Without the profits being generated from service and parts, where would your dealership be? The time has come for the spotlight to shine on the back-end of the business.
In fact, the average technician generates as much gross profit a month for the dealership as the typical 10-unit a month salesperson. Do the math; the average sales gross minus F&I equals between $1,300 and $1,500 per unit, while a technician generates an average of $130 gross per repair order, which produces about the same gross in only 10 or 11 ROs.
With so much at stake, no service or parts department can afford to send a single customer to the competition, whatever the reason. Today, the importance of taking every opportunity to deliver service excellence at every point you engage with your customers cannot be overstated.
“Given today’s market conditions, where dealers are finding it extremely difficult to achieve profitability, it is vital that they not overlook the importance of ensuring their service customers are satisfied,” notes a recent J.D. Power and Associates report.
“Not only does meeting and exceeding the expectations of customers through after-sales service result in an increased likelihood that those customers will return for service, but it also results in increased likelihood that those customers will stay loyal to the brand when they are next in the market for a vehicle.”
Increasing profits in your service and parts departments is largely the result of three practices:
1. Increasing customer retention
2. Selling maintenance
3. Mandatory, on-rack vehicle inspections
We will focus on these basics because when they’re part of the back-end culture, profits will grow.
“For instance, General Motors believes the average dealership can increase its fixed gross profits by 10 to 15 percent by retaining one more of [every] 10 service customers—plus increase [the] opportunity for additional vehicle sales,” explains Melody Schuette, director of digital marketing and customer retention for GM’s service and parts operations.
“It might be saying the same thing, but a five percent increase in service customer retention will increase the profitability of a dealership by 25 percent,” continues Ronald A.J. Fortt, vice president of dealer development for OneCommand, a relationship marketing company. “This is absolutely huge,” he says.
So shine the spotlight on the guys and gals in the back end. “Perhaps it’s time, as you celebrate a good month for the sales department, that you also shake the hands of your technicians who’re making as much money for you as your sales staff,” asserts Randy Johnson, president of Car People Marketing, a customer and service retention marketing company.
“Never has the time been better to focus on the service department as the way to get customers into your store,” he continues. “It’s time for general managers and principals, many who do not understand service, to trust their service directors to aggressively sell and market the service department.”
Retain more business.
Let’s start that selling with our internal audience, the staff. Listen carefully to how your salespeople, cashiers, and service writers meet and greet your customers. Shop other area retailers and pay attention to how they interact with you. Does anyone bother to thank you for your business anymore? Is the courtesy and respect they show you no more than a casual “Yup?” Ever want to slap them awake?
No customer wants to be made to feel that he or she is not valued or is a frustration to an employee; “disrespected” is what I’m after here. When was the last time you coached all of your staff to converse with customers with the utmost respect? I was raised in the South, where you addressed any man older than you as “sir” and all women as “ma’am.” I have yet to insult anyone by addressing them with such formality; I doubt your staff would either if you instituted such a policy.
Why is such informality and sloppiness tolerated in ourselves and in those who work for us? Customers, even those who are informal and sloppy themselves, deserve respect when they’re doing business with you.
Which brings me to retention; a high customer retention rate is comprised of more than respectful dialogue and overall courtesy—though I believe it starts there—it’s also earned through:
• Communication via email, phone, or letter that is personalized, considerate, and designed to engage customers with your dealership.
• Convenience in scheduling appointments, interacting with the service lane, and in the hours you’re open to handle customers’ business.
• Confidence earned by fixing customers’ vehicles right the first time as well as by identifying vehicle needs not yet evident, which if ignored could leave the customer stranded later.
• Commitment to improving retention by instituting procedures and policies that are proven to generate the desired results and by fostering a culture that establishes your service department above all others, including independents.
“These [are] things you can change to make the customer choose you,” Johnson says. “Don’t encourage customers to find a better deal elsewhere…reel them in.”
First, he asks: Why not coach the advisor staff to sell services rather than take orders? “The service sales manager is a motivator, coach, and trainer,” Johnson explains, “who helps his staff learn how to handle objections and work harder for the business rather than taking a ‘no’ at face value.”
