Using Subscriptions to Boost Customer Loyalty and Retention | SDR #207

Welcome, everybody, to the big show. Today we're going to talk about how will our business model change in the future. It's an exciting conversation, and we're going to throw around lots of ideas. But what's going to happen here is it's going to inspire you to think a little bit different and be ready for the changes that are coming. Also, some interesting stats in the news about Christian's driving and much, much more coming up on this edition of Service Drive Revol.

Before we get to the subject of today, which I love to talk about, streams of income and business models, we've missed you here, Christian. Yeah, Christian has not been in the office for was a couple days, but it felt like weeks because there's so much going on. Things are moving so fast, and there's so much going on that you being gone for a couple days felt like you were gone for weeks.

Yeah. And it's so weird. Like, I keep, like wanting to check in and be like, how's it going? And everything like that. And I'm texting jokes instead of coming and telling you jokes and they're not hitting as well. It's tough being on. I don't like it.

Yeah, you said so we have a thread where.

It'S an internal text thread where we talk about our sales department or our sales department will report their numbers, that sort of thing. And in that thread, you said something about plaid.

I thought it was hilarious.

Personally, I did not get it. I didn't understand it. But I just. In support of you, I just said, yeah, I'm glad you brought that up or something. But I have no idea what you were talking about.

Yeah, so we were talking about the city of White Plains, New York, and I threw out this little joke and I'm like, not to be confused with green plaid, White Plains, green plaid and crickets. Like, nobody responded or anything.

I was laughing when I typed in, are you drinking? No. No, I wasn't. I should have been. But I gotta tell you, I didn't have much sleep the night before, so that might have been.

How many states did you go to in that little amount of time?

I was in Florida for about.

30 hours, and then Virginia for about a day and a half. And then in Washington, D.C. just kind of in a little. A little thing which was drive by. Yeah.

You went and met with the president and then got in and out.

We had a chat about the future of the industry. For sure.

He had Covid, though. Did you get Covid?

No.

No.

You want to. Do you want to do the news.

It's a really good. We got some.

Before we get to the news though. You know, one thing that I'm noticing about you.

What's that?

You are starting to get jet lagged. Like, there was a time where I thought Christian was superhuman in the sense that we would do these trips and I would be worn out and he'd be. He'd be raring to go.

And I think that that's starting to change.

It might be. I'm feeling it a little bit today. Sorry to the audience because I can tell. Got back late last night, back here at seven bells this morning. And yeah, you can feel it. A skoach. But it's all mental.

We gotta push through it. It's a very Midwest.

Yeah. You know what's also funny is like when I was a kid, I always thought that like, like the rich kids, like they all had these like Bose stereo systems. And then, you know, I had like.

Remember that? Yeah, kind of. You were like, man, I wish I was like those kids.

Yeah. Like, I wish I was a rich kid that had the Bose stereo system because, like I had Sanyo.

Well, you'd go in and they would demo the Bose system. Remember that? The demo.

They didn't let me into the demo. They knew I couldn't afford it.

Well, in the demo, their aha was they would. You would. They would like play a movie, right? And it would be like some movie with a car chase. You'd be like, that's. It's bringing the theater home. Like, this is incredible.

Oh, yeah.

And then at the end of the demo, they would pick up this basket on the floor and underneath the basket, guess what?

There was the price.

A subwoofer. And they're like, the reason why it sounds so big is because Bose has a subwoofer. And you're like, oh, but yeah, we couldn't afford that one.

That's right. Yeah. So I thought that for years and years, but turns out those are just stereotypes.

You're tired. Whoa.

You didn't think that was that good.

No, it's funny.

Yeah.

I'm just giving you a hard time. Okay, let's get to the news.

This is a really funny news article. So the.

Sinaloa.

Sinaloa. The Sinaloa cartel is now selling Tesla and Prada branded cocaine. And which is important because I don't want my cars or my cocaine to cause me to need gas. Huh? No.

Why would cocaine cause you to need gas?

You're missing the maybe different kind of gas. Boy, these aren't hitting well today, but that's all right. It's early.

Not the fuel. Gas, but the other gas.

So I've never tried cocaine.

Yeah.

But I'm wondering at what point does it being branded Tesla.

Improve? Like, can you charge more for Tesla branded cocaine?

Yeah.

And then it's like considered luxury cocaine.

Right. It's cutting edge.

Is that a real thing in your experience with cocaine? Like, some cocaine is like.

