Advertising For a New Auto Body Shop
A short time ago, I wrote an article outlining some basic ideas
when opening a body shop. I touched upon the business model,
location and service as key points to making a successful operation
of your new shop. I will assume each new body shop has established
themselves as such and are driving forward with their individual
business plan. Remember, we passed on borrowing heavily and
financing a large debt. Instead, let us assume we picked up a
lease/buy-out option on a 5000 sq. foot facility from a former shop
owner who was retiring ( a very common scenario). In doing this, we
were able to secure a cheaper property that had an existing layout
for the collision business, had an established visual presence in
the community and was deliverable without the hassles of a lot of
the permitting/zoning one faces when trying to build a new
facility. Yet, as with buying anything "used", our facility will
need a face lift. Set aside some capital for new paint, fresh decor
and new signage as well as updating potential administrative tools
(computers, phones etc). On a positive note, our existing frame
machine, paint mixing station and spray booth were in good enough
shape for us to get by using for a few years. Therefore, we can
reinvest money normally spent on equipment into other parts of the
business, such as advertising and getting work through our doors.
But this raises one of the toughest decisions a proprietor must
make when determining the future of his shop. How do I invest in my
business for maximum returns? Return
On Investment, or
R.O.I., is what we are looking to build; finding
the greatest yield of profit for the most economical investment. It
is truly a hard question. So let us look at some of the different
scenarios and how they may affect our small, start up shop.
1.THE INTERNET - In today's world, the Internet is as much an integral part of society as we are. So much of what we do every day is in some way tied to the Internet. Think about it. Banking, shopping, etc are all done through the internet. Why not advertising? Ever type something into a web search engine? Amazing what it can find you. Why not let the web find us customers for our shop? Google is growing everyday as more and more people look to find the products they use and the services they need. We obviously will have a web-site for our shop. Why not build an Ad-Words campaign through Google to help land us some business. Through the Pay-per-click advertising process, not only can we determine and control a spending budget monthly, but we have live data feedback on how many people saw our advertisement, how many people came to our landing page. All of the information we gather from the customers submitting inquiries (names, addresses, phone number etc). The most effective and valuable commodity we can get our hands on in business is information. Who is looking for our product? How can I reach that consumer? When will I see his business? Where else is he looking? Why didn't he come to me for his collision needs? If we work hard to make sure our product is the best it can be, the last two questions will never be an issue. But, we definitely must attract the consumer to us first. So we build a Google Ad-Words campaign for our shop. We work on optimizing our website to find the front landing page for any and every search category we can think of. If we recall I discussed my friend's shop in my last article. I will simply use his Ad-Words budget amounts as my own . Basically, we establish that we will spend $100.00 monthly. We will be able to adjust monthly spending based on results and reset that spending limit according to the effectiveness of our Ad-Words campaign. So we look at the Web-Est Shop-Find program. Highly effective, extremely affordable and 100% adaptable to our web-advertising needs. Consumers are going to the web to find the service they need. On an average, we will spend between $2.00 and $3.00 for every click-through lead that comes to our landing page and requests a quote for repairs. Even though we only budget $100.00 per month for the Ad-Words campaign, we can assume our pay-per-click results will get us between 30 and 50 visitors to our website ($100/$2.00 and $3.00, respectively). If we convert even 25% of those potential customers, we are looking at between 8 and 13 customers per month. And according to a recent industry survey from Mitchell International, the average loss per claim in 2008 was approximately $2,600.00. Translation: Our $100.00 monthly advertising budget just grossed us between $249,000 and $405,000 annually; not to mention off the street/drive by or referral work. AND, we know exactly which Ad-Word campaign jargon works the most effectively, which campaigns landed higher close rates, etc. Importantly, we captured information of customers who did not bring us there car. We can follow up with them and find out why not. We can adapt our business model to incorporate solutions for those lost customer opportunities. The bottom line is that we captured their information and we can reach back out to them (whether they brought us their car or not) and try again.
