Keeping customers

How to hold onto customers through tough times

WHILE NEW ZEALAND NARROWLY AVOIDED A TECHNICAL RECESSION WITH A 1.7 PER CENT GROWTH IN GDP, WE LOOK AT HOW WORKSHOPS CAN SURVIVE IN AN ECONOMY BATTLING INFLATION

New Zealand has avoided a technical recession — two consecutive quarters of negative growth — by recovering from a 0.2 per cent drop in GDP to a 1.7 per cent uptick in the June quarter, but supply chain issues and inflation create distortions in the economy that can put pressure on different sectors.

During times of economic stress, people who make less also spend less. Some industries are better insulated from those changes than others.

IS AUTO REPAIR ONE OF THOSE INDUSTRIES?

The answer is yes, because people tend to avoid major expenses like newer vehicles which means they hold onto older vehicles longer, which require more maintenance — but that doesn’t mean that the industry isn’t affected. For every person who holds onto their vehicle longer, there’s another who also puts off a needed repair because they can’t afford it.

It’s also possible that regional or local impacts could be much bigger than the overall national impact.

In short, the garages and workshops that survive best during hard times are those that understand how the customers and community are being affected, and adjust their services to help them meet their current challenges. This isn’t saying you need to lower your prices.

Here are three things that happen during economically challenging times, and what you can do to help address them.

1. CONSUMERS ARE LESS ABLE TO HANDLE LARGE PURCHASES

Rising costs without any increase in income mean some consumers are forced to dip into savings to handle large expenses — if they have any savings at all. Consumers are also less likely to have large lines of credit available because they can also be reduced in line with their ability to pay. Selling maintenance plans and emphasising warranties will help consumers have confidence that they’ll avoid an expense they can’t afford and end up without a means of transportation.

2. PEOPLE HOLD ONTO CARS LONGER

As mentioned, people don’t want to make large purchases during a recession, so they hold onto cars instead of trading them in.

People holding onto older vehicles is generally news for independent workshops because those older vehicles will need maintenance to stay on the road. To really benefit from this, however, they will need to put time into customer education. Workshops need to use the time they have with customers to get across the message that the relationship between short-term maintenance and long-term reliability is real. If they elect to delay maintenance too, those costs will grow in the long-term, perhaps dramatically.

Don’t veer into scare tactics though. Provide customers with an honest explanation of what might reasonably happen if they don’t take a preventative step, and leave the choice to them. Once they understand the consequences, they might reconsider their decision to wait. A practical illustration such as showing the customer what a worn part looks like and what a new part looks like can be effective.

3. CONSUMERS START TO CUT COSTS

As your customers go down their bank statements looking for monthly transactions to cut, will your workshop stand out as a cost-cutting opportunity? That may depend on whether they view the service your shop provides as a cost or an investment.

Do your customers understand and appreciate all the value they get from having a workshop looking after their car that’s staffed by technicians they trust? Take the opportunity to give customers information about their vehicle that will help them make good decisions in the future. This will also help remind them of what they’re going to lose if they decide to move to the cheapest alternative in town.

Take advantage of the opportunities you get to influence and connect with customers. Why? Because then you’re not likely to be a part of the conversation when they decide price-shopping for cheaper workshops is going to be a worthwhile trade-off.