Low status and other cocaine is high status. Like wine. Like you'd have two buck Chuck and then you'd have like a bottle of Canis.

Is that how it works?

Probably. That's so funny.

I'm out of my depth there.

I think so too. But there's gotta be low grade, high grade, there's like street and then what you get? Not on street.

Now, can Tesla sue them for copyright infringement?

It doesn't say that in here, but it definitely says that. It's, it's, it's getting bigger. Being sold in Mexico City.

Wouldn't it be funny if the guys are down in some part of Mexico bagging up Tesla cocaine and then all of a sudden people bust in the doors and they're like, stop. Blah, blah, blah. And they don't arrest them for their cocaine, they arrest them for the copyright infringement. Right.

Like they're taking the print, the tea print.

We're fine with the cocaine at this point.

It's good for the economy.

You can't violate a copyright.

Oh, so funny. Yeah, I think that's probably what it is. That's. That's a big deal. You might be right. All right, so that is, that is the one piece of the news. Now the second one, I'm just, I'm only doing this to see what your response is because I feel like it's probably going to go a different direction than the, than the article itself. Out of the DailyMail.com Driverless cars may need gender settings after study shows women are better than men at taking control of the vehicle when required to respond to hazards.

So women are better at it than men.

Yes. Yeah.

And that you think that's funny because you're not a good driver and you represent yourself as a he.

Yeah. So I was thinking that what you were probably gonna say is that there would have to be a third setting.

Which would be what?

Me.

At which point I would be not, I would not be able to take over the driverless thing. Like, I just, it's safer that way. Even if the driverless car is malfunctioned.

I think that a driver, the software will Be a better driver than you. Yeah, safer.

I think you might be right. Poor rental car.

Is that real?

Yeah, totally.

Whoa. Okay, so what made me think of this subject Christian about? Is our business model going to change? Well, I think that. Let me tell you.

Yeah, please, tell me.

Not quite a rhetorical question.

So do you know what inspired me to do this story?

No, tell me.

You changed up your answer.

The last time I tried to answer a rhetorical question for you, it didn't go well.

That's what was funny.

Okay.

I'm excited about this subject. Do you know why I picked this or what inspired me to pick this?

Yeah. I'm gonna assume it was.

The winds of change in the air that are always in the air.

Maybe. But it was more this article on this Vietnamese EV company called VinFast.

That makes more sense.

Do you know how many electric vehicle car companies are coming into the market?

I have a guess of roughly 120.

120.

What do you think?

Yeah, It's a lot.

Yeah.

We're going back to the beginning of the automotive industry when there were thousands of car companies and they were more local, right?

Yes. When anyone with a last name had a car company.

Yeah, basically.

So this Vinfast is coming into the marketplace.

With some distinct disadvantages.

In the sense that nobody in the US Or Canada, when they think an amazing automobile, does the country of origin in their mind pop up as Vietnam.

Yeah, that's true. Right. It's not in your top 50.

Yeah. And so they're a car company from Vietnam. So that's a disadvantage because you just don't have. You don't have a script for that mentally. Like, we understand cars from Korea. We understand cars from Japan. We understand cars from France. The Renault. Yep, the Renault. We understand cars from Italy, definitely. We understand guns. Isn't the Burra made in Italy?

It is.

So you got. You got Ferrari, you know, so we kind of have these connections, right?

Yeah.

And even we understand to some degree that there's cars coming from China that.

Are electric that might have another name on them, too.

Yeah, but we understand China, but nobody thinks Vietnam like, it doesn't. So that's a distinct disadvantage that in the marketplace to get somebody to spend 40 or 60 or $100,000 on a. On a car that has. The company has no infrastructure. So there's no service departments, there's no history, there's no brand recognition.

That seems like a risky bet to buy that car.

Oh, yeah. I mean, just thinking, even the Korean thing, think back 25 years ago. How hard it was Hyundai, Kia and Daewoo to get into the market.

Oh, go. Go beyond that and think about how hard it was for Honda and Toyota.

Oh, yeah, for sure. It was. It was decades. Right. For them to really kind of get their footprint.

Oh, yeah. And in the beginning, I don't. I don't know if you remember this, but their quality wasn't that great.

I don't. I think it was a little bit before my time.

Yeah, their quality wasn't. They figured quality out, but it wasn't. In the beginning. It wasn't that great. And also they. The cars were underpowered, so.

Yeah, they were. There were lawnmower engines.

Yeah, that would be the joke, right? They were. They were lawnmower engines. And so they're coming into the marketplace selling some cars in Vietnam. So they. I think they sell 35,000. 35,000 cars in Vietnam. They are only coming into California.

