BG Products Industry News

By Charlie Polston, Automotive Customer Retention & Profitability Consultant, BG Products, Inc.

The holiday season is a wonderful time to reflect on the past year and count your blessings. Let me start by saying, I’m not naive or unaware of the political, religious, or ideological issues that divide us. Ours is not a perfect country, nor are any of us perfect – but there’s nowhere else on the planet that I’d rather live. And, there is no other career path that affords the excitement, variety, satisfaction, and unlimited financial opportunity like the automotive industry – and the best is yet to come!

Let’s review the opportunity that lies ahead of us as we count our blessings:

Vehicles in Operation

There are currently 273.7 million cars on the road in the U.S. That’s the highest car count in history – up over 70 million since 2002. When you consider the average car gets serviced two times a year, that’s over 500 million service visits. What an opportunity to increase your customer base as the VIO grows.

Service Bays

The number of service bays continues to decline. Over 50,000 service bays have gone away, due to dealerships and garages going out of business, in the last 15 years. Service bay count went from 1,217,000 in 2004 to 1,167,000 today.

It is simple supply and demand economics. The supply (of service bays) is down and the demand (of cars on the road) is up. What an opportunity to increase your shop efficiency and facility utilization. You have less competition and more cars needing service. The automotive service business is a robust growth industry.

Unperformed Maintenance

Last year, $69 billion of preventative maintenance went unperformed. That’s money left on the table. It’s not exactly pent-up demand… but it is pent-up need! My friends, that is over $250 per car of low hanging fruit. Of course, you won’t get all of it; but you’ll get at least a third of it – if you ask.

Dealership Service Share

Last year, dealership customer-pay service and parts sales exceeded $39 billion. That’s the highest ever! While that is still just a fraction of the total $252 billion market, it represents an increased market share over previous years. Time out. Consider the last two statistics: Dealers sold $39 billion and left $69 billion on the table. You could increase your business by 25%, 50%, or even double it and still barely scratch the surface of the untapped potential.

You Eat What You Kill

Most fixed-ops pay plans are performance-based. The more hours or dollars you produce, the more money you make. From techs to advisors to managers there is a financial reward for working harder, smarter, and more efficiently. There are so many dead-end jobs in other industries – where the pay is the same regardless of work ethic or performance. What an opportunity to be able to work harder and make more!

Career Advancement

No matter what your education, skill level, or ambition there is a place for you in a car dealership. If you’re a gear head that wants to solve complex mechanical problems, dealerships have a place for you. If you’re a wanna-be gear head, you can start as a lube tech and work your way up. If you aspire to leadership, management, or sales, there’s no better place than a car dealership to fulfill your dreams. If you have an entrepreneurial passion there are opportunities across the nation to own your own dealership. I know several dealers that got their start turning a wrench, selling F&I, or even washing cars.

Making a Difference

Many in the automotive industry have a passion for the environment and “going green.” The quickest way to help customers reduce their carbon footprint is to see that they have a well-maintained automobile. Tires, filters, fuel system cleaning services, and fluid maintenance services are just a few ways to keep vehicles green.

Americans cannot live their lives without safe, reliable automotive transportation. If you truly care about your customers then selling preventative maintenance services is your ultimate noble mission – it is your higher purpose. It is a win-win for everyone. The customer wins through less costly catastrophic failure and you win with an increase in revenue. If you want to make a difference, there is no better way than the automotive service business.

Most dealerships take inventory at years end. It’s a necessary part of your business. Equally important is that you take an inventory of your blessings. I am certain 2020 will be the best year the automotive industry has ever seen.*

https://www.digitaldealer.com/sales-variable-ops/seasons-of-opportunities/

Happy New Year! As you bring 2019 to a close, it’s time to hit the reset button and start fresh.

It’s a given that you are expected to grow your business in 2020 and out-perform last year. The question is how?

If you had stunning growth in 2019, then you struggle with thoughts of “How do I best myself… after coming off of my best year ever?”

If you had a lousy year, then it’s “What did I do wrong – and how do I avoid another disaster?”

Regardless, the answer is found in becoming a master of the basics. If you simply adhere to the basics of our business, the simple meat and potatoes, that have proven successful – then you will grow in 2020.

King Solomon was correct when he said, “There is nothing new under the sun.” It seems like many managers are looking for the latest, greatest digital miracle, or the magical process that will propel their business to the next level; yet true success is found in the basics. And there is nothing more basic and fundamental to fixed ops success than selling service on the drive. It is the centerpiece of a successful fixed ops growth strategy.

