More specifically, warranty costs!
Warranty costs everyone! It costs the customer time, and it costs us direct and indirect money. Direct money is the money we spend to cover the parts and labor associated with any warranty. Indirect refers to the costs of a Tech NOT being able to work on anything else while he is handling a warranty, and indirect costs can be more harmful to a business than anyone would ever expect!
Indirect costs are very seldom ever accounted for when a warranty occurs and they sometimes cost companies more money than the basic warranty ever did. Look at what your Techs produce hourly on average; now double that because most facilities run a 50/50, or so, parts to labor split. Got that number? Now look at how many hours that Tech or Techs performing the warranty spent on that warranty, and do the math. Now add that money to what the actual warranty costs in parts and labor and you start to see where warranty can kill a business.
To understand and see how much these numbers add up to be, you must be tracking warranty and that is another area were we lose money when it comes to warranty. You are tracking it, right? I have seen warranty be as high as a full week’s worth of Tech time in a month OR more! And the only way to correct it is to know where it is coming from. If you aren’t tracking it how will we know whether or not it was a Tech issue or a parts issue? We had a warranty issue once at a transmission shop that we worked with and it was the tracking that stopped us from firing a Rebuilder, a builder that had worked for this company for 15 years. The warranty issues were with trans pan leaks and it was only after a couple of counselling sessions and a review of the warranty tracking sheets that we finally came to the conclusion that the company supplying the overhaul gasket kits had changed pan gasket suppliers themselves and had started using a less expensive (i.e. cheaper) pan gasket that split even when torqued properly. We brought it to their attention and with a little persuasion (i.e. threat) they changed back AND reimbursed us for the problems we had had. Would we have found that without a tracking sheet…….probably not, and in this case we may have fired a good Tech.
The other area that costs us money when it comes to warranties is in assuming we know what the customer expects from us in a warranty situation. What do I mean here you ask? How many of you ask your customer “what they think would be fair” when it comes to questionable warranties? You know, the great customers that have a vehicle that is technically out of warranty but we take care of them anyway. We all do it, so don’t feel that I am picking on anyone here! The thing is that when most of us do this type of warranty work, we simply give it to the customers….period, there is never any compensation spoken of. Now this is a GREAT thing if you are the customer, but if we go back and read the above mentioned costs of warranty work, we may start to see another thing happening. Our good customers; the ones we want to take care of because they always do what we say, don’t really expect something for nothing and in most cases would actually pay something “IF” being slightly out of warranty is brought up to them. So, if they are slightly out of warranty, your first question should always be something like, “so, knowing that it is slightly out of warranty, and that we want to take care of you for being a great customer, what do you think is fair?” Nine times out of ten they are probably going to ask for less than you would have offered and that is why you always ask first! This idea goes a long way with most people, and is a fundamental rule of negotiations, “ask before offering”!!!!! This rule is also great when negotiating pay back money for failures of service, when a customer is looking to sue! By asking what they think would be reasonable instead of making the offer first we have saved many clients a LOT of money. It’s a simple question and it should not offend anyone, so ask it!
The final thought on warranties I would like to share would be that a warranty is one more chance to sell the customer on who you are as a business. We all know that warranties are a pain because of the costs and time involved, but how we handle the customers can make the difference between someone that returns and spends more money, or someone who just leaves mad. Warranties are a part of doing business in this industry, and we all have them, so make the best out of them! “WHAT?, how can we make the best out of them you say”? Treating the customer like they did something wrong will always be the wrong approach, and yet I see it all the time. They have already spent money with you, so they have already proven themselves to us, treat them accordingly! Warranties should be handled as quickly and as professionally as possible. They should take priority over other vehicles and the customers need to feel like they are the only vehicle you have there today. And “IF” handled like a King or Queen when they come in with an issue, there will always be a better chance that you may be able to upsell them easier down the road.
To end this little article, remember this; “people want to be treated like you want to be treated”, generally speaking, no more and no less. If you manage to do that, you will have customers for life, but if you decide to not follow that simple rule, you will be stuck in that never ending rut of looking for way more new customers than you probably should be!
If you need help with your business and want to see and feel the successes you expected when you opened your doors, give us a call at:
The ACT Group, 805-444-2598 or visit our website for more information www.automotivecoachingandtraining.com