Now. What I think is some of these companies that are coming into the US or that are starting are going to gravitate towards LA or New York, because, let's face it, if you take New York City, Manhattan, and you take Los Angeles and put them together, you got Canada.

Oh, by population, there's more people in those two cities than all of Canada. Right.

Good Lord. That's crazy to think about that, isn't it?

But if you're going to start a company without a lot of infrastructure and you just need population.

Yeah. 1% market pen in LA and New York is better than 1% in Canada. Yeah, I get that.

So they're gonna start here in Los Angeles. They're gonna have showroom. They're. They're also kind of just following the Tesla roadmap, where they're gonna be in malls. Yeah, they are going. So their service is going to be 100% virtual in the sense that they will come to you. Which Tesla started out that way.

Yep. That's how Hoagie did his thing.

Yeah. So one of our coaches on our team was OG To Tesla, and he had a whole region. He was the only technician in a whole region in the Midwest. And if something happened, he would fly in and have to, like, figure it out, go to Home Depot.

Thing is, like, his employee number was like, 108 or something.

Yeah, OG so if you had the disadvantage of being a Vietnamese company with no history, you're not. The perception in the marketplace is zero.

You're not the forefront of technology, production, anything.

And you're not selling a $50 product. You're selling a product that's 40, 50, like it's, it's a lot of money. So people, you know, they're, they're going to be more apprehensive.

So they are coming into the marketplace, virtual service department. So technician will come to you. But they're changing up the model and it makes me wonder how much will our model change over time. So what they're doing is they're leasing the battery and I would bet that they're just going to lease the cars because if you came into the marketplace with an EV in LA and New York and you said, hey, you can rent or lease this car month to month, no commitment whatsoever for 500, something very, very reasonable. And they just want to get the cars in the marketplace and control perception. So they want people talking about it. New York and LA are kind of the, they, they create culture for the world.

Yeah, everyone's got their eyes on them for sure.

Eyes on them. All the movies, all the books, all the TV shows.

Everything comes out of here in New York.

Right.

I mean you got CNN in Atlanta and ESPN and Connecticut, but if there's.

No Real Housewives of Madison, Wisconsin.

Right. So you're going to try to get the cars into traffic here, you're going to lease them month to month to make it super easy. Now what will that lease include?

If it was up to me, I would say everything. Insurance, maintenance, the actual cost of the car, the whole thing. It's a what you write one check.

Now right now, Tesla, a big part of their business is the insurance, which.

Was by far the easiest way. So for me, I did my Tesla insurance. It was not only cheaper, it was so easy, it was just essentially I paid the insurance over the app.

Yeah. Now when I called my insurance to insure the Tesla, it was way more than Tesla was to insure the Tesla.

Yeah, me too.

And so if you understand how insurance works is you take the money end. And this is the same for extended warranty. So I've worked with and set up extended warranties or paint fabric protection, where it's an in house thing. So it's self insurance is what they call it. Now.

Most of the time when you do this, let's say you collect $3000 for an extended warranty, maybe 1500 of it goes to the actual insurance of it. 200 and something will go to the reinsurance and the administration of it. And so when it's all said and done, maybe on $3,000 you got $1,200. It's going to the insurance. Now you invest that money And I've had it before where my income from the return on the investment of the money more than paid the claims. Okay, but the other thing you can do with that money is you can borrow against it. So it's like a bank. So instead of investing it, you can say, I want to loan myself that $500,000 and I'll pay 4% interest, I'll pay a fair interest rate on it. But you can fix cash flow issues or you can fix acquisition issues. You can use money to acquire other things. You can use that money to fund growth factories, whatever it is, it's basically cash. You can borrow from yourself. And.

If you do it right and the claims are low and you've charged the right amount of money because you can, you know, there's, there's companies and people out there that will tell you, like, here's your risk factor, here's what you should charge. But you can mark that up. So let's say you're selling an extended warranty on a Toyota Corolla, whatever. And let's say the, the loss ratio for extended warranties is, adds up to, you should, you should have $700 put aside for that.

Yeah. Because they know that the average Corolla is going to have $1200 worth of claims over the four years, blah, blah, blah, bl.

So so many people will trade them in first, whatever.

Yeah.

