate performance

Make sure your employees have clear job descriptions so that they know what you expect of them. Then, hold quarterly performance evaluations with each of your employees. Before these evaluations, determine whether the employee is fulfilling every responsibility listed in his or her job description. This will help you determine what strengths and weaknesses to discuss with the employee during evaluations.

A great staff starts with finding the right people, so a strong hiring process must be your top priority. Qualified master technicians are in high demand in most areas of the country. 

When discussing employees’ weaknesses, help them identify how they can improve in those areas and ask for their input regarding that. Remember, it’s just as important to acknowledge specific areas in which the employee shines during the evaluation.

At this point, be as specific in your praise as possible. Rather than saying, “You interact very well with customers,” for example, say, “I’ve had six customers come up to me this month to share the positive interaction they had with you.” Pointing to specific examples makes it clear to employees that you are present, engaged, and fairly evaluating their performance.

Hold staff accountable 

While performance evaluations are a great opportunity to identify general areas of weakness an employee needs to improve, don’t wait to address larger performance problems when they crop up. As soon as a problem arises or escalates into a broader issue, speak to the employee about the problem privately.

Just as it’s important to share specific examples when praising employees during evaluations, it’s crucial to share specific examples when sharing criticisms. For instance, rather than saying, “You are always late,” say, “You’ve been late three of the past four days.”

When discussing employees’ weaknesses, help them identify how they can improve in those areas and ask for their input regarding that. Remember, it’s just as important to acknowledge specific areas in which the employee shines during the evaluation.

After discussing the problem, make it clear to the employee that you are willing to work with him or her to resolve the issue. Ask “How can we help you get back on track?” An employee who is engaged in identifying the solution will be more likely to follow through with the plan for improvement.

Train well

It’s critical to establish an ongoing training program to ensure all employees — not just the technicians — are trained appropriately. Front-desk staff, of course, should focus closely on customer service and billing; while technicians should know how to complete an inspection and how to explain repair needs to customers.

One key training area is customer education, particularly among technicians who must explain repairs, inspection results, and maintenance needs to customers. Often, visual tools can help technicians explain what repairs are needed and why.

Consider creating a digital inspection form that technicians can use to document repair issues based on the severity of the problem, upload pictures, and even link to videos explaining the basics of the vehicle’s needs. (Tip: Have an electronic library of YouTube videos organized by repair topic so that technicians can quickly find relevant videos).

If the inspection form is completed electronically, technicians can also offer to email the report directly to customers. Even if customers don’t elect to take care of all the recommended repairs at that visit, they then have the report as a reminder of future work that is needed. Later, your shop can follow up with customers about these needs and offer to resend the report if customers misplace it.

Chapter 3: Pay attention to your numbers

A third area that can make your shop stand out from the competition is by making it clear to customers that they are getting more for their money at your shop.

That doesn’t mean you need to lower your prices. It means you need to make sure your service far exceeds the competition. That way, customers will be willing to pay the fair, competitive prices you charge. If you follow the methods recommended above to create a great customer experience, customers may even be willing to spend more money on repairs and maintenance received at your shop.

But thriving financially is about more than just customer service. You also need to pay close attention to your numbers so that you are making the most of the money that is coming into your business.

Make sure your service far exceeds the competition.

Consider gross profit

A common mistake shop owners make is looking just at their total sales and checking account balances when assessing financials. But that doesn’t give them the full picture. They really should look at gross profit: How much they have left each week after paying for parts, technicians, taxes, and so on.

To ensure you are meeting your financial goals, you should determine your weekly gross profit goals and work backward from there. Gross profit is what’s left over each week after you pay for parts and labor, but it doesn’t include your fixed costs, such as rent and insurance, so you’ll typically want to keep that gross profit number at 50 percent or higher. To increase your gross profit, you either need to increase sales or reduce your costs, or both. So pick a few things you want to work on in both areas and then track your weekly process to see whether you are meeting your goals.

