Carving a Niche
What’s the easiest way to gain a customer’s trust?
Be an expert, says Kurt Adler.
“The biggest worry a customer has is that they don’t understand what’s going on in their vehicle, and they aren’t sure that you do, either,” he says. “They’re paying this money and they want to know 100 percent that the person working on it knows what he’s doing.
“If you’re an expert—and you know that vehicle inside and out, down to every specification, and have performed those same repairs and seen those same issues hundreds of times—they’re going to trust you. They’ll drop off the car and not worry about it.”
Adler would know. That’s how the vast majority of his customer interactions go at A&A The Shop, his two-location repair business in Anchorage and Eagle River, Alaska. The shops, which generate just under $3 million in annual revenue out of a combined 6,000 square feet of workspace, have a 95 percent customer retention rate. And they’re busy, always busy; in January alone, Adler had 75 new customers.
Remember: This is in Alaska. Although it’s the central hub of the Yukon region, Anchorage isn’t exactly a town overflowing with economic opportunity. It’s been ravaged in recent years by an underperforming oil industry, which accounts for roughly 85 percent of the state’s tax income.
So, how has Adler done it? Well, he and his team are experts—in Subarus. For nearly 20 years, Adler has carved out his niche working on a single make of vehicles.
Ask nearly any industry consultant and they’ll tell you this is the way many successful shops are trending. Carving out a unique niche for your business is a must, says Elite Worldwide coach and California shop owner Dean Kuhn, but that’s not limited to specializing in a specific automaker or genre of vehicles. You can be the shop that donates a portion of revenue to charity, or the business that is extremely environmentally focused.
The bottom line is that you find a model that not only suits you, but suits the customers in your area.
“This isn’t saying that everyone needs to go out and find one brand to work on to make [the business] work,” Adler explains, “but you do need to find your own niche. How are you going to stand out? And how are you going to do that, and win customers over, within your business model so you can succeed? That’s the key. You have to find what you are as a business, and then try to be great at it.”
The Benefits of Specialization
Part 1 - Eliminating the Unpredictable
There are no silver bullets in business, and Adler is quick to point out that automaker specialization (or any other type of niche) is certainly not one.
When Adler first bought into the business in 1996 (a friend of his from tech school had started it a couple years prior), there were two other Subaru specialists in the area. And that’s not a random occurrence: According to Adler’s market research, one in every seven Anchorage drivers owns a Subaru—or roughly 45,000 of the area’s 300,000 residents.
However, today, A&A The Shop is the only independent Subaru shop left. That’s also not by chance.
“You still have to have everything else in order and run the business well in the same way you would any other shop,” he says.
Adler has always been a stickler for operational efficiency, and he says the biggest key to efficiency is eliminating unpredictable issues that arise.
While having a tightly focused business model isn’t a cure for every problem, Adler says his niche gives distinct advantages for his shop in general areas of trouble for most repair businesses:
Vehicle Diagnosis: Adler’s staff lives and breathes Subarus. They study the vehicles, they train on the vehicles, and they perform hundreds of hours of service on each and every model of Subaru every year. Because they can narrowly focus their expertise, the team is able to be ahead of trends and new technology in vehicles—while many general service shops struggle to keep up. The team does an 85-point inspection on every vehicle, and the quickness and accuracy (more on that later) of the diagnosis turns what could be a hassle into a strength, Adler says.
Parts Ordering/Inventory: Waiting on parts is a common issue in shops. In Anchorage, Adler says it can take between five and eight days for even the simplest of parts orders. However, by tracking his shop’s repair work and understanding its work mix, Adler says he’s able to keep an exceptionally large inventory of parts on hand—about $200,000 worth at any given time. It may sound extreme, he says, but his shops have parts for 95 percent of jobs onsite at all times. “The amount of efficiency that creates is unbelievable,” he says. Ninety percent of the shop’s work has a same-day turnaround.
Technician Shortage: Trying to find qualified technicians anywhere—let alone in Alaska—is a tall task. Adler says they simply train their own. He has a number of former Subaru dealer techs on hand, but he says the majority of his team was hired based on personality and motivation, and then trained in house. He will pay to send techs to any training they find, but most often, he brings trainers to his shop.
Marketing: Through research (using DMV data, local list agencies and websites like zipskinny.com), Adler is able to target his marketing pieces directly to owners of Subarus. He doesn’t waste money trying to “cast a wide blanket,” he says, and his brand reputation as a Subaru expert helps narrow the marketing messages. (He estimates that 90 percent of his direct mail pieces wind up in his target customer base.) Basic shop signage helps as well. He has Subaru logos throughout the facility, and has an electronic sign out on the road. “You want your shop to be so recognizable to people that it becomes a landmark to them,” he says. “They can give directions and say, ‘Oh, it’s just past the Subaru shop on the right.’”