But at the end of the day it'll be $700. You could charge 900. So you can play with that number to, you know, you can be ultra conservative in that way. But insurance money ends up being a huge factor. How much will that change on the, the manufacturer and the service side of things that will we start including insurance? Like, will we look at the repairs and maintenance on a car more like insurance than having the customers pay out of pocket going forward? Because that's what these EV companies are going to do. It's going to kind of be like if you had, like in the trucking industry.

You will go to a company and the company will administer your purchase of 20 trucks and they will build in the maintenance, they will build in everything, and then they will administer that. But your cost is fixed.

Yes.

So your cost of driving those trucks is fixed because it's all built in, administered by somebody. How much will we get into that going forward?

And how much will service departments be more of an.

A prepayment like insurance, where you say, you know, we're gonna charge $200 a month to be in our club, but anything that happens, we fix it.

I think it's a great idea.

Like I, I've set that up with doctors a couple times. And the doctor that I have is, that way you pay so much a year and he's your private doctor. He can, he can only have, you know, we kind of figured out that a doctor can service 75 people in a. You know, and spend enough time and make enough money. And so if something happens to me, my doctor is on the phone with the er. He would show up. Like, he's, he's my personal doctor.

You can call him as much or as little as you want, right?

Yeah, if I called him right now, if he's not on the phone, he'll answer.

Yeah, that's great to talk to him.

Two days ago, but yeah, like. And.

So how much will it be like that? Because we've had service departments that are doing that in the sense where customers are paying so much a month and then any repair, anything that happens, it's fixed.

Well, it's two things. One is I think it's the best retention tool. And two is I think that it's really easy for the customer. Talk about reducing stress. Like, there's no worry of like, what's my bill gonna be today? I like that.

So then if we're selling that, what is it the customer.

Wants in that scenario? Like, what's the added value? Like, let's say you have a shop or a dealership or a service department or whatever, and I have one, and you're charging $300 a month as a subscription for any maintenance or repairs that are needed on a car and I'm charging 300. What would differentiate you from me?

You could pick a bunch of things. You could say guaranteed appointments, you could do valet pickup service. Like you could have a 24 hour hotline.

Well, that's a good point because what will happen is kind of like in certain scenarios with healthcare or in countries that have healthcare, yeah, your kidney replacement's covered, but you gotta wait six months or whatever it is. Right. So because they're booked out. So you could say guaranteed next day.

Yeah, there's a lot of different things you could do, but you'd want to let them know that. And the end of the day is just, it's about peace of mind and why I'm the best place to do it. But I think it would be really easy to come with a bunch of differentiating factors of why my subscription is better.

You know, insurance companies could get into that. So geico, they could get into that in a sense. Right? They could have their own service departments because isn't that what Kaiser Permanente does in a sense is they're controlling the input and the output. They're saying pay us for health care, but then you have to go to them and then they're controlling their costs.

Because if they mark something up, they're marking it up to themselves. So like if you have a normal health insurance and you go to a hospital, the health insurance is like an extended warranty in the sense that they're.

Paying the hospital and it's all pre negotiated rates on, based on the job and everything like that.

Yeah. Which is kind of like.

Kind of like what, what is happening right now with. We own Manheim, we own cars dot com. What else do they own?

Kbb.

Kbb, yeah. So Cox owns Kelly Blue Book, they own Mannheim. So they're setting, they're setting the, the value and they're controlling the value at the auction. So if cars are out of whack, they can slow roll them and have them sit somewhere. Right. They can no sell at an auction. So they can control the value of the cars.

It's also like if they own it, if they own the, the auction and the reporting thing, they can make those numbers whatever they want them to for the customer.

Right.

That's so great.

Yeah. Somebody on a keyboard can just type in a number. It doesn't necessarily have to be. And we're not saying that they're doing this, but we're saying it doesn't necessarily have to be based on what the auction is doing.

Yeah. Who's going to fact check it?

Where historically they were separate entities.

Yeah, that's super interesting.

So if you're, if you're an insurance company or you're a parts manufacturer.

What.

Would be a better way to control what you can sell the parts for? Like remember when we had the. I forget his name, but the kid whose dad started Atari.

Oh yeah. What was that guy?

He owns Two Bed Circus down here. And so what he was, we were talking about things he learned from his dad or whatever. Right. And he was saying that when his dad owned Atari, he would wholesale the, the consoles, the video game consoles. So like Centipede Donkey Kong, whatever it was for like fifteen hundred dollars to these middlemen that then would lease them or sell them to arcades for 5,000 or sell them to grocery stores. Remember you go through the grocery store or Pizza Hut. Yeah, there would be one. And he, he said what we need is, we need another company that's an arcade that we can sell the Machines to. For full retail. And so he started Chuck e. Cheese so he could sell his games to Chuck e. Cheese for full retail and cut out the middleman and name the.

