Friday, 30 September 2005 17:00

Expanding your business - without DRPs

There's little doubt that much of the growth some collision repair businesses have experienced over the past decade has been fueled by insurer direct repair programs (DRPs). After all, the percentage of insurance-paid work handled through DRPs quadrupled - to more than 30 percent - between 1996 and 2002. Most major insurers are already well over that 30 percent mark - with some at 70 percent or more. 

But what about those shops not participating in DRPs - or those that wish to become less dependent on them? Given DRP trends, these businesses will need to find creative ways to keep a steady supply of customers coming to their door.

Develop relationships with dealerships

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Sturken 

Steve Sturken, the second-generation owner of Sturken's Auto Body in San Jose, California, said his 30-employee company does little direct repair work, preferring to focus on referrals from several dealerships.

"DRPs are a model that works for a lot of people," Sturken said. "Most large shops are successful because of that model. But you have to know how much control of your business you want to have, and how much you're willing to give away. I like to control my own destiny."

As with DRPs, Sturken said, focusing on dealership referrals is still risky if too much of your business - 20 or 30 percent, for example - is coming from any one source.

"Don't put too many eggs in one basket," Sturken advises. "If you do and something goes wrong, will you be able to afford to recover?"

It's a situation Sturken faced not with an insurer that suddenly dropped his shop from its DRP, but from a dealership that made a change.

"I was doing a substantial amount of work with them and they made a change for no good reason, just like people do, and it kicked me in the teeth," Sturken said. "It wasn't exactly losing my whole business, but it was a radical wake-up call."

Sturken recovered from the change, and has worked to avoid becoming too reliant on any one particular source of work. But with only 40 percent of dealerships having body shops, there are plenty looking for shops to which they can refer their customers.

Develop fleet accounts

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Baskerville

Dee and Wiesje Baskerville say that while working on fleets of company-owned vehicles isn't always ideal work, it has helped bring a new source of revenue to their shop's door. And while some fleet managers focus mainly on price, others - such as delivery services - may be more interested in quick-turnaround and are willing to pay a premium for it.

The Baskervilles, owners of Auto Hound Collision Center in Seattle, Washington, said they got their initial fleet work by participating in PPG's CertifiedFirst program. Through that program, they now repair vehicles for a national fleet account of company cars used primarily by pharmaceutical representatives in the area. The work has its downsides - the fleet management company requires several approvals throughout the process and can have multiple people overseeing a claim leading to duplicate phone calls to the shop - but there are upsides as well.

"If you take care of them, those customers tend to refer their friends or spouse because you did such a good job on their company vehicle," Dee said. "It's not a large percentage of our work right now, but it has added a certain amount of revenue," Wiesje said. "And it could end up being more because of the growth of the biotech companies in this area. It was one of the major reasons for us staying with PPG and the paint jobber that we are with; they were bringing revenue to the door instead of just taking it out."

Diversify your business

Offering a wider range of services has helped some non-DRP shops improve their sales and profits. Some shops have added a fleet of rental cars that can also be used as free loaner cars when necessary to "sell" a job. Others offer mobile estimating or pick- up and delivery of vehicles. Offering towing services or mechanical repairs can also bring in more work.

"Mechanical repairs are a natural complement to collision repair," says Dick Strom, owner of Modern Collision Rebuild in Bainbridge Island, Washington. "With today's hurried pace, providing one-stop-shopping offers the opportunity to 'up-sell' mechanical and collision repair work. We give everyone who walks through our door, a simple but eye-catching single-page flier we designed that specifies all the services we provide. By taking a moment to explain this flier, we've increased our gross and net profit substantially."

Offering mechanical repair can help attract fleet work or help keep a shop busy even during "slow seasons" when there is less collision repair work.

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Not all added services seem as natural a fit - but still can bring added traffic and revenue. Dan Gardner, owner of True Form Collision Repair, with two shops in smaller towns in Oregon, recently added True Form Soda Blasting, a cleaning and paint stripping service that is offered on a mobile basis or at the company's third facility. Gardner said that the baking soda used in the blasting process causes less damage to the substrate than other media.

"We can soda blast over glass, chrome, aluminum or masonry block," Gardner said. "We can use it to strip paint off cars or remove graffiti off of walls. And once we're done shooting, the baking soda is inert. You can rinse it off with water. When it comes into contact with grease or oils, it converts them to soap, and they become water soluble. The contamination generated from sand blasting or other media blasting is all still right there and you have to dispose of it. But with soda, it's not."

It's a good added service for his collision repair business, because the shop uses it when it needs vehicles or panels stripped, and it's another unique service he can offer that keeps his company's name out in the community.

Market directly to consumers

Most non-DRP shops agree: marketing and advertising has to become a larger part of your budget if you're not going to rely on insurer referrals.

Perhaps the best known advertising campaign for non-DRP shops is one developed by an ad agency for Bob Juniper's chain of collision repair shops in Ohio. The campaign relies in large part on warning consumers that insurer's don't have their best interests at heart, but that one collision repair business does.

Whether you seek or shun DRPs, any advertising you do should focus on what makes your shop different. Michael Quinn of 911 Collision Centers in Tucson, Arizona, says his company spends some of its marketing budget on traditional advertising (particularly cable television and bus benches), but it also focuses on systems and strategies to offer customers a better experience.

"We offer 24/7 service, for example," Quinn said. "We use a live answering service trained to take the necessary information, contact the towing company if needed, and contact the staff member who is on call. Not all accidents occur from 8 a.m. to 5 p.m. And when they happen at 10 p.m. at night, a lot of people don't know what to do. We tell them what to do in our advertising: Call us."

Don't just spend your advertising dollars without a plan. Choose a target market. One shop, for example, targets upper income residents ages 40-55; this group tends to be well-insured, drive later model vehicles and are often willing to spend money out of their pocket (above and beyond their deductible, if necessary) to get the quality and service they want.

Marketing is not just advertising, however. It includes involvement in community groups and activities. It may mean putting your employees in uniforms, or creating an attractive logo or catchy slogan. It involves the "look' of your facility, even your signage. Gary Hall of Hall's After Collision in Rock Falls, Illinois, changes the reader board outside his shop every 7 to 10 days, posting humorous or motivational sayings to catch attention. "People call to let us know they love what we post, and that they'll remember us when they need our services," Hall said. "We've picked up a lot of jobs because that sign has become a cornerstone for our shop in this community."

While some non-DRP shops use advertising to "educate" consumers about their rights and the possible downsides to using a DRP shop, others take a more positive, less adversarial approach.

"With the customer's permission, we use their comments from the customer satisfaction survey cards returned to us in our radio and newspaper ads," Hall said. "We've found people love to hear their names on the radio and see it in newspaper ads."

A unique position

While many DRP shops like the steady supply of work the programs often offer, non-DRP shops say they enjoy a sense of independence and tight connection with their customers - the vehicle-owners. For all the heated debate about the programs, many on both sides of the issue say participation comes down to a business decision.

"Can you succeed as non-DRP shop? Yes, you can, it just takes some work," says Johnny Mock, a past chairman of the Automotive Service Association and owner of Johnny Mock's Auto Body in Turtle Creek, Pennsylvania. "Just make it a business decision and think out how you can make it work and be profitable for you."

John Yoswick is a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988.

 

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