It was late 2003.
I had been working on a reused parts strategy for three years and had just agreed to trial it with the largest insurer in Australia, Insurance Australia Group (IAG). We and IAG were presenting the concept to a room full of very sceptical collision repairers in Liverpool, Western Sydney.
The strategy was built on the following 3 simple guiding principles:
Incentivise the repairer to use more recycled parts in the repair process. That is, make sure their margin opportunity is better than that on any other part option.
Build a supply chain that is managed to ensure a quality service and product is delivered every time.
Make it easy for the repairer to communicate and order their products.
Both the insurer representative and I outlined these three principles. You could see the scepticism in the faces of the repairers. ‘What does the insurer have up their sleeve? Why are they going to pay me more?’ An eerie atmosphere filled the room as the repairers digested what seemed to be too good to be true.
Then, the million-dollar question from someone at the back of the room (these curve balls always come from the back of the room, right?).
“So, Chris, that all sounds great, but when I buy a new part, I get a 12 month guarantee on evert part I buy” said the voice from the back row. A pretty rowdy bunch chuckled and seconded the comment with, “yeah and when we buy recycled, we are lucky to get a 30-day warranty…” More chuckles and support as the group of repairers made their position really clear.
I had planned long and hard to get this right. There was a lot riding on it, and I knew that the collision repairer had plenty of arguments as to why this was not good for them. To be honest, most of them, if not all were reasonable arguments. The automotive recycling industry, generally, had let this sector down with inconsistent quality, inconsistent service, a lack of understanding of the customer requirements and their drivers. It was also true that the collision repair industry was heading into a period of change, one where price and margin were to be matched in importance by cycle time – the speed in which a vehicle could be repaired, while maintaining high quality and costs.
It was critical to have considered all the objections and have a solution to them. My response to this objection had to be decisive and, as with all other parts of the value proposition we were taking to the market, it had to be simple and better than that which they were getting at that time.
I answered in three parts;
What if I said that with every recycled part you purchased through this program (excluding headlights*) you were to receive a lifetime ownership warranty? and,
What if, in the case that the recycled part failed, that not only was the part protected by the warranty, but also your labour and paint?
So to be clear, if anything happened to the part and it failed during the time that you have offered a warranty on your repair, we would match that warranty, replace the part and pay you to remove and refit as well as paint the part.
I’m not sure they were expecting this response. The repairers thought they had me and that they had found the hole in the strategy. In no more than a minute and in three simple sentences, the repairer’s objections were dealt with in such a way that gave them the confidence that this was not an ‘ill-thought-out’, ‘short-term plan’ to sell more parts. We had thought long and hard, we had met with repairers and understood exactly what they needed, and we listened.
Recycled parts usage for this insurer, on average, doubled within twelve months and in some regions, quadrupled. Repairers were PULLING parts into their process with request volumes growing so much that we struggled to fill their demand. The issue became about supply, NOT demand and a key reason for this was the offer of an ownership parts and labour lifetime warranty.
Now I know what you are thinking. How can we offer this to the collision repair industry? Why should we when the vehicle manufacturer only offers a twelve-month warranty on their new genuine parts? This is a recipe for disaster!
NO! NO! NO!
What could go wrong? When is the last time you sold a part and a customer came back with a rust claim? Let’s face it, the only time the part you sell to a collision repairer ever needs replacing is when it is impacted by another accident, and for obvious reasons, this is not covered by the warranty. The risk associated with offering the peace of mind of a lifetime ownership warranty is as close to zero as you could get.
The only claim I ever had on a part under warranty was on a leaking $40 taillight from a Toyota Camry. The customer didn’t even claim it, they just called to say that they had purchased the part some three years earlier and that they needed another one because it was leaking. My immediate thought was, ‘what a wonderful opportunity to promote a no fuss lifetime warranty!’ I told the customer that his part was covered by the lifetime warranty promise and that we would send a replacement part out free of charge. Even better, I asked him what the labour cost would be to remove and refit the part – he could not believe it.
As it happens, only a few weeks later, this repairer was attending a feedback session the insurer held on the program. To my delight, he stood up, unsolicited, and told the room the story about the Camry taillight.
Should you offer a lifetime warranty on your collision parts?
ABSOLUTELY, without a doubt!
Recycled Original Equipment (ROE) parts are an integral part of the repair process and are critical to the viability of a profitable parts (including VM new parts), insurance and repair sector moving forward. Do everyone a favour and give the collision repair industry a reason to use your part.
There is no better way to compete in the market than on quality. The alternative is a race to the bottom on price. The auto recycling industry has a wonderful opportunity, with the advent of certification programs on the agenda, to lift the image of the industry and the product it sells. After all, the ROE part is original, is the best option for the environment and will enable the safe and economically viable repair of millions of vehicles in the coming years.