Now I am not saying that selling preventative maintenance services will solve all your problems – oh wait a minute; yes, I am. In fact, it doesn’t matter what other processes you have, if there isn’t an effective sales process in place, then your success will be limited.

There is no place in your dealership for a technician that won’t recommend services to sell. There is no place in your dealership for advisors that won’t sell services the technician recommends. And there is no place in your dealership for service mangers that won’t hold technicians and advisors accountable to sell service.

This was clearly underscored a few weeks ago during a secret shopper assignment carried out by one of the ladies on our team. When our shopper arrived at the dealership she was blown away by the prompt, friendly service. As an avid coffee connoisseur, she couldn’t believe the selection of javas, espressos, and lattes they had in the waiting room.

Her diesel pickup was delivered right to the service drive upon completion; only a few steps from where she paid the bill. Oh, by the way, the bathroom was spotless – stocked with paper products, soap, and even flowers.

She left the dealership less than an hour after she arrived. She had a wonderful experience, but… she left with tires that had two thirty-seconds of tread depth, a fuel filter with less than 2% life (according to the digital display), a dirty cabin air filter, and transmission fluid that was dark (original factory fill.)

The dealership had a great meet and greet process, a great caffeine process, a spectacular bathroom process, and a stunning delivery process.

However, they left over $1,500 on the table because they don’t have a sales process.

Now, in fairness to the dealership, they do in fact have a sales process in place – but no one followed the process, and no one held them accountable to follow it.

In addition to the lost revenue, of even greater concern is the fact that she left the dealership with an unsafe vehicle!

This is a true story and this is exactly what happened. Unbelievable, but true. I’m sure you get the point. So, let’s look at the basics of selling service.

For the past 35+ years I’ve taught a simple sales process of 1) Educate the customer, 2) Offer the solution, and 3) As them to buy. Educate. Offer. Ask. That’s the basics of selling.

The most profound truths are profoundly simple and easy to understand. Therefore, if you can keep the communication simple, your customer will have clarity; and with clarity comes sales success.

Let’s look at a profound truth in the automotive industry: The fluid fails before the part. The beginning of transmission failure is transmission fluid failure. Head gaskets fail because the antifreeze got acidic (fluid failure.)

Master cylinders corrode due to moisture absorbed by brake fluid (fluid failure.) There is a direct relationship between engine failure and engine oil failure.

Another profound truth is that fluids are cheaper than parts. At $250 a transmission fluid exchange is expensive – but it’s a lot better than a $5,000 transmission. Antifreeze is cheaper than a water pump. Brake fluid is cheaper than calipers.

A third profound truth is that vehicle owners can’t budget for a catastrophic part failure, but they can budget for routine fluid exchange.

The word track for service advisors would go something like this: “Mrs. Jones, our factory trained technician has recommended a brake fluid exchange service for your Tahoe. The beginning of master cylinder failure is brake fluid failure. Therefore, we have found that by keeping the fluid fresh we can greatly reduce the chances of costly brake system repair down the road. The fluids always fail before the parts, does that sound reasonable? Can we go ahead and do a brake fluid exchange for you today?”

Remember our goal is simplicity. A profound truth explained in easy to understand terms, followed by asking for the sale – today.

I’d suggest you make copies of this article and use it as the basis of your first service sales meeting in 2020. Practice, drill, and role-play. Keep it simple.

About the Author

Charlie Polston is an Automotive Customer Retention and Profitability Consultant with BG Products, Inc. Charlie has been with BG’s Fixed Operations Division for over 38 years. He has trained over 7,500 dealers, managers, and technicians – and has been a frequent workshop leader at NADA’s annual convention.*

https://www.digitaldealer.com/sales-variable-ops/fluid-fails-part-sales-opportunity/

The following is a true story.

I took delivery of my new vehicle in January 2009. It was a smooth process and overall a pleasant buying experience. The salesman thanked me for my business and then he stuck his hand in my face, palm facing me, and said, “We do not want to see you again until the oil light tells you that you need an oil change.”

Even though it goes against my grain, I decided I’d play the game. At 11,000 miles the light came on and I stopped at the closest dealership for an LOF and tire rotation. At 22,000 miles the message center on the dash said it was time; so once again I had a dealership do an LOF and rotation. In both cases the combo service was about $39.95. (By the way, 11,000 miles between tire rotations is absurd…but, I’m only doing what the on-board message center and the service advisor tell me to do.)

