If we lived in a perfect world, we would have perfect relationships with our customers. For instance, customers would gladly pay whatever we charged them for repair work on their vehicles. From our customers’ perspective the relationship would also be perfect; they would gladly pay us as little as possible if they can’t actually get repair work on their vehicles done for free. However, since we do not live in a perfect world, our relationships with customers are not always perfect and as a result, we sometimes lose good customers to our competitors because we might be perceived as being too expensive. Thus, in this article we will discuss some of the possible reasons why customers sometimes take their business elsewhere, starting with this question-
While your pricing model may be the reason why you are losing both potential new business and previously loyal customers to your competitors, or are seeing a decline in the average value of your work orders, the fact is that pricing alone is very seldom the primary reason why you are losing business. This is especially true if you have been operating a workshop in the same location for a number of years.
Having said that though, both profitability and sustained growth are the sum of many factors, but there are two sides to the problem of sustained profitability. For instance, if you are a truly independent operation with no ties to a franchise chain, you can basically charge whatever you want for any given procedure, provided of course that your target market will bear your pricing model. If however, you hold a franchise, you are likely bound to a specific business model that prescribes fixed charges for specific procedures, and herein lays a major problem if the demographics or economy in your area change for the worse.
In the real world, you can easily adapt your pricing model (within reason) to suit changing local trading conditions if you are an independent operator, but franchisors generally do not offer their franchisees much, if any elbowroom in terms of pricing adjustments. Thus, what do you do when you start hearing your customers complaining that you are too expensive, and that they can obtain the same service at a “better” price elsewhere?
As a first reaction, you may consider raising your labour charges to cover the business you are losing, but this is always a bad idea. Many start-up workshops fail simply because the operators start raising labour charges and parts mark-ups when they realise that they are not being run off their feet by their competitor’s loyal clientele. This of course, loses them even more potential business because they gain a reputation as being expensive almost from the get-go.
On the other hand, many start-up workshops have also failed because the operators lowered labour charges and parts mark-ups to the point where the business cannot be sustained, even at just break-even margins. As a practical matter, finding the ideal price points for your services and products is an extremely delicate exercise that must be approached with a great deal of circumspection backed up by extensive market research, regardless of whether you are a franchisee or an independent operator.
Getting your pricing model wrong can place you in a downward spiral from which it may be impossible to recover much quicker than you might think, so let us consider another approach to the problem of customer retention by asking ourselves this question-
This question has several possible answers, but the very last thing any customer wants, is to know just how passionate you are about fixing cars. Most customers could not care less about your passions, but those that are somewhat interested rather expect you to have at least a more than passing interest in resolving their car troubles professionally in exchange for their hard-earned money. In fact, herein lays much of the secret of how to retain your customers, your pricing model, or your customers’ perception of it, notwithstanding.
We mentioned elsewhere that changing demographics and difficult trading conditions could have devastating effects on the profitability of your workshop. Typical changes for the worse could include key industries closing or relocating to another state or even another country, a steady decline in the average disposable incomes of your target market for any number of reasons, or even natural disasters such as severe flooding, which can have long-lasting and severe knock-on effects on all the industries in a region.
How you react to negative changes in trading conditions may change the way you do business, but one thing that will never change is the fact that your customers will always want the same things they received from doing business with you before the changes happened. So, let us look at five of the things that could cause customers to take their business elsewhere if they don’t, or are no longer getting them from you, starting with-
When last have you placed yourself in the shoes of some of your customers, and especially customers that were dealing with you for the first time? In fact, do you ever consider the issue of mutual trust and respect from a new customer’s perspective?
Countless studies on consumer behaviour and specifically, why people buy goods and services from one supplier and not another have shown that when it comes to car repairs, most people are less concerned with the cost of repairs than they are concerned about buying peace of mind. The primary concern in most customers’ minds is not so much the fact that they may not be able to comfortably afford a proposed repair; most customers are concerned that the repair they are expected to pay you for may not represent a definitive and/or lasting resolution of their car troubles.
Of course, we as business owners are not responsible for our customers’ financial woes, but then again, what to do when you become aware that a customer might be on a tight budget? If you don’t want to lose his business to a competing workshop, there are two possible approaches to the problem you can take.
The first is to manage his expectations, but to do that effectively you have to explain the problem in non-technical terms that the customer can understand, which will allow him to make an informed decision. For instance, a sudden increase in oil consumption and recurring catalytic converter failures may be as easy to fix as replacing the cheap (and unsuitable) engine oil that is now in the engine, or, fixing the problem might involve a turbocharger rebuild or replacement, engine rebuild, or even an engine replacement. In cases like this, the onus is on you to make sure the customer understands all possible implications of whatever his concern might be.
Regardless of the actual problem though, the key to writing new business and retaining existing customers is to manage the expectations of both sides. For instance, you will want to be paid for having performed appropriate repairs, and the customer will want the problem he is paying you to fix not to recur because you did not fix it right the first time.
The second possible approach is to issue warranties on workmanship that-
a) do not contain nebulous terms and conditions that could be interpreted in various ways
b) make it crystal clear that parts used to effect repairs are covered by manufacturers’ warranties
c) clearly spell out both yours the client’s rights and obligations should anything go wrong.
Actionable warranties have been shown to be a vastly more effective way of ensuring that a customer gets the peace of mind he wants than any number of verbal assurances that you and your mechanics can be trusted to do the right thing. As the old saying goes, “Talk is cheap, but actionable warranties and effective after-sales service make for loyal customers”.
