In his Wednesday morning session "Marketing for a DRP – Acquiring the Business," Hank Nunn, western region collision director at AutoNation, said that DRPs are just another type of marketing strategy – one that shops should evaluate objectively.
"The DRP is an option, one of many marketing strategies a shop can follow," Nunn says. "You have to look at which DRPs are the ones that may fit your individual shop. You determine what the DRPs needs are and perform an analysis, then decide if it's the right decision for the business."
Where many shops make a mistake, though, is in not evaluating the true cost of DRP participation.
"The current batch of new contracts have some pretty stiff wording regarding the acceptance of liability," Nunn says. "In a few agreements, the shop assumes liability for acts of God. In one case, basically, if you have a yard full of cars and a hail storm comes by, you are on the hook for that hail damage. That's a substantial additional cost."
Have an attorney evaluate the agreement, and find out if the DRP offers any flexibility in terms. "You just have to look at it as a marketing option and take the emotion out of it," Nunn says. "The top insurance companies have a big market share, which can be a foundation for new business. You have to look at the participation costs."
In order to successfully join a DRP, shops have to find out what performance metrics are most important to that carrier ¬– customer satisfaction, cycle time, aftermarket parts usage, etc. "And then the shop really needs to make sure they can create performance metrics and measure them on their own," Nunn says. "If you want on a particular program, you meet with the carrier's rep and find out what metrics they are using, and then you start producing those KPIs from your own system. You can take that to the rep and document that you can outperform your competition in key metrics that are important to that carrier."
Once a shop successfully joins a program, they have to maintain that commitment to service and KPI measurement, as well as keep track of changes to the terms of the agreement.
"There is a lot of hidden liability in these contracts, which is why you have to have an attorney read them," Nunn says. "Tally up the costs of discounts and concessions. It can add up to an expensive marketing strategy if you aren't careful."
Although DRPs can be costly, shops also can successfully make money with them, provided they are willing to adapt. "You can't run a shop the way you did 10 years ago and make money on a DRP anymore," Nunn says. "You have to be efficient and match up with their cycle time requirements."
Nunn recommends a break-even point analysis. Shops should use conventional work to reach their break-even point, then use DRP work for everything above that. "There's another benefit, too, and that's the opportunity to convert that customer from an insurance customer to the shop's customer," Nunn says. "Then the next time they damage their car, they call the shop instead of the insurance company. There are some substantial wins there."
