A great friend of mine and a mentor, Ray Chew, now retired from CCC Intelligent Solutions, once shared an insight with me that I find very relative today. It was this: The No. 1 single most important KPI for body shops is capture rate. Without a strong capture rate, without cars to fix, no other KPI matters, right? Do you know if you are converting enough of your potential customers and jobs coming into your shop into actual repair orders?
As I travel around the country -- as of-mid-April, I’ve been in 22 states this year already -- I'm hearing most shops say their next appointment is an hour from now, or even not until the next day or two. So if you’re reading this article and you’ve got a backlog of a couple weeks of work, you probably should go to church and put some extra money in the offering plate, because you’re the exception. Most shops right now are just really, really slow.
It's been a bit of a wake-up call. A year ago, everybody was really busy. I think shops were all so busy processing work, they kind of fell into the mindset of being order-takers rather than salespeople. We have to get back to the basics in terms of understanding once again how to sell.
How do we spend more time with the customer, convincing them we're the shop of choice? How do we follow up with that customer if they don't schedule an appointment? Do you have a good standard operating procedure in place for that follow up? Maybe it’s calling them one day later, then again maybe three days later. If you track how many of the jobs you capture with each type of follow-up call, you can dial in a process that’s most effective. And if you end up not capturing the job and they choose to go somewhere else, you should probably find out why they chose the other shop.
One of the exercises I did when I had my shops was this: Any time a customer didn't commit to schedule an appointment to leave their car at the time of the estimate, we would record the reason why they didn't schedule. Once a month, we would review those reasons as a group, and develop sales scripts to overcome those objections, whether they seemed to think they needed to get three estimates, or they didn’t have the money for the deductible, or they needed to check with their spouse.
Another key step is to make sure you’re using your shop management system to monitor your capture rate. If you're a DRP shop, it's very easy to get a false sense of security about capture rate. When you get a DRP assignment, that's like a layup in basketball. It's an easy shot. You need to track your closing ratio both including and excluding DRP assignments to get a true sense.
You also should track in your management system how people found out about your shop. To me, it's important to do this on a granular basis. Don’t just track that someone found you “online.” Was that online through Google, through your website, through an OEM shop locator? Tracking helps you understand if your marketing dollars are working.
Tracking this on a monthly basis can also help you spot if work starts to decline from a specific source. Let's say there's a dealership that sends you a ton of work, but if you track that every month and you start seeing referrals decline, you’ll know that’s something you need to look into. Maybe it's an indicator there's a new service writer at that dealership who has a buddy they're sending the work to instead of your shop. But you won’t know if you just list the source of the job in your management system as “dealer.” You need to track it by the specific dealer.
That takes me back to the topic of marketing dollars. My best-in-class shop clients are spending 4% to 6% of their total sales on marketing versus most shops, which are spending less than 1% of their sales on marketing. I think shops need to increase their marketing spend because I think what we’re seeing right now is the new norm. I don't think we're going back to those days of abundant work.
Another thing to watch: If you’re a DRP shop, CCC has something called Indicator Reports. Those show you when an assignment is received, and what the estimate start date was. You’ll know how long after an insurance company sends an assignment it takes your shop to get that customer in to write the estimate. I’ve seen DRP shops tell me they are slow, but I look at that report and I see the time from assignment received until the estimate is started is four days. If you're slow, why is it taking you four days to get that customer in to get an estimate written? In my mind, that should be less than a day.
There are a lot of tools that are available today to help you to record accurate and detailed information to monitor how well your marketing is working, how well you’re capturing work, and whether you’re taking advantage of all the potential work that's coming to your door.
Mike Anderson