How much money is being left on the table?

When there is so much uncertainty around, it’s always good to have something you can count on.  In the world of automotive retail, that is usually aftersales.  The parc changes quite slowly, even when sales slump due to financial crises or semi-conductor shortages.  If times are hard, owners may defer a service or choose a cheaper part for a repair, but the work normally gets done, and repairers therefore have a relatively predictable business.  However, there are headwinds ahead as electrification will progressively reduce the generous profit margins that flow from oil changes, and other changes in driving behaviour and vehicle technology will cause a structural decline in the total volume of repair and maintenance operations of around 9% by 2030 compared to a pre-Covid 2019 baseline according to ICDP simulations.  This will reduce the contribution that franchised workshops can make to overall dealer profitability – a cross-subsidy that is baked into the traditional dealer business model, and which historically covered the whole of the dealership fixed costs – the holy grail of ‘100% overhead absorption’ (or fixed cost coverage in US terminology).

In that environment, where a steady business is coming under pressure, and it risks undermining the foundations of dealer networks, and further weakening the sometimes precarious viability of independent repairers, you might expect that every opportunity is being taken to maximise the opportunity from every customer that visits a workshop.  However, data sourced from CitNow from their UK client base suggests that money is being left on the table in eye-watering amounts.  One of their core products is their video-based process to advise customers of additional work required when a repairer is carrying out a scheduled service or planned repair, and allow the customer to easily review and authorise this work.   The process is so effective that it has been very broadly adopted in UK dealerships, and recommended by a number of the OEMs.  Over half the red work identified and around 20% of the amber work is authorised and completed on the original visit.

However, that means that 44% of red work and 80% of amber work remains outstanding when the customer collects the car.  Extrapolating up from the CitNow data, the value of the outstanding work that is not authorised on the initial visit works out to £1.1 billion for red work and £2.2 billion for amber work.  Putting that in context, this is around 30% of the total annual value of the UK repair and maintenance market.  Most of that work will be completed at some point, either because it is urgent, or when the brake pads or tyres identified as amber work actually reach the point where they have to be replaced.  Some customers will return to the original repairer, but a significant number will shop around and get the work done elsewhere, with the risk that they move their aftersales loyalty for future work as well.

There are clearly a number of opportunities for repairers to do a better job in this area.  The critical areas as I see them relate to trust, affordability and follow-up.  Whether it is going to the dentist or taking your car for a service, we all hope that the routine check-up will not generate a list of additional work, and it is probably natural to wonder whether any such items are genuinely needed.

That is one of the great advantages of using video in aftersales – the customer can see a wear step on a brake disc or a leaking oil seal, share it with trusted friends, and through that be certain that the work is needed.  However, the extra money on the bill is always more than you were hoping to pay, or in some cases can afford.  Repairers need to consider using alternative quality parts if this is appropriate to the age of the car, price to market on items like tyres, and perhaps take a view on the labour cost rather than lose the customer – much as you would in the bodyshop with Total Loss Avoidance schemes.  There are also a growing number of options to allow customers to spread the cost of a repair, with Bumper being a recent entrant that has made a big impact in the UK market, and is apparently now looking to Europe for future growth.  Relating to follow-up, I have never had any form of follow-up on amber work from any repairer over decades of car ownership, despite the repairer often having a good view on monthly distance driven and having all the necessary contact details and permissions.  There is no need for telematics solutions to find a solution to this.  What would the return be for a repairer to hire one additional person to follow up according to the usage history of each car on amber work that should be falling due?  Perhaps one additional job per day?

At the moment, too many repairers are leaving money on the table.There are some simple steps that can be taken to reduce that, and given all the other pressures and risks on the industry, repairers should be taking those steps now, rather than waiting for the heat to be really turned up.