“Second, get convenient. Why is the dealership service department closed on Saturday? We’ve been conditioned to believe there’s no business on Saturday, yet why is Saturday the busiest day for independent repair shops?” Johnson asks.
Being convenient applies to the many ways the customer touches the dealerships.
Johnson says a study recently conducted by Car People Marketing was eye opening.
• 74 out of 150 test calls to dealerships were not answered within five rings or were put on hold for two minutes.
• Of the calls answered, 85 percent did not ask for the caller’s name and simply quoted a price for a service.
• 97 percent never asked for the appointment.
“Dealers should not spend a dime in advertising to increase their RO count if they can’t answer the phone right away,” Johnson advises.
Johnson also admonishes dealers to get competitive. Here is one way dealers can get competitive immediately: Charge $17.95 per lube, oil, and filter (LOF). He says an LOF price below $17.95 is perceived with suspicion by consumers and anything higher prices the dealer out of the market.
Sell more maintenance.
One might conclude that with consumers so concerned about high fuel costs, the dollars for vehicle maintenance just aren’t there. Perhaps, but doesn’t that mean now is the time to aggressively market fuel-saving maintenance services?
“Service consultants need to focus on every single customer; we’re losing customers daily by not meeting their service needs,” remarks David Brown of Brown and Associates, fixed operations trainers and consultants.
“Sell them on fuel-saving maintenance items; the following,” he says, “are proven to help customers get more miles per gallon from their vehicles:”
1. Proper tire inflation
2. Regular fuel and air filter replacement
3. Use of OEM-recommended grades of motor oil
4. Reducing the number of errand trips
5. Eliminating quick starts, stops, and high speeds
6. Removing weight often carried in trunks
Insist every vehicle that comes in for service gets a walk-around. “A good walk-around should take about three minutes,” Brown continues. “Always ask the customer permission to do this, which accomplishes two goals—it alerts the customer that you’ll be looking for additional needed services and that the customer might receive a call later in the day about that and second, the walk-around helps identify existing dings and dents that, if not brought to the owner’s attention at this point, might come back as a costly accusation later.”
Brown also believes that recommending that owners install replacement wiper blades, hoses, and belts, where needed, can add half of an hour to every repair order. Over the course of a year, the dollars added to the bottom line can be significant.
Inspect every vehicle.
Some inspections just can’t be done while the vehicle sits in the service lane. Only on a lift can brakes, driveline, and chassis be thoroughly inspected. Many advocates insist that on-rack inspections should be made of every vehicle in the shop.
“It presents the biggest opportunity to provide an impact for the dealer,” advises David Boyle, president and COO of Mobile Productivity Inc., (MPi) a company that markets technology to help service departments conduct structured, process-driven vehicle inspections.
“We believe the real opportunity for dealers to control their service revenue stream is by selling more services to the customers they already have, which is done through the vehicle inspection process. Much data suggests that for most dealerships this is often a poorly performed process,” Boyle notes.
Too many inspection processes, if done at all, are paper-based, without structure and consistency, so measuring and reporting are difficult.
MPi’s world class inspection product, Edge, is a structured, computerized inspection process that delivers a more thorough, consistent inspection of every vehicle every time, the company says.
“Of the dealers enrolled in our program, the average up-sell per inspection across those dealers is $123 per inspection—an increase of $88 parts and labor per RO, which is substantial once you factor in the number of opportunities or ROs a month,” Boyle explains.
Increase parts profits.
Every labor dollar should generate 50cents in parts sales, which is why programs like walk-arounds and on-rack inspections help service grosses grow. The relationship is so significant that some OEMs have contacted MPi about its inspection program to learn more about how it might be leveraged to help their dealers sell more parts, i.e. increase parts revenues for the OEM.
The opportunity to make more parts dollars also exists in your special order parts (SOP) department simply by making sure SOP orders are actually converted to cash.
If SOP customers fail to return to pick up their part or if they fail to bring the vehicle back in for the part to be installed, SOPs get quite expensive for you. For instance, an hour of labor revenue is lost when a window repair can’t be made on the first visit. If the customer can’t be brought back into the department when the SOP does arrive, another hour of labor revenue is lost. In addition to labor costs, when the SOP isn’t installed, it becomes cash tied up in the parts bin, cash that could have been used for more productive purposes.