My vehicle told me it was time for another oil change at 32,000 miles so I popped into the closest service center, a tire store, where they installed nitrogen in my tires and performed a fluid maintenance service on all my vital fluids. So why didn’t I go to a dealership? Because I never got the feeling they wanted my business. The selling dealer didn’t give me a service menu at the time of purchase. They never made reference to the service department. And I never received any correspondence from the service manager or an advisor inviting me in for service.

The two dealers that serviced my vehicle didn’t seem to want my business either. No menu, no call, no card, no nothing. Let me be clear, the service was great, the people were professional, the facilities were nice; but there was nothing to build loyalty. There wasn’t anything to tie me to the dealership.

The tire store wasn’t as clean as the dealership, the chairs in the waiting area were pretty worn, and the TV was probably purchased during Ronald Reagan’s first term. But, I learned that they offer a full array of vehicle maintenance services.

The bottom line is I lost loyalty to the dealerships because they never asked for my business or took any action to demonstrate they were anything but an oil change place. Maybe you’re reading this thinking, “OK Charlie, your car is low mileage and doesn’t need anything.” How about a quality, professionally installed bug shield? How about nitrogen in the tires? How about an air filter? How about a full wash and detail? All of which I would have purchased if asked!

At the very least they could have given me a menu, a multi-point inspection and set my next appointment. Yet they didn’t….and they’ve lost me.

Here’s a question for you: Has my story ever been repeated in your dealership? Don’t guess, but rather go to your DMS system and get the facts. How many new cars purchased in the first quarter 2009 have been in your service department in the past year?

Did you see the article written by Erin Kerrigan in the March 2010 edition of Dealer magazine?

“The back end is the new front end! The front end is a loss leader. It is credit-reliant, unpredictable, susceptible to the manufacturer’s challenges, and generally driven by forces for which the dealers have minimal control. By contrast, fixed operations is a profit engine. It is credit-resistant, recurring, predictable and if done well, it should be the pipeline for future car sales.”

Erin is right on the money…literally. By the way, she works for Auto Star, a growth capital firm; therefore, she’s looking at this strictly from the profitability angle.

She goes on to say, “The service and parts profit margin is 10 times larger than that of the new car department (45% versus 4.5%). In other words, the new car department has to work 10 times harder to earn the same gross profit.”

“At some level, service is a “need” not a “want”, whereas, a new car is usually a “want”; not a “need”. Most Americans require a functioning car and therefore, must service their vehicle in order to live their lives.”

Thank you, Erin, for telling it like it is.

Action point: Assemble your service “sales staff” for a meeting to discuss their importance to overall dealership profitability and customer loyalty. Copy this acticle and use it as your agenda. Teach them your expectations on handling customers with low mileage vehicles. Make sure they know how to recommend services needed today and how to plant seeds for the future.

In conclusion, I must tell you about a dealership in the northeast that “gets it!” Frenchie Coupal, owner of Frenchie’s Chevrolet in Massena, NY, along with his son, Scott, read my February article on Motivating Technicians. They implemented the “cash for upselling” process and in the first 22 days of March they increased fixed operations revenue $15,797. Their investment was $500 cash plus pizza and soda pop!

“It was fun for everyone,” Frenchie said. “We have already refilled the box with cash and we’re doing it again!”

They have nine techs, two advisors and they see about 850 cars on the drive per month. They are located 60 miles south of Montreal, Canada.

Frenchie concludes, “Since we began this emphasis on maintenance, our fixed coverage (service absorption) has gone up six points…from 64.8% to 70.9% …I’m very pleased!”

For more information on the technicians “cash for upselling” process and the play money template just send me an email and I’ll send the info your way.

Have a profitable summer! *

https://www.digitaldealer.com/dealer-ops-leadership/fixed-operations/a-story-of-lost-loyalty%e2%80%a6-and-how-to-regain-it/

By Charlie Polston, Automotive Customer Retention & Profitability Consultant, BG Products Inc.

Tatton Manning of Patriot Auto bought the group’s first dealership in 2014 – today they own five. He turned 40 last month! Manning is the epitome of entrepreneurship, determination, ingenuity, and living the American dream. 

Manning doesn’t have an automotive background and didn’t get in the business because of a Ph.D. (papa had a dealership.) No, instead he describes his entry into dealership ownership as more of a calling. With the exception of a brief stint as an F&I manager right out of college, he didn’t have any automotive experience at all before he got into the business. 