Price he buys it for.

So I know this is really forward thinking, but kind of think about this in the sense of our industry is ripe for a parts manufacturer, for a big insurance company to come in and say, we're going to include the repair and maintenance and we're going to open up our own repair facilities so we can control the input and the output. And we only have to do it in L. A in New York to start. Right. I mean, just think if you had 20 of them in L. A and 20 of them in New York, that's, that's enough to prove the concept.

Yeah.

And what a great business lesson in terms of the key to success is controlling the input and the output. You just, you limit the variables. Yeah, that's funny. You know, you were talking about the doctor. I think I'm actually going to get a new doctor because I went to mine last week and this guy told me, he said, I've got antisocial personality disorder. At least I think that's what he said because it was hard to hear him over the duct tape.

And segue.

Thank you.

The other thing that made me think about this with this car company coming in is I was doing a strategy session and I was talking to somebody about doing lifetime alignments. So, you know, tire season's coming up and oftentimes what happens to a lot of service departments in the northern part of the country where snow is an issue and you have winter tires is they will have a huge influx of customers to get the winter tires put on and they'll have a huge influx of customers to get the winter tires taken off.

Yes.

So it peaks twice a year. And so what happens is that peak will overrun the service department in the sense that you don't have enough people to do everything. And you got 30 an hour text doing tires because you're so booked up, you don't, you don't recommend alignments. You're not selling. A lot of brakes you take, you start taking shortcuts in a sense because you can't handle the volume. But you're losing that work and they're not coming back three months later to get an alignment or the brakes or whatever. And so we were talking about, why not do a lifetime alignment? Which we've had success with. We have some clients that love that and it works. And that made me think, like, how much are we going to change where things might be more of a subscription based thing where you pay us so much. Maybe it's a year, maybe it's a month and then anything you need, you're coming to us.

Which then is secure for both. It's secure for the shop and it's secure for the customer to know you have both. You have the, the guaranteed income in a sense and you have peace of mind that you have a place to go. And would that change the relationship with customers?

Yeah, I think it makes it more of a partnership.

Yeah.

Great. It's a really good idea.

So food for thought, everybody. I hope this inspires you to kind of think a little bit different and pay attention to the news with these car companies coming in. But I believe that they're going to be more localized and the one thing they're going to need is they're going to need service. And if you have the tax and you have the ability to service cars, you are in the driver's seat. I've been saying that for a long time, but it's never been more true than it is now. And going into the future is they're going to need help because they can't ramp up technicians in the field. It's not scalable. At some point they got to have locations. What they're going to want to do is go to local service departments and offer some sort of deal where you administrate the service for them. But if you're booked out two weeks already with what you have, you're not going to be able to pick that business up.

They're going to pick the best of the best for sure.

And they're not even trying to touch tires and all that either, by the way. They're not even. They're just doing warranty in that sense.

So.

Yeah, so the thing that they're doing is they're leasing the battery and they own the battery forever. So when you buy a car for them, you're not buying the battery. They own the battery and they will replace the battery if there's better technology, they'll replace it if it wears out. But in a sense they're trying to protect the value of the car by ensuring that it always has the latest battery. And if it wears out because batteries.

Lose their function. Yeah. They lose their functionality over time.

That's a non concern because it's always under warranty.

Yeah, it's a great pitch for sure. I love it.

What these new manufacturers coming in are going to have to do is add perceived value to the marketplace. So they're going to come up with crazy stuff just like we're seeing in our industry where, you know, guys can't hire tech. So they're saying, you know, we'll pay you customer pay time for warranty work or, you know, all, all these crazy things that we see and do because sometimes we're doing that, but it, it is changing the way that we did things previously. So fun stuff. We'll talk about it more in the future, but that's it. Do you have anything else you wanted to say?

Not one thing.

No more jokes. So thanks you guys and we'll see you next time on Service Drive Revolution. Thanks so much for watching this episode of Service Job Revolution. We're uploading new stuff every day, so make sure you subscribe and click the bell icon so you don't miss out. If you have a question you'd like us to answer on the show, call 8333 Ask SDR and we'll answer your question on the show. That's 8333 Ask SDR. For special deals on our books and training, head over to Offers Chris Collins Inc.com. now that's offers.chris collins inc.com I'm Chris Collins, and I'll see you in the next video.