Today, technology makes keeping in touch with customers, wherever they touch the dealership, fast and easy. This hands-off reminder approach relieves parts staff of having to telephone or address post card reminders to keep SOP customers informed and to close the service loop. Too often SOPs are looked upon from service’s perspective as “not my job.” So, whether your parts department takes an active stance about communicating SOP arrivals with customers or not, technology can simplify this administrative function and ensure that this communication is indeed done. “Even if your process is to mail a post card when SOPs arrive in your store, an automated customer communications system that notifies the customer via phone, email, text, or letter can ensure no customer and his or her related SOP and labor revenue are lost or neglected,” remarks OneCommand’s Fortt.
This communication should not only notify the customer the part is in but, if service is involved, the message should also invite the customer to call your service department to schedule the work. Some systems even enable the customer to schedule an appointment simply by pressing a button on their phone.
Communicating with customers
Speaking of communications, one key to increasing service business is better, more frequent, more personalized communications with customers, active and not. Most dealership computer systems feature modules for generating customer mailers; at a minimum, use these regularly; customize them and make them personal to engage customers and motivate them to do more business with you.
J.D. Powers’ recent dealer services satisfaction survey finds some interesting points about customer communications:
• Communicating with customers after service work has been completed has a notably strong impact on satisfaction, particularly through increasing customer perceptions of fairness of charges and the value of service received.
• For customers receiving an explanation of work performed or an explanation of charges, satisfaction is approximately 100 points higher, on average, than if no explanations were provided.
• Approximately 82 percent of customers report that they received explanations of the work performed on their vehicle, while 58 percent say they received an explanation of charges, when necessary.
“Many times, it is the quality of communication provided by service personnel that makes the difference between a satisfied customer and a true advocate,” stresses David Sargent, vice president of automotive research at J.D. Power. “When customers are provided with clear explanations as to why the work performed on their vehicle was necessary, as well as the reasoning behind the charges, it improves satisfaction with the value of the work performed, as well as perceptions of the fairness and honesty of the dealer.”
“Consistently following these relatively simple steps helps to foster trust among customers, which is critical to building loyalty for future service work as well as future sales. For example, 78 percent of customers who rate the fairness of charges as ‘outstanding’ say that they will return to the dealership for routine maintenance after the warranty expires, while only 49 percent of customers who provide ‘average’ fairness ratings say the same,” he continues.
The study also finds the following key patterns:
- While five percent of customers say that they would prefer to schedule their service visit with the dealer via the Internet, only one percent of customers actually do so. The vast majority of customers—74 percent—call the dealership to schedule an appointment, while 25 percent of customers just drop in.
- When vehicles are returned to the customer cleaner than they were when received by the dealer, satisfaction scores average 48 points higher than scores provided by customers whose vehicles showed no difference in cleanliness. There is a particularly large decline in satisfaction, 202 points on average, however, if vehicles are returned less clean than when they were received.
- Among customers who report speaking to a service advisor immediately upon arriving at the dealership, satisfaction scores average 927—224 points higher than among customers who say they waited more than five minutes to speak to a service advisor.
Online appointment scheduling
Several sources for this article disagree with J.D. Power’s findings about the use of online appointment setting. OneCommand’s Fortt, believes that making online service appointment scheduling available gives customers control of the appointment setting process and helps them avoid going through the dealership switchboard.
“The reason some dealers don’t use online appointment setting is they don’t believe how difficult it can be to get through to their own service departments by phone,” Fortt contends. “Dealers are trying to increase their service penetration, but their processes cause the customer to jump through hoops to set an appointment. Why not eliminate those obstacles and set up an online appointment scheduling system?”
Tom Henderson of General Motors adds, “The J.D. Power survey indicates that while five percent of owners report they would like to make appointments online, only one percent actually do. I wonder why that is? My guess is that since this is a relatively new area of business for fixed operations, not many dealers have jumped on board, industry-wide.”
“If you were a customer and tried to make an appointment online, you might get frustrated and pick up the phone and just call the place or worse, go somewhere else. Remember, Internet sales leads took a few years to take root with most dealerships. Now they are an important element in their marketing plans. We think this is an important area of future growth for dealers and have made it a high priority here at GM” Henderson continues.
