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Growing Your Service Repair Business During a Recession

Autosphere » Mechanical » Growing Your Service Repair Business During a Recession
Aftermarket vehicle service opportunities continue to increase, despite the onset of a recession, according to John Phelps from TekMetric. Photo Huw Evans

TekMetric webinar highlights that even during economic downturns, opportunities exist.

As we enter 2023, the term economic recession is on the minds of many. Stubborn inflation and rising interest rates from the Bank of Canada and the U.S. Federal Reserve are likely to push the economies of both countries into negative growth territory, at least for two quarters during the year.

With consumers scaling back spending, many businesses are wondering how they can not only survive, but continue to grow, despite the economic uncertainty. 

To help answer some of those questions for the automotive aftermarket, TekMetric, in conjunction with Ratchet+Wrench in the U.S., recently hosted a webinar, appropriately titled Growing in a Recession.

John Phelps, Director of Channel Partnerships at TekMetric provided some thoughts and ideas about how aftermarket service centres can position themselves for growth during a downturn. Phelps started by asking the question—is it even possible to grow during a recession? 

Some factors to consider

The first factor to consider here; is understanding which methods of growth have been successful before. “There’s no reason to reinvent the wheel,” Phelps explained.  

The second factor; is figuring out how you can apply those growth methods to your particular business since it is important to understand that a strategy that might work for one shop, may not work in the same way for another.

“We want to make sure we can apply these principles to the business model we have in our own shops,” Phelps explained. 

Another thing to consider is what will that growth actually look like. Sometimes it may not be growth in the traditional sense of the term, but the ability to maintain a consistent level of business even during an economic downturn. If a shop is able to keep its doors open and maintain a consistent level of service and revenue month after month (even as rivals see their business decline and might have to shut their doors), that can put the shop in very good stead once economic growth returns and consumers start spending again.

When it comes to seeing business and revenues increase during a recession, the ability to do that hinges on what the shop is implementing successfully today and asking whether it’s possible to do more with the current resources available. “Can we get more ‘yes’ responses from our customers?” Phelps asked, “and if that is the case, does everyone agree that we can grow the business during a recession?”

Phelps provided some examples of companies that were established during economic downturns that subsequently went on to thrive and dominate their sectors. These include Disney, which was founded during the Great Depression and made a successful business out of licensing and merchandising its key characters and brands; Microsoft which started during the energy crisis of the 1970s and continues to be one of the top providers of IT operating systems and Uber, which got its start during the Great Recession of 2008-09 and revolutionized the concept of ride-sharing and food delivery.

With that in mind, how has the automotive industry faired, particularly over the last 15 years? The COVID-19 pandemic hit the automotive sector hard, no question, but Phelps argued that in many cases, automotive service providers today are in better shape now than they were prior to the pandemic. 

What’s been helping the aftermarket, is that the average age of the vehicle fleet continues to rise. According to data from S&P Global, in the U.S., the average age of a private vehicle in use is now 12.2 years. Additionally, there are 10 more million vehicles on the road in the U.S. today, than there were just three years ago. 

More opportunities for the aftermarket

So, with more cars on the road, and people keeping their cars longer, opportunities to service those vehicles increase. Additionally; with the price of new vehicles having more than doubled since 2002, along with higher inflation and interest rates, there has never been a greater incentive for consumers to hold onto their existing vehicles longer.

With that in mind, Phelps asked what service centres are doing when it comes to reviewing declined service from customers and reviewing the history of business from each client that comes in. 

Additionally, there’s the whole no-touch experience that really gained traction during the darkest days of COVID-19, whereby customers simply drop the keys off, request a text to be sent once the work is completed, and arrange to collect the vehicle after hours. Given that similar strategies are now in place at all kinds of other traditional customer-facing businesses like fast food restaurants, grocery stores, and other retail outlets, there is no question why service providers cannot continue to emphasize this model of no-touch convenience for their customers.

Additionally, the technology and tools available today make it easier than ever for service providers to adopt these strategies and hone them not only for customers today, but tomorrow as well.

Going back to the keys of success, Phelps said that no matter what state the economy is in, business success ultimately comes down to two things. 

Understanding your customers

The first one is understanding your customers. What do they want and what do they need? Secondly; creating a process that facilitates those wants and needs.

Phelps noted that all too often, we hear stories in our industry of how this process “won’t work in our shop, it won’t work for our technicians or advisors, etc.” It is important to note, however, that in statements such as this, the customer often gets left out of the equation which can have a major negative impact on business/client relationships.

Therefore, creating a process that really caters to your customers is necessary if you are to not only thrive but survive during a recession. 

The key to making it work is being consistent in the customer experience you’re able to deliver and that requires ensuring that all staff within the organization buy into the process. That means service advisors at the same locations—or even different ones under the same banner—all understand no matter what day or time of the week, or location, there is a consistent customer experience across the board.

Evolving needs

Shops also need to be cognizant of the fact that needs and wants from their customers will evolve and can often be impacted by larger trends, such as changing economic conditions, evolving buyer demographics and preferences, as well as new technology and different business models. 

Yet in order to cultivate business, to begin with, the shop needs to understand, firstly, what its customers want in a shop and secondly, why they say “yes” to vehicle maintenance and repairs. These must be seen as two different topics and treated as such.

Starting with the second aspect, in order for a customer to say “yes” to maintenance or repairs, the service advisor and technician need to clearly explain what the vehicle requires and why in a manner the customer understands. While some clients may be familiar with the workings of a vehicle, many are not. 

