Even before the coronavirus outbreak, I was telling shops I work with a renewed focus on “capture rate” was increasingly important. Now it’s become critical.
Here’s why: Look at any reliable source of claims counts in the U.S. over the last couple of years, and you’ll see they are declining. The increasing number of vehicle on the road with advanced driver assistance systems (ADAS) is reducing accidents. Not by a lot, and it varies a bit by region, but by about 2 to 4% a year overall, most analysts agree.
That might not be particularly noticeable---yet. I think it has been masked by shops feeling like their sales increased in recent years, but that’s because severity has been getting higher. The ADAS impact on claims count has also been offset until recently because low unemployment and low gas prices were keeping more vehicles on the road for more miles.
But we’re a little bit like the frog in that old analogy: Put a frog in a pot of boiling water, and it will jump out. But put it in a pot of tepid water and only slowly bring up the temperature, and the frog will boil to death.
Similarly, a 2 or 3% decline in claims counts each year might be easy to ignore, but in five or seven years, you’re going to be wondering why the water around you has gotten so hot.
So now, and especially in response to this pandemic, we have to get back to the fundamentals, including focusing on capture rate, something most of us did when we were first in business. You need to convert more of your potential customers into actual repair orders.
How do you do that? How about following up on estimates written? If a customer gets an estimate but doesn’t schedule the job, call them the next day, then three days later, then five days after the estimate.
One of the major clients I work with said those type of follow-up calls are helping them capture 20% of those jobs that weren’t scheduled at the time of the estimate. That’s a big deal.
The pandemic and work slow-down has shops following up like never before. I talked to a shop in late March who told me, “We’re following up on estimates we wrote a year ago.” The reality is all shops should have been doing that type of follow-up all along.
Another thing you should be doing: Monitor where your work is coming from. Most management systems can help you do that. Unfortunately, I look at many shops’ “referral” or “source” reports and see just generic categories like “insurer” or “internet” or “dealer.” That’s not good enough.
Capture your source information in detail. Let’s say you’re a direct repair shop for ABC Insurance. If you run the source report and see you repaired about 20 cars a month through DRP claims paid for by ABC, and now you’re only doing 15 a month, you need to get proactive and find out why.
You can also track how many claims were paid for by various insurers through a “Body Shop Scorecard” report available through Enterprise. It shows you by insurance company how many of your customers were in an Enterprise rental while their vehicle was in your shop. If you are seeing fewer rentals covered by a particular insurer, find out why.
Don’t just list “dealer” as a source; identify which dealer. Again, if you see a decline in those referrals, you can look into whether there’s been some change at the dealership. Maybe there’s a new general manager or service writer who is sending work to his buddy’s shop down the street.
Similarly, don’t use a generic source as “internet.” Indicate whether that customer found you through your social media, your shop website, an OEM shop locator, etc.
Another way to monitor and improve capture rate for direct repair shops, or those who receive “open assignments” through an information provider, is tracking the metric of “assignment received to estimate start date.” This report shows you how much time on average passes between when your shop receives an assignment and when you begin to write the estimate.
Often when a shop tells me they need more work, we’ll check out their assignment-to-estimate metric and see it shows it’s taking them five or six days after getting an assignment to get that customer’s estimate started. Those shops don’t need to be attracting more work; they need to be getting on assignments in a more timely manner.
Capture rate will also increase in importance if something leads to an increase in the rate at which consumers are shifting to newer cars with more ADAS. That might seem hard to fathom with the slow-down in car sales we’ve seen. But that decline might at some point prompt some sort of “cash for clunkers” federal incentive to attempt to revive new car sales.
The good news in such programs for shops is that newer cars are more likely to be insured and thus repaired after an accident. But it could also push a lot more ADAS-equipped cars onto the roads. That could mean the annual decline in claims could jump to 5 or 7 or 10% a year.
So we all need right away to start refocusing on basic best practices, like improving capture rate. Because it’s going to be much more competitive for claims.
The water around us is going to start heating up, and we can’t wait too long to respond.
Mike Anderson