But he had an even greater calling – the U.S. military. Shortly after the war in Afghanistan, Manning would meet soldiers and felt that “these guys are my age and sacrificing everything to protect our freedom – and I’m not doing anything.” 

He joined the Army and served from 2005 to 2009, including a one-year tour in Afghanistan. Captain Manning was a Field Artillery Officer in charge of “the big guns.” 

After an honorable discharge, he went back to school at night and on weekends, earning a master’s degree in business from Oklahoma State University. His day job was in the oil and gas business, which he continued after graduation. He was successful and his career path seemed set… but he wanted more. 

He approached Bob Rosene, CEO of the firm and said, “Bob, I want to own a car dealership, but I can’t afford it.” A partnership was born, and it continues to this day. 

“I made cold calls on 14 dealerships exploring opportunities,” Tatton explained. “One of those 14 was Kevin Grover GMC in Wagoner, Oklahoma. Kevin took me under his wing as a mentor and coach. I would work four and a half days a week at my day job, then, I would work at the dealership every Friday afternoon and all-day Saturday.” 

With Grover’s help, Manning kept learning and looking – learning the business and looking for his first store to buy. The opportunity came in early 2014 in Bartlesville. Manning is an American patriot, so it was only fitting that his dealership was named Patriot GMC Hyundai. 

The dealership was housed in an aging facility with declining traffic and revenues. They had been selling about 30 cars a month and only seeing 280 ROs in service. (Last month they ran over 900 ROs.) 

From those humble beginnings the Patriot Auto Group now has five dealerships across Oklahoma. New and used car sales have grown from 190 units to over 900 vehicles per month. 

Manning credits Seth Knighton, COO and partner, with the dramatic growth in variable ops, “Seth knows how to buy cars, and sell cars, and grow the team!” he said. 

Fixed ops is growing, too. Manning hired Mark Demaro as fixed ops director as his family of dealerships began to expand. Demaro knows you grow a business by growing your people, and the more people you hire, the more customers you can serve. 

When they bought their most recent dealership earlier this year, there were three line techs and one lube tech. In just a few months they’ve grown to eight line techs and three lube techs… and they need more! 

So, how important is fixed ops? Manning answered, “Seth grew up on the sales side of the business; I grew up on the finance side of the business – yet every month we begin our executive meeting with strategies on how to move the needle in fixed ops.” 

“The real money is in parts and service; that’s the only way we can hit our net to gross,” Manning concluded. 

So how did he do it – five dealerships in five years before the age of 40. 

First, he attracted great people; both at the store level and at the corporate level. (just this year he has added a CFO, accounting manager, and HR director to his executive leadership team.) 

Second, he earned the respect of great people: vendors, strategic partners, industry experts, community leaders, etc. 

Third, humility. “That may sound strange, but successful people come with egos – and usually baggage.” Manning explained, “my faith teaches me to be humble. My church family is very important to me and my family. Without my faith I would not be humble.”

“I have to surround myself with people that are better than me. Seth is better at selling cars than I am. Mark is better at growing fixed ops than I am.” 

“If you always have to be the smartest guy in the room, then you limit yourself. Humility lets me defer to others who know more than me,” Manning said. 

Fourth, an emphasis on fixed operations. “We take a variable approach to fixed – meaning we focus on sales! We have service sales managers and service sales advisors at each dealership. Their job description and pay plans are built around sales production,” he explained. 

“If you want to increase the bottom line of a RO you start by increasing the top line – which means you must sell service.” 

Manning continued, “Many dealers, like me, didn’t grow up on the service side of the business; so my advice is to find someone you trust who knows fixed ops – a vendor, a partner, or a manager. Have them do an honest analysis of your parts and service department – and be prepared to be embarrassed. Most importantly, act on their recommendations. I did, and it paid off!” 

Fifth, tie car buyers to the service department. “Sales customers become service customers; and service customers become customers for life,” he said. To that end, Manning and his team started “The Patriot Pledge,” a retention program that encourages lifetime loyalty through lifetime vehicle protection. 

“It’s an investment in our customers and in our future – and it’s working,” Manning concluded. 

So, what’s next? “Our house is built on the goal of being the best and most respected dealership in each of our markets.” 

When asked if more acquisitions are on the horizon, Manning didn’t hesitate for a moment, “we are still on the grow – and managing the growth. I’m always on the lookout!” 

