Strategies for success in tough times
Editor’s Note: This article appears in the November 2008 issue of Professional Carwashing & Detailing. If you have a technical tip, article or topic idea you would like to submit to be a part of Professional Detailing e-News, please e-mail Editor Kate Carr.
Price cutting competitors are like rust on bare metal; as soon as you clean it off, it starts forming again. And, as soon as one price-cutting detailer goes out of business, there is another to take his place.
Just like you can’t ignore rust, you can’t ignore price-cutters. If you don’t pay attention to what they are doing in your market they can erode your detail business.
You can be the largest or busiest detail business in your area, but don’t let that market position blind you to the impact of competition.
Some guys work out of their garages with no insurance, no license fees, no worker’s comp (if they have employees), using off-the-shelf or dollar store products. Their biggest expense is their own labor. They can dupe the motorist into thinking they offer quality work and can do a professional job.
You have to educate customers as to differences between your service and professionalism versus that of the low-ballers. Not to mention the fact that most do not liability insurance.
You can respond to these price-cutters by meeting or beating them in the lowball game. But you will find there is always someone who is willing to go even lower than you. Of course, in some cases you may need the business and this is the only way for you to survive, at least temporarily.
But there are alternative strategies that will allow you to build your business even if you’re not the cheapest shop in town.
Strategy #1: Diversify services
One way is to diversify your detail business so that you can afford to pass on the low-ball job without worrying about the impact on your bottom line. Provide as many cosmetic car care services you can think of in an effort to build revenue and fully use your business’ capacity.
Many detail businesses sell everything from detailing to paint touch-up, carpet dyeing, windshield repair, invisible film, etc. Some detailers also install accessories such as wood grain dashes, pin striping, body side molding, window tinting, etc. Spray-in truck bed liners can also be done in a detail shop.
Keep in mind that volume is important, but not at the expense of quality. A reputation for top quality work supports higher prices.
By offering a wide variety of cosmetic car care products and services you will avoid some of the ups and downs in the marketplace. If one thing goes out of style, like gold plating, another comes in, like invisible film protection.
If a product or service gets hot you will be ready to handle it, giving yourself a good jump on the competitor who hasn’t the money to learn a new technique to respond to the demand.
You can cross-sell customers, adding profitable volume to many detail jobs and building repeat retail business, which is difficult if you only sell one product.
Strategy #2: Target niche markets
This diversity strategy goes a step beyond most shops’. While 90 percent of your work is on cars, you can also include boats as well. What about airplanes, motor homes and motorcycles? How about over-the-road tractors or even agricultural equipment?
You can also adapt another strategy for beating the competition. Simply target a niche market and do one thing — and do it very, very well.
For example, high-end cars like a Ferrari or Lamborghini; a niche that can be easy in big markets because the quality demands are so high by these owners.
There are a lot of consumers who can wax a car, but they can’t use a buffer on today’s clear-coat paint finishes. It takes the right tool, pad, chemicals and knowledge to do the job right; most motorists do not have these, or the inclination to do it.
Remember to charge a premium for servicing these niche markets. If customers don’t want to pay for quality, don’t bother. They can go someplace else.
It’s all about fully utilizing your capacity so that a desperate measure — like cutting prices to stay afloat — isn’t necessary.
The idea is to attract many different types of work, but also maintain a balance between retail customers and commercial work. Retail jobs generate a higher profit margin, but the dealer business provides volume to maintain capacity utilization. If you have both, you can afford to maintain your prices, even to dealers, body shops and mechanics.
Strategy #3: Stand up to low-ballers
Dealers who come to you for detailing are going to be pretty price conscious. They will play you off against the competition. Don’t be afraid to walk away from the low priced business. If it’s a package deal — like detailing, windshield repair, carpet dye, etc. — you can give them a little bit of a break.
Take the same firm stand with retail customers who try to play you off against a low-ball detailer.
Some customers will even come in with their own wax and beg you to put it on and reduce your price. Tell them that since you’re missing the opportunity to make a few dollars of profit on the chemicals, you’ll have to mark up your labor. They might go along with that, especially when they don’t want to do it themselves.
If you do dealer or body shop work, you shouldn’t be driven by a need to beat the competition; there is another factor to take into account: Their profit margin.
For example, when it comes to pricing subcontracted work to body shops and garages, allow them to make a profit without undercutting your retail price.
Don’t let them give the jobs away; which will hurt you in the long run. The ideal situation is for the body shop or garage’s customer to pay the same if they came directly to your shop.
Any detail business owner knows there is always somebody willing to undercut the price. One way to respond is to make a knee-jerk price cut of your own. But that’s not necessarily the only way to build your business.
R.L. “Bud” Abraham is president of Detail Plus Car Appearance Systems,