When it comes to service and repairs, everything on a typical passenger car or light truck tends to fall into one of four categories. 

  • Safety
  • Performance
  • Dependability
  • Protecting the investment 

Different customers have a different level of importance for each of these four categories every time they visit the repair shop. And if a service advisor is able to understand what each customer needs and what they will prioritize in terms of repairs, the shop is far more likely to have a successful transaction and build trust with its clients.

“Understanding what your customers need and what they will say yes to allows us a presentation style that speaks directly to those needs,” Phelps explained. In other words, a customizable presentation and dialogue based on individual customer preferences and priorities. 

For example, dependability is critical for somebody who spends a good deal of time in their vehicle, while performance may be more important for a younger driver with a souped-up sports car. Alternatively, safety could be of paramount importance to a family with multiple children that relies on a minivan to get them around. 

Why did they choose your business?

Besides addressing customer needs, so that they will say “yes” to service and repairs, understanding their wants is critical for earning repeat business. “Their wants are why they choose you in the first place,” stated Phelps. 

He noted that these wants also typically fall into one of four categories:

  • Comfort
  • Convenience
  • Loyalty
  • Trust 

When it comes to comfort, convenience, loyalty, and trust, these four factors apply to any business, not just automotive service repair, but the most critical to ensuring repeat business is trust.

“Trust is paramount,” Phelps explained. “If your customers truly trust you, they will drive out of their way because you are more convenient to do business with.”

Additionally, if they trust you, they are more comfortable doing business with you, and that applies whether they value safety, dependability, performance, protecting their investment, or a combination of all four.  

While it isn’t possible to win over customers 100% of the time, if a service centre is able to provide the experience they want, and the advisor can explain what the customer’s vehicle needs and why it needs it, to the point the customer knows that they need it, the chances for them to say “yes” to the repairs or maintenance exponentially increase. “When you know that you need something, the answer is typically, ‘yes,” said Phelps.

So, when presented with customers in your shop, it’s critical for service advisors to get those clients to a level where they are going to say “yes” more often and are happy doing it.

Cultivating new clients

Then, of course, there’s the business of cultivating new customers. While it is easy for some shop owners/managers to say they are as busy as they can be and aren’t able to take on new clients, the ability to do so hinges on how efficient the shop is. If the business is getting more clients to say “yes,” it can book more vehicles, meaning there is more time and ability to cultivate new clients. This can translate into more customers and more work per vehicle that comes in, resulting in higher profitability, better scheduling, and an improved operating environment for the business and its employees.

As Phelps noted, it’s about “planning for the business you want to become.” And that means ensuring your shop is staffed properly. And doing so requires planning now for work in the future, whether it’s next month, in six months, or even next year and beyond. Getting staff to understand your processes and what you want to accomplish, along with timeframes is critical to making it work. If a shop is able and willing to take these steps, and the staff buys in, the business is then prepared for that extra work when it does come. 

Furthermore, once you have the staff in place, there are also marketing considerations. And while marketing budgets are often among the first things to be cut during recessionary periods, consistent, effective marketing is critical for ensuring the success of your business. And that means, like staffing, the shop needs to have a strategic plan when it comes to marketing.

In other words, having the ability to effectively target the right customers—those looking for the experience that you’re able to provide. That means working with a marketing provider that understands both the needs of your business and the needs of your customers.

Finally, there needs to be an established process in place. Phelps noted that “an imperfect process, executed perfectly, is better than a perfect process executed imperfectly.”

Consistency counts

Ultimately, being consistent with your process is key to long-term success, even if that process itself may not be “perfect.” A consistent process; ensures better results and also better forecasting.

Part of that requires the ability to increase repair orders and again, that is determined by having the right staff, the right marketing strategy, and a consistent, established process that’s done every single time. This not only increases the probability and frequency of R/Os but the dollar amount per vehicle that comes into the shop.

“Customers are more likely to come to you and come back to you, when you put the information on their vehicle in terms they understand,” stated Phelps.

This is an important consideration, especially in an industry where new customers become available almost every single month. There’s also the fact that statistically, 67% of customers leave the dealership once the warranty on their vehicle expires and as the vehicle fleet continues to age, more and more vehicles are coming off warranty, meaning that more customers are looking for a new shop to handle their car care needs. 

This represents a big opportunity for independent aftermarket shops to cultivate those customers and retain them long-term. The retention aspect is important because statistically, 40% of customers will only visit a shop once if they are not taken care of and if they are not marketed back to.

“We need to make sure we are taking care of those customers and that they know we took care of them, via a marketing tool,” Phelps explained. “What that does, is increases the trust and the experience.”

Digital inspections

An effective way of doing this—while customers are in your shop—is via digital inspection tools—providing them with photos and videos of the work that needs to be done and the progress made—as well as updates via text. Above all, clear, concise communication is key to being successful here.

Texting has proved to be a particularly effective communication tool today since 91% of text messages are opened in under three minutes. Emails or phone messages, by contrast, can languish for days and weeks without getting a response.

Additionally, when it comes to digital vehicle inspections, those shops that were able to send at least eight images to clients, demonstrated a $106 higher R/O than shops that did not, based on TekMetric’s own findings in the U.S.

Armed with tools like digital inspections, service shops can effectively track data, have a better understanding of their customer’s wants and needs, deliver a more consistent process and ultimately, ensure better long-term client retention—no matter what the wider economic conditions may be. 

 

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