Many studies on consumer behaviour have shown that while most of our customers are willing to pay premium rates for premium services, most of our customers also expect to actually receive the premium services they are paying for, one of which is to receive their vehicles back at the time they were told their vehicles will be ready for collection.
Again, we need to place ourselves in our customers’ shoes. Not all of us can afford to give each customer a vehicle to use while we have theirs in our workshops, meaning that such customers have to rent a vehicle or catch rides with friends, family and/or colleagues, or worse, use expensive taxis and/or public transport where it is available. Thus, if we do not return a customer’s vehicle to him at the agreed upon time for reasons that we had control over, that customer may be severely put out, and that customer will almost certainly take his business elsewhere.
The quickest way to lose a customer to a competing workshop is not letting him know about delays in repairs, or worse, additional work that may be required to perform a professional repair. Clear, effective, and consistent communication with customers is the cheapest and surest way not only to retain existing customers, but also to persuade new customers to become repeat customers.
Here again, we need to look at a customer’s concerns from his perspective. For instance, while our service writers may know everything there is to know about a known problem on a particular vehicle, it is sometimes very easy for our service writers (and us) to forget that the customer who presents a vehicle may never have experienced for example, a serious driveability issue that makes it unsafe to operate his vehicle.
The biggest mistake a service writer can make in a situation like this is to say something like “Oh, that’s a common problem on your car; we’ll take look and let you know what we find”. No customer wants to hear that- what he wants to hear is that his concerns have been noted and understood, and that the problem will be attended to in a professional manner.
Repeat customers of quality workshops almost invariably state that they and their concerns were not being taken seriously when they presented their vehicles to competing workshops. So, if this is a reason why you are losing customers to competitors, how do you fix it? Here is how-
You can’t fix a problem unless you know and understand the nature and details of the problem, so the first thing to do is to determine the nature of the issue by contacting as many former customers as you can. What you need to know is what it is that your erstwhile customers were complaining about, exactly; were your services simply too expensive, or, did your former customers feel that they were not receiving fair value for their money?
There is an important distinction to be made here. In the first case, a suppressed local economy and smaller disposable incomes in your target market may really have placed your services out of the comfortable reach of some customers, which could very well require you to adjust your pricing downward somewhat.
However, the second case, that of clients not receiving fair value for their money, is a different kettle of fish altogether. The problem is that the concept of value for money is subjective, and your former customers almost certainly have a different sense of what it means than what you think it means. Nonetheless, if you are bleeding customers because your customers feel they are being short-changed, you are going to need to think like a customer to figure out an effective remedy, which could require you to adjust your pricing downward somewhat, but not necessarily, or at least, not before you understand why you are losing customers.
Once you have a handle on the problem, you need to perform a thorough and extensive analysis of your work orders going back at least two years. Doing this analysis on the work orders written by each service writer will tell you several things, all of which will help you formulate a strategy to stop customers leaving. Let’s look at what you need to know-
The average value of work orders
This value is crucially important; if it remained static over the past couple of years, it means that either your service writers are not up-selling services, or they are not explaining the benefits of preventative maintenance to customers. If however, the average value of your work orders has been declining, it could mean that your prices are too high or more likely, that your service writers are not, or are no longer explaining the benefits of complimentary safety checks to customers. This could cause a customer to take his business elsewhere if a safety issue crops up on a vehicle two days after your mechanics had performed a major service on it.
The number of work orders written by each service writer
It is highly unlikely that if your customers were generally happy with your services and prices, they would not recommend your establishment to friends, family, and colleagues. Thus, if the number of work orders written by each service writer remained static or declined, it means that either your customers are not recommending you, or your marketing plan is not working, with the former being the most likely.
The percentage of repeat customers vs. once-off customers
While we all have once-off customers, any workshop with a good reputation should have a repeat customer percentage of at least 60% of its total customer base. If this percentage is significantly below 60%, the most common reason is usually that customers feel they are not getting fair value for their money.
Fixing this perception always takes a team effort that involves service writers who are consistently up-selling services, recommending complimentary safety checks, and taking an active interest in customers' concerns, mechanics that report additional faults and defects on vehicles, and supervisory staff that perform substantive quality checks on all work performed. In addition to the above, no vehicle should be returned to its owner with grease and/or dirt stains on the carpets, seats, and steering wheel and the radio or audio system should not have been fiddled with.
These points may seem small when they are seen in isolation, but taken together, they equate to a pleasant experience for the customer, which amounts to nine tenths of value for money.
The moral of this section is that anybody can be a service writer, in the sense that anybody can write down a customer’s concerns on a work order. However, service writers are the face of any workshop, and therefore, a service writer is a crucially important member of the work force. In fact, it can be argued that the attitude of service writers largely determine whether a workshop fails or succeeds.
While some service writers see just another customer walking through the door, others see an opportunity to promote their employer’s business simply by taking an active and genuine interest in all customers and their concerns, which is something only born salespersons can do successfully.
It is our hope that this article has illustrated the point that customers view their interactions with workshops and mechanics somewhat differently than mechanics and workshop owners do. For us, the transaction is often only about repairing a defect on a vehicle in a professional manner and being paid for it, while for a customer the transaction is almost always about trust, peace of mind, and receiving fair value for his money.
At the risk of belabouring the point, we might think that our customers are receiving excellent value for their money. However, when we stop to think about how customers might be experiencing their interactions with us, we might be forced to admit that sometimes, our services are too expensive considering what our customers are getting from us in return, which, when we think about it, might be the real reason why customers are taking their business elsewhere.
Once we understand this, we might start to improve our customer service standards instead of starting to fiddle with our pricing models, which in the final analysis, very rarely does anything positive for anybody.