2.TRADITIONAL MEDIA - Traditionally, the phone book was the way most shops advertised. Some used billboards, radio and even a few used television to reach customers. These advertising outlets, while potentially effective, are extremely expensive. Of the three, radio is still the best "bang for your buck." You can reach massive amounts of people by simply airing a commercial. The phone book (Yellow Pages, Yellow Book, etc) is simply archaic. Very few people still open a phone book to find anything. Those that are looking for something generally start in the "As" and call the first name listed. In the past, I have seen shops list themselves as "AAAA-Walter's Collision" because otherwise, nobody makes it to the "W" section. Billboards are effective. But in order to the most visibility, you have to put them near roads such as freeways. The problem is getting the drive by customer to you from the freeway. Television is so expensive that we will not consider it. So what does that leave? Well we can do it the old fashioned way. Some hard work, word of mouth and a few well-placed ads can land us some customers. Perhaps generating some flyer leaflets and passing them out at the local grocery store? These are several ways to attract customers through traditional means. Some of them cost a large amount of money and all of them require a labor-intensive process of reaching out to the consumer. Traditional medias are more expensive than internet marketing. At times the conversion can be higher but remember, when you directly advertise, you are blanketing the consumers, wholesale style. Your individual per/customer costs for acquiring the customer will be considerably more. But we are trying to optimize our ROI. We want to make money. So we need to be careful when budgeting these types of advertising expenses. A few expenditures here or there in traditional media may yield results but we need to be very selective and cost-conscious when using these campaigns.
3. Traditional DRP - Now there are many pros and cons when considering a DRP. Depending on who you ask, the pros will outweigh the cons and subsequently, the next person you ask, will tell you the exact opposite. There are many political, financial and personal reasons a shop will or will not participate in a DRP. Ideally, the premise of a DRP is sold to a shop on the idea that they will be the "select" shop for doing work for this particular insurance carrier. This would be a tremendous advantage if this shop were the sole provider of service for this carrier, but we all know that is not how it works. Part discounts, labor concessions and other "freebies" aside, an insurance carrier uses a DRP relationship as a means of cost control by establishing a streamlined competition within the local repair community. While shops on these programs are usually getting volume work, the profit for the majority of them may get consumed through the aforementioned giveaways. Basically the decision is "will the spend rate merit the gain?". Spend enough money on mandated software, and maybe you will get some work from your carrier. Maybe that work will be profitable. There are no guarantees. So for bigger shops, where volume through the doors is the key to success, they can generally handle the tighter profit margins through attrition. Since we are going small, however, we need to concentrate on optimizing our R.O.I., on each car and maintaining a high percentage of repeat business to fuel our business model. We cannot turn the volume of cars to make the numbers work that a big production shop turns. But we do not need to. Our overhead is far lower and our variable costs are less impacting on a day to day basis.
4. Non-Standard DRP - Sometimes, however, a non-standard insurer (also known as a tier 2 or tier 3 carrier) may approach a smaller shop with the desire to move into a DRP agreement. These carriers are generally focused on turning claims over quicker and typically have fewer physical damage experts on hand to review files. Instead, they rely on adjusters (usually independents) who may push the claim through faster, resulting in quicker pay cycles. They also may not require specific software be used to process the claim and may be more willing to work with the shop's estimate and supplements. This can be beneficial for us since the number of vehicles the smaller carrier insurers is less and translates into less work from them. Therefore, we can push back on any concessions they ask for since they cannot provide the volume that will merit any real discounts
So as we weigh out the options, which is the best for our shop? We are in a higher populated area with street presence already established thanks to buying an existing facility. We gave our business a cosmetic facelift and have maybe spent a little money in local advertising but not much. So we hang our shingle up, fill our bays with vehicles and work with our customers and make sure we give them the best experience we can when fixing their car. We know we have some controlled advertising expenses that are going to land us potential customers. We will work to get them in the doors and get them satisfied. And that is the key to success. Doing better than the other guy. Remember, in our business, every car is a rolling advertisement. The best advertisement we can possibly hope for is the free one. The satisfied customer's referral. So as we put our name and our reputation on every vehicle that goes out our door, we are putting one more piece of advertising in front of the consumer. So we cannot fail to exceed the customer's expectations. Because no matter how much advertising we do, it is the end result of a satisfied customer that determines our success in business.