Even though the percentage of customers who currently contact dealerships online for service appointments is relatively low, some believe that will change. According to Yahoo! alone, more than 50 million consumers search for service or parts online every month and that can translate into dealer business.
“Our dealer Website volume of service leads has quadrupled this year, compared to 2007,” contends GM’s Schuette. “Making sure that your dealership designates someone to respond to online leads can yield dividends.”
For example, GM reports, Classic Chevrolet in Texas manages a large OnStar portfolio that produces an average of 50 service leads per month. These are in addition to the over 65 service leads the dealership receives from its own Website each month.
“We’ve applied what we learned in dealing with online sales leads to online and OnStar service leads,” explains Donna Lawlis, Classic’s Internet leads director. “We look at these leads just as if the people were walking through our front door. It’s plus business for us and our customers appreciate the convenience.”
Communicate with customers more selectively.
Customer communications specialists like OneCommand promote a multi-channel communications strategy. This means reaching out to customers using email, text message, telephone, or letter, whichever way customers tell you they prefer. It should be part of the initial showroom up process and certainly part of the vehicle service check-in process, to confirm by which medium the customer prefers to hear from you.
“Note their preferences in whatever type of program you use to collect and update customer information and then be sure you stick to communicating [with] them using their preferred method,” advises Fortt. “If you do, you’ll realize an increase in your customer response rates.”
Nothing beats mining the dealership customer database for opportunities, however. Analyze it and segment it to identify lost opportunities and then create your communications to those opportunities.
For instance, segment owners for 30,000 or 60,000-mile service intervals for timing chain or belt inspection/replacement services or select those who have declined recommended services during a prior service visit and communicate to them why having the declined service is important to their safety and fuel economy.
Some typical communications your service department should send regularly include: service appointments (i.e. recommended services), service appointment reminders, maintenance service appointments, specials on tires, accessories or parts recall notifications, and business thank-yous and loyalty builder mailings.
Fortt suggests tracking customer visit frequency, labor, and parts gross per customer, heavy repair customers, routine maintenance customers, and other criteria to segment customers into groups that can be more easily targeted by selective mailings.
Fortt notes:
• Customers are six times more likely to re-purchase from you if they have their vehicle serviced by you.
• If you lose a customer, you lose a substantial lifetime revenue stream from that customer—money that goes to your competition.
• Make it simple for customers to schedule service appointments.
• Use call tracking to monitor customers trying to schedule appointments.
• Use innovative marketing techniques and multi channel communications based on customer preferences to drive customers back to your dealership.
Some final ideas
Selling accessories and tires through the service and parts department is certainly proven, effective revenue generators for many dealerships. If one had to choose which one to implement first, the vote would unanimously go to tires. Establishing a tire business within your shop boosts customer-pay dollars faster than just about any other tool.
Car People Marketing’s Johnson advocates that you “get into the tire business and look, feel, and smell like you’re in the tire business.”
• 75 percent of customers buy new tires from the first business that suggests to them they might need new tires; be sure to check tire wear during every walk-around and certainly when the vehicle is on the lift.
• Tire sales most often lead to additional lines on the RO; with the vehicle on the rack, brakes can be inspected thoroughly, shocks tested, springs checked, CV boots checked, brake lines examined, oil leaks identified, u-joints tested, steering components checked, and more.
• Advertise your tire business aggressively. Independents advertise aggressively. In fact, they advertise three to four times more often than most dealership service departments. With the opportunity of 70 percent gross on service work, why let the independents out advertise you for this business?
• Start the service relationship with the sale of the vehicle; set the customer’s first service appointment; speak to the customer about the importance of scheduled maintenance; introduce customers to the service and parts staff; and then when the customer becomes a service customer, get to know them, keep in touch and say “thank you.”
You say you don’t know how to put on the sales hat? “If the service manager isn’t adept at sales, he or she can visit the dealership’s sales department and drop in on a few sales meetings to start to learn how to do it,” Fortt says.
“You don’t want to do anything that might cause your customer to contact a competitor, especially when it comes to pricing; your customer might just meet a salesperson at the competition who reels them in.”
Source : www.dealermarketingmagazine.com
Tweet This Post
