I just pulled out from Charlie’s Café and headed to Gus’s Garage to help Gus resolve his first major problem since we have been working together. Three weeks after beginning INSIGHT’s Customer Satisfaction Index Program, Gus had received his first customer complaint fax alert from INSIGHT.
Gus had personally called the customer who had sent back a very negative response to the survey mailing cards. She had complained primarily about paintwork and that the car was delivered one week later than promised.
We were going to look at this vehicle that the customer had dropped off two days ago for the shop’s warrantee service. The car will be delivered to the customer tomorrow. The shop has supplied a free rental car to the customer while the warrantee work is being performed.
Gus is pretty upset; he had expected to be using this month’s customer responses as testimonials for a promotional guide he was going to use for local area agent and broker marketing, not taking care of a complaining customer.
After arriving back at the shop we went to look at the customer’s vehicle. Kelly, the estimator accompanied us to look at the car. I asked to review the RO file and the customer’s "hit-list". The car was in the paint department being taped off for refinishing. The left fender and both left side doors were prepped for paint. There was minor body-work on the front door about three-fourths back from the fender.
We reviewed the customer’s "comeback hit-list":
- "The car was one week later than originally promised"
- "There is painting problem with the left front door"
- "Missing left fender name decal (you told me it was on order)"
- "Scratch on left front wheel" (wheel not replaced and the scratch was shown on the estimate)
- "Noise in left front door"
While I was looking over the file and the car, Kelly was quick to point out that this should not really count as a comeback or warrantee job. I was also just as quick to ask him why he thought that as I have heard this type of casual approach to warrantee claims from almost every estimator and shop owner. "First off," Kelly said, "nothing on the hit-list is due to a workmanship or quality problem. Both the nameplate and center cap were back-ordered and not available at the time the car was ready for delivery." He noted that he forgot to mention the center cap to the customer, and that it didn’t matter, because he intended to replace it anyway when the customer came back for the nameplate.
When I asked him what the paint problem was with the front door, Kelly said that Gus was giving away a free repair on the small door ding and scratch that was "cleared-over" when the blend was made for the new fender. Gus jumped in and said that Kelly was right, that the customer noticed the difference in finish on a non-claim-related scratch since there was now clear-coat over a minor scratch. Gus said that he is now throwing-in the door repairs due to the customer having a complaint and being inconvenienced. He also said that the door repair is not a big deal to fix since the car is already back in the shop.
"As far as the late delivery and the left door noise," said Gus, "the insurance company re-inspector held us up for a week and the noise was just a broken clip that was rattling around loose in the door. So basically, this is really not too bad, and plus it is only costing me the price of four days of a rental car and a little labor and material to make the customer happy. Plus, he said, "This was a $7,200 job and there are greater profit dollars to draw on." Both Kelly and Gus were now being kind of smug and nodding to me as if I should understand their viewpoints and agree that such a fuss was unwarranted and unfair.
Since I had heard this type of rationale before, I smiled and asked both of them to come into Gus’s office to discuss this warrantee job in more detail. As we sat down in the office I asked both of them a few questions as I made some entries into a spreadsheet.
This is what we came up with:
|4 days of rental @ $24/day||$96|
|4 hrs of labor @ $20/hr||$80|
I next told them that we weren’t finished and that there are overhead expenses (Gus’s has an average 31 percent O/H cost.) to be considered and a lost gross profit opportunity (37percent) for the work that could have been produced if labor was not processing warrantee work and stall/booth space had not been tied up. We estimated opportunity costs based on his average RO price of $1440. The 4 labor hours could have produced 6.4 sold hours or a $495 job (Labor sales is 44 percent of total sales price.) with the labor resources used for this warrantee job. We then allocated lost gross profit and overhead needed to process the warrantee work.
I then reminded Gus that last year he averaged a 6 percent net profit margin and that the $542 equaled approximately 7.5 percent of $7200. He essentially ended up doing this large job for free after factoring in this "not too bad" comeback.
Kelly suddenly found some work he needed to catch-up on and left the office. Gus was now even more depressed then he was with just the complaint and the negative CSI response. But more importantly, Gus now wanted to revisit this warrantee and find out what could have been done to prevent it from happening again.
I reminded Gus that he is supposed to be learning how to become his own consultant. I asked Gus to work on this problem for us to discuss during next month’s visit. I suggested that he should try to answer the following questions in addressing the issues that were exposed by the CSI Alert and warrantee claim.
- What are the issues or problems affecting the warrantee claim (how far up-stream do they originate)?
- List the processes or functions involved with the issues (estimating, sales, customer care, repair order management, parts, metal, paint, etc.)
- List what procedures need to be performed to assure that future break-downs are minimized
- List the participants (staff members)
- Create an action plan to resolve issues (who, what, when, where, how)
Next month we will review Gus’s analysis of why he had the problem and discuss key steps that Gus feels will prevent/reduce future problems. It turns out that Gus is half right in his analysis, but he has overlooked a very key element in the solution. Stay tuned.
Read Part 1
and Part 4 of Gus's Garage.