Price right 

Shop owners often believe they need to bring in more customers to increase their top line. But you must also price correctly for both your parts and your labor. If your margins are too low, you won’t likely be able to grow your way out of that problem with new customers since each new customer is

another one for whom your profit margin is too narrow. To set your parts and labor prices, divide your real cost by the difference between the margin percentages you’re aiming for (typically, at least 40 percent for parts and 70 percent for labor) and 100. For example, if you paid $100 for a part, and you’re looking for a 40 percent margin you’ll divide $100 by 0.6 to get $167. If your average hourly labor rate is $25, and you’re aiming for a 70 percent margin, divide $25 by 0.3 for an actual rate of $83.33.

Track and monitor performance 

One key area to look at when making these decisions is how you are compensating your service manager. He or she should be responsible for controlling sales and costs, so that means you should base compensation at least partly on how close you are to achieving your gross profit goals each week. It’s your job as the shop owner to help him or her stay on track, so you should be measuring gross profit each week and sharing the results with your manager.

Another way to increase efficiency and therefore revenue at your shop is to hold staff accountable by running a production report every week to ensure they are on track. If they meet your production expectations, praise them; if they don’t, help them make a plan for improvement.

Approach sales strategically 

Finally, arrange for some additional training regarding how your staff members should approach customer sales and work orders If they write the work order in a specific way, you are likely to sell customers on more repairs and maintenance needs.

Make sure that the first item on a work order is the item that the customer originally came into the shop to address, as it’s very likely the customer is going to invest in that item. The next items to include on the work order are those related to vehicle safety since customers will usually spend money on safety-oriented repairs. The last items to include on the work order are the maintenance and cosmetic items. Those items tend to be of lower value to shops, so they are the least important to your overall bottom line.

Defend your prices 

When customers push back on prices, empathize but don’t negotiate. Acknowledge that it’s expensive, sometimes, to keep a car working properly and safely, and present yourself not as a “salesperson” but as a genuine service advisor. It need not be your goal to recommend that the car be kept in “like new” condition, which is usually the approach the dealership service department takes. 

Instead, be entirely honest about what you found: Let them know what items can probably wait and what items are more urgent, then let them make the decision without pressure. Most people want to take good care of their cars, and they’ll appreciate you letting them know how they can do that without breaking their budgets. Establishing a long-term bond of trust with your customers is far more important to your business than any incremental increase you might gain by talking someone into more than they really wanted to spend.

Chapter 4: Stay connected to your customers

While it’s important to attract new customers, remember that the bulk of your business comes from the customers you already have. Be careful not to forget these established customers when you are attempting to reach new ones. 

Check-in with customers two days after each visit to thank them for their business, ask how everything is going, and follow up about additional repairs. Then, one month later, send a letter or email thanking them for their business.

Use technology to help

Remember to use technology to your advantage when attempting to better connect with customers, improve customer service, boost staff performance, and monitor your financials. Mobile applications available at Canvas can help you accomplish many of these tasks. If you ask customers to fill out and update their customer profile via a customer profile app, for example, it will be easy to sort through your customer database at the end of each month to identify which customers to reach out to.

And if you document inspection reports via a mobile app, it will be easy to include that report in the letter or email so that customers can review additional repairs or maintenance that may be needed.

While it’s important to attract new customers, remember that the bulk of your business comes from the customers you already have. Be careful not to forget these established customers when you are attempting to reach new ones.

Mobile apps can also help you monitor your staff’s performance and your financial performance. For instance, you can create a production report mobile app so that all of your information can be updated, monitored, and stored electronically. Tracking and monitoring performance via a mobile app is also a great way to engage your staff. Since all of the information will be stored electronically, it will be easy to email reports, such as the weekly production report, to staff members, identify where production is lacking, and set improvement goals.

The best way to get started is to download the Canvas app to your phone or tablet, then sign up for a 30-day free trial. From there, you’re free to explore hundreds of pre-made forms for auto repair in Canvas’ Application Store — or make your own using Canvas’ app builder.

Once the goals are set and you and your staff are using the right mobile forms, you can easily monitor performance over time, regularly email updates to your employees — and most importantly, identify when you reach your goals so that you can celebrate with your staff.

Ready to Rethink How You Work?

GoCanvas has helped a variety of businesses across multiple industries transform their safety processes and rethink their efficiency, ultimately saving them money. Why not do the same? Reach out to one of our experts today to kickstart your process revolution.