NO DIAGNOSTIC DILEMMA
Another perk of specializing? Adler says, between his two facilities, he owns three scan tools—one of which is older and not used often.
“I would definitely say we don’t need as much equipment,” he says, noting that his shops each have an OhioDiagnostics SSMIII tool, and that his main shop has an SSMII model, as well.
Adler charges a half-hour of labor for diagnostics (about $55), only giving complimentary scans for items like a loose gas cap.
“Being a specialty shop gives us a pretty good idea on most things so it actually takes us less time [to diagnose issues], which saves the customer money,” he says. “This also gives us a very good competitive edge over shops who work on everything and aren’t as familiar with Subaru models.”
The Benefits of Specialization
Part 2 - A Focus on Quality
After graduating from technical school, Adler worked 16 years as a prospector, dealing with small mining companies in the Alaskan bush. He returned to Anchorage and the auto industry because he and his wife wanted to start a family.
That’s the culture he wants in his shops: a family.
“That’s the biggest reason we’ve been able to do what we’ve done, the culture,” he says. “Everyone here is a part of that family.”
“And that brings us back to quality [of work],” Adler adds. “If you don’t have the right culture in your shop, you can’t control quality of work—and vice versa. Those two go hand in hand, much more than most people think.”
Quality is what Adler and his team pride themselves on. With so little shop floor space in both facilities, Adler says efficiency is critical. The aforementioned obstacles his shop eliminates through specializing play a huge roll in his technicians’ average efficiency of 185 percent.
“But you also can’t be efficient if you’re making mistakes,” Adler says. “Quality ties it all together. Because we’re a specialty shop and have this niche, we eliminate all those things, and can just focus on quality.”
The shop has a 0.02 percent comeback rate on work, and has hardly ever used its three-year, 36,000-mile warranty. Mistakes are so rare in either of his shops, that, when asked, Adler couldn’t recall what or when the last one was.
“Our guys know what they’re doing,” he says. “I give them a lot of leeway to make decisions on their own, because I trust them.”
So much so, Adler says, that he has his staff work autonomously in teams. At his main shop, he has three teams, each with one service advisor, two A-level techs and one general service tech.
There are always two teams on at a time, rotating together on four 10-hour work days each week. It allows the shop to be open extended hours and on Saturdays.
“It also gives them more days off each month while getting the same hours,” he says. “We do really high-quality work, and we try have that work-life balance. We provide full benefits and other things, and we want to make this a great place to work. It’s a family.”
DOES THE DEMO FIT?
Every market is different, Adler says, which means that there is no exact science to determining whether or not a demographic is perfect for your business. However, Adler says there are three steps you can take to help give you a much clearer picture:
OPEN YOUR EYES. What is the market like around you? Who are the customers you want, and what is most important to them? For Adler, Anchorage provided a very clear demographic, and within that, he says that “Subarus are just everywhere.” Look at what your market is like and where it’s heading.
LOOK WITHIN YOUR WALLS. Adler says to understand your business model thoroughly, and know the amount of work and type of work you’re capable of handling.
ANALYZE DEMOGRAPHICS. It’s not necessary to have the staggering number of potential customers as Adler did with his area’s Subaru owners. Adler says that a good-fitting demographic for your business would be able to fill up your entire workload with 10 percent of its population.
Know Your Niche
Today, Adler sees room for additional growth. By continuing to tweak shop systems, he feels he could add 30 percent to his gross, between the two shops, in the coming years, before even thinking about expansion.
It’s quite a difference from where he started. The first A&A The Shop
facility consisted of just one bay in an old brick building that once housed the fire department in the 1920s. “You could barely put two cars in there, end to end,” Adler says with a laugh. With the cramped space and surplus of Subarus in the area, one vehicle make was all he and his partner needed.
As their reputation grew, they found their niche.
Adler’s advice to other shops: Be who you are—and be who your
customers need you to be.
“Specializing brings about every type of advantage,” he says. “You can’t be everything to everybody. There’s just no way to do that and do it well. You need to be the shop that best serves your market, whatever that may be. For me, it’s been specializing in Subarus.
“The biggest thing is that your shop has to be an expert to your customers. That’s how you gain their trust.”
TWO FORMS OF SPECIALIZATION
Dean Kuhn, a California shop owner and a business coach with Elite Worldwide, says specialization can be a very effective way to carve a niche in a local market. And, he says, there are two different ways to specialize.
BY MAKE. This is what Adler’s done—and many shops across the country have done as well. The benefits, Kuhn says, stem from the shop’s expertise, which builds trust and confidence with the consumer. It also can create efficiencies with the staff as each team member’s experience level builds, and can reduce the cost of equipment, data packages, and other repair expenses.
BY TRADE. Kuhn owns three transmission shops, and he says that specializing in a type of service—whether it’s specialty work like hybrids, or having a quick service segment—is another way to corner a market. The benefits can be very similar to specializing by make, but shops need to rely much heavier on a strong referral network.