"I've got my most expensive technician, my highly skilled diagnostic technician (doing diagnostics). I've got some of the most expensive equipment that we own in use. And I'm making less money (on diagnostic work). Is this a good plan for long-term success?" he said. "And by the way, that technician is going to continue to need to go to school and we're going to continue to invest in more equipment. …
"So what we suggest is that you make your technician 200-percent efficient. If I do that, then my revenue per hour would be $200, which would compare very well to the $180 (for labor and parts on a regular repair). ... Why are we afraid to charge what we're really worth?"
One shop owner in the audience worried that customers would complain about the diagnostic charge.
"If we tell them upfront what they're going to spend, and they agree to it, then what is there to complain about?" Mr. Gilley countered, noting that a shop's customers come because they trust the shop.
What if a competitor offers free diagnoses? "I suggest that just because somebody else is going out of business slowly, doesn't mean we should model their business plan," Mr. Gilley said.
"There really are only two successful retail companies out there anymore, the others are all struggling — there's Nordstrom and Walmart. Which one do you want to be? If you want to be Walmart, it's a race to the bottom. If you want to be Nordstrom, it's always a race to improve on service," he said.
"It's a keystroke (to change prices) and a mind change. And you are responsible for the mind change (on diagnostic charges)," he said.
"We have some terrible service advisors in our industry and yet we still are in business. I don't understand it," Mr. Gilley said.
"In order to hire somebody to be on the front counter, the first requirement that you should be looking for is that they love people. It's a people position. They have to love dealing with people.
"The second thing is they have to be able to sell because it is a sales position.
"The third thing that I look for is they need to be someone who is organized and that is sometimes hard to find because when they are a people-person and they love to sell, they sometimes aren't as organized as we'd like them to be.
"The fourth thing is they need some technical knowledge, which is the least important and the easiest to get.
"Very few technicians have the personality to transition from the rear of the shop to the front. They have what we call 'the curse of knowledge.' They know too much," Mr. Gilley said.
The curse of knowledge, he explained, is when a tech knows a lot more about vehicle mechanics than the customer. The customer doesn't necessarily want to know the details of how to fix the car, they want to know how much it will cost and what will happen if it doesn't get fixed, he said, noting that with all that knowledge, a tech tends to give away a lot of diagnosis.
Service advisors also need to have keyboard skills and software training, as well as communication skills (translating between the customer and the technician and vice versa.)
"We spend all this money on marketing (to draw) your customer in and if they come in, 50 percent won't come back a second time," he said, quoting industry statistics.
"Of the 50 percent that come back a second time, only half of them will come back a third time, which is really what it takes to become a customer. So if you think you're spending a couple hundred bucks to get a customer to come in, you're really spending closer to a thousand to get a real customer. How much is that impacted by the whole shop and the experience and everybody they meet? How important is the service advisor now?
"If they like the service advisor and there's a problem with the car, there's a good chance they'll still come back. But you can do the greatest job in the world repairing a vehicle and if they don't like the service advisor, they're not coming back. So why would you have anybody on the front counter who wasn't a total Mr. or Mrs. Personality?"
Team and equipment
Mr. Gilley recommended shops invest in 60-80 hours of technician training per year.
"Have you budgeted? Have you charged enough to get your gross profit so you can afford to send them to school?" he asked shop owners.
"How much are we going to have to invest each year in technology to keep up? ... We got to continue to make money and reinvest in our business."
Investments must be made in equipment that creates technician efficiency, enables the shop to expand its service capabilities and will provide the shop with a competitive advantage, he said.
He suggested some shops may need to charge more for labor to meet their budget and investment requirements.
Mr. Gilley noted that in 1995 a repair shop was probably charging about a $65/hour labor rate. If that rate was adjust ad annually for inflation, that labor rate should be $210/hour today.
"So we kind of dropped the ball in the last 20-some years," he said.
"If you were at $210, could you pay your technicians more? Could you buy more equipment? Could you invest in more training? So why aren't we there?" he asked.
"I just want to suggest that perhaps we should really reexamine where we're at and what we're charging for what we do."
He quoted a study that determined that HVAC technicians are probably the best qualified candidates to recruit and transition into the automotive repair industry.
"The problem is, there is no monetary incentive to move," he said, since they usually are paid more than automotive technicians.
"I would suggest that automotive vehicles are a whole lot more sophisticated and a whole lot more challenging to work on than an HVAC system."
Mr. Gilley noted that a plumber can charge more than $200/hour; a copier repair person can charge as much as $300/hour — "And we get all squeamish at $120? So where is the disconnect?"