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Growing Your Customer-Pay Segment

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Ed Dietz says it was a decision born out of necessity. Although Lefler Collision and Glass Centers, where Dietz is vice president of operations, was pumping $10.5 million out of three facilities in Evansville, Ind., management found that most of that business was coming from only a couple of direct repair programs.

“We had too many eggs in one basket,” he says. “What if an insurer came to us and said they were discontinuing their program or didn’t want us on the program anymore? How would we be able to recover from the loss of revenue?”

To avoid that potentially disastrous consequence, Lefler started focusing heavily on customer-pay work. It’s a segment that more shops could benefit from focusing on, says Hank Nunn, president of training and consulting company H.W. Nunn & Associates.

“The gross profits generated from customer-pay work go right to the bottom line for the business,” Nunn says. “There are a huge number of customers that come in to get an estimate and are trying to decide if they should pay for it themselves or submit it to the insurance company.”

In fact, Nunn says that recent numbers from paint companies show that customer-pay could account for as much as 20–30 percent of sales in a collision shop. 

For Lefler Collision, the shop has grown its customer-pay segment from 3 percent to nearly 10 percent of total sales, which brings in an extra $1 million yearly.

“For us, it wasn’t about reinventing the wheel,” Dietz says. “It’s all about maximizing your opportunities and selling those opportunities.”

Dietz, Nunn and Kirk Henson, owner of Fix Auto Escondido in Escondido, Calif., break down their best advice for growing your customer-pay segment.

Be Creative in Finding Customers.

Dietz says when Lefler started to focus on customer-pay work roughly a year ago, they purposely looked outside the box. 

“It was an eye-opening deal for us. When everybody thinks of self-pay business, they think of the general customer who shows up at your door wanting an estimate,” Dietz says. “While that is a portion of it, a lot of it is looking down a different avenue.”

Rather than just focus on customers that walked in the door, they actively sought out commercial accounts that could benefit from a similar service. Dietz says the shop looked to fleet vehicles, handymen, or service industries who use personal vehicles as a business tool. Those businesses, the shop found, were especially reluctant to file claims because the vehicles were written on business policies. 

“We went to them and said, ‘We know that you have a fleet of vehicles. We know that you don’t want to run a lot of things through insurance because of premiums. If you decide you’re going to repair vehicles, let us give you this particular deal on our services.’” Dietz says. “We were able to coordinate everything from prices of detail and general maintenance to actually figuring out a way to work on their vehicles in an economic setting that still turned out a quality product at a profitable venture.”

The most important step, Dietz says, was finding a balance between an economical rate for the customer and quality work produced by the shop. He says that fleet accounts, in particular, prioritize having a clean-looking vehicle that properly display the business’s logo and lettering. This gave the shop a starting point to discuss how they could provide value for the fleet vehicles while keeping costs down. 

Create a Marketing Campaign.

There are a variety of marketing tactics that could be used to promote the customer-pay segment of the business.

Nunn suggests creating a marketing campaign that explains the options presented by the shop.

“Those campaigns could have a focus on the variety of different ways to help limit the cost of the repair, the financing you offer, the ways you work for the customer, not the insurance company,” he says. “There’s a huge number of customers you should be marketing to that are trying to make the decision if they should pay for the repair themselves or submit it to the insurance company.”

To market their customer-pay segment, Lefler looked to integrate the discussion into their existing efforts. Lefler has always been very proactive in educating the community, Dietz says. The shop holds new driver education, ladies’ nights and continuing education classes. While those classes all hold specific purposes, Dietz says the shop makes it a point to educate participants about customer-pay work during every single class.

“We talk to those folks and say, ‘If you have a $50 deductible and your estimate is $595, at least come talk to us and let’s look at this claim.’ We try to educate them and that has worked really well,” he says.

Dietz says that integrating the customer-pay message into a class is an easy way to avoid heavy selling, while still making the customer feel informed about their options.

“You’re not making the decision for them,” he says. “You’re providing choices, presenting options to the customer, and making them feel informed. Last week, we had a dad come in and he said, ‘I sat through one of your classes and now my son has backed into the garage door. Can you give us some ideas?’”

Master Consultative Sales.

Getting the customer to understand the options for repairing the vehicle is all about education, says Dietz.

“It’s all about proper discussion and explaining their options for repair,” he says. “There are a lot of things to still turn out a quality job that the customer is happy with that you normally may not do with a retail customer. You can get into aftermarket versus OEM pieces, blending versus tinting, doing paintless dent repair.”

Nunn says that the estimator should also explain why going with the insurance company may not be the best option for the customer.

“In this situation, the estimator should take a consultative sales role,” he says. “If you go with your insurance company, your deductible is going to be paid but over the next three years, your premium may increase by 15 percent. You can look at the cost of paying it through the insurance company and factoring in the increase in premium, as opposed to paying for it yourself and keeping it off your record.” 

Create a Strong Sales Presentation.

A strong sales presentation is key for customer-pay work, says Nunn. Because the customer is paying for the repair out of pocket, Nunn says their concerns are typically higher. Having a sales presentation that focuses on their needs and questions can help capture more of those jobs.

“If we’re looking at a $2,500 repair on a 10-year-old Honda Accord, that person’s concerns are going to be considerably different than a $2,500 job on a brand-new Honda Accord,” Nunn says. “A lot more time has to be spent explaining each and every individual operation on the estimate so the customer understands it.”

Nunn says to get the customer involved in the sales process and get their input on items that may be able to reduce the cost of the repair. Most customers don’t understand blending, OEM vs. aftermarket parts, unibody, or structural bonding. It’s the estimator’s job to explain all of that to the customer and ensure they understand their options.

One way to illustrate those options is by using a sales aid. Nunn suggests having a small piece of a door where the handle and molding is masked and painted, and then another example where the handle and molding were taken off, painted and then placed back on.

“The customer can actually see the difference between masking it and leaving it on,” he says. “If you go to tire stores, most of them are doing some sort of variation of good, better, best. In a collision repair shop, particularly with customer pay, you can offer them a good, better, best option and let the customer make the decision.”

Balance Cost and Quality.

One of the benefits to customer-pay work is that it is mutually beneficial to both the customer and the shop, says Henson. The shop is able to provide a discount to the customer, he says, and still retain more profit than an insurance job. 

In addition, Henson says customer-pay work involves less administration than even a small DRP claim, which saves both time and money for the shop.

The tricky part is finding a balance between a fair rate while still producing a quality product.

“I think most estimators are versed enough in the business to say, ‘If you can live with this scrape, you can save this much money,’” Dietz says. “That’s fine but the problem with that is, you’re still giving them a product that you’re not 100 percent satisfied with because it’s not perfect. I’m not OK with patching a vehicle up halfway and having someone say, ‘I took this to Lefler’s and here’s what I got for this much money.’ I’m looking for quality repairs at a fair rate.”

To strike that balance, Dietz says it’s important to think outside the box about unique ways that the shop can save the customer money. That could be tinting versus blending a panel, doing PDR work, or for a fleet account, asking if they still have the vehicle graphics in stock to avoid charging for it again.

Henson says his shop also offers customers a discount on their door rate.

“With the customer pay, we can write an estimate at our door rates and give them a discount that is even more than what we give our DRPs,” says Henson. “Our door rate is $60. A lot of our DRPs are $43, so if we discount down to $55 and we show them how much money we can save them if they pay customer pay, then that seems to really help them.” 

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