Hats off to Tatton Manning; a family man, a businessman, a Christian man, – and a true patriot! *

https://www.digitaldealer.com/latest-news/tatton-manning-a-true-patriot/

By Charlie Polston, Automotive Customer Retention & Profitability Consultant, BG Products, Inc.

Customers in your service department say that value is their top priority. Does that mean you’re charging too much; that you need to lower your prices; or that customers want cheap service? No! No! No! 

The Cox Automotive Service Industry Study, after interviewing 3,500 dealership service customers, found vehicle owners want a good return on the vehicle maintenance and repair dollars they invest, and that is the definition of value. You get what you pay for; cheap isn’t good and good isn’t cheap. 

There is this crazy wrong impression that dealerships charge too much for service work – way more than anyone else does. It just isn’t so! For example, Cox found the average dealership oil change to be $61, while the quick lube average was $60, and tire stores and repair chains averaged a whopping $75 – for an oil change. 

Fact: Quick lubes, tire stores, and auto repair chains do millions more oil changes than dealerships. 

Fact: Their average oil change price is the same or much higher. 

Conclusion: Cheap price is not a huge motivator – but value is. 

Quality, convenience, and trust rounded out the top four customer priorities – in that order. I find that very interesting because a great definition for value is quality (skilled technicians and precisely engineered parts), convenience (reasonable wait times, loaner or rental cars, shuttle, and streamlined drop-off and pick up), and trust (keeping your word, following through, and showing transparency). 

Speaking of convenience, the study revealed the threshold for wait times was 2.4 hours. Customers that spent less than 2.4 hours at the dealership gave a CSI grade of “very satisfied.” There is this crazy notion in the collective fixed ops mindset that says we have to get them out in 30-45 minutes. 

This rush to push customers out the door is a great excuse to squash any service up sales. In their quest for speed, many advisers never discuss needed maintenance with the customer – or if they do, it is discussed in terms of “do it later.” My friends, never put off until tomorrow the labor that you need to sell today! Strike while the iron is hot – ask vehicle owners to buy tech-recommended, needed maintenance – right now. Your shop can get any fluid maintenance service, filter exchange, or fuel service done in an hour, and the Cox study says the consumers will give you the time. 

I realize this is an article about value but indulge me for a few more paragraphs about time and convenience. If you review the multi-point inspection with customers no longer than 25 minutes into their wait time, then odds are you can buy more time. Most people would rather spend an extra hour at your dealership today, than try to figure out a time to come back, fight traffic, and go through the inconvenience later. For heaven’s sake, ask for the additional tech-recommended maintenance and repair business – ask for it today! 

The reality is if you don’t sell it today, you never will. 

Oh, and by the way, the dealership will make more money doing repairs and maintenance services than oil changes – and so will managers, techs, and advisers. 

Remember, you do oil changes to retain customers so you can sell maintenance services to make money. 

By the way, that’s value. Your dealership becomes their one-stop service shop for all their automotive transportation needs. 

Your labor rate is probably somewhere around $125 per hour – wow, that’s a lot of money; or is it? Bob Greenwood says shops are, in reality, knowledge-based businesses. Your shop manages productivity through billed hours, which come as a result of selling your knowledge. Greenwood, president and CEO of Automotive Aftermarket E-Learning Centre, LTD., goes on to say that the automotive industry is all about competency – and competency is reflected in the labor rate. That’s value! 

Doctors, lawyers, nutritionists, CPAs, college professors, and automotive technicians are all paid in the same manner – according to their knowledge and competency! 

Earlier this summer, I bought a 14-year-old four-wheel-drive SUV so my wife and I could access two of our favorite fishing holes. It was in great shape, but it had a flutter, a stumble at about 40 mph. It annoyed me beyond measure. The shop diagnosed it as a transmission issue; yet $400 later the problem persisted. Then I went to one of the most expensive places in town. Ninety seconds into the test drive the technician diagnosed a misfire. Problem solved. 

Additionally, they found my alternator was on its deathbed. I can’t tell you how much safer I feel taking my sweet wife of 34 years into these remote locations to catch bass. (She usually catches more than me.) I paid more for the right diagnosis and cure – and it was worth it. That’s value. 

Let me make one final point. Value is not automatically perceived by vehicle owners; it has to be sold. It may well be your most important sale.

Make sure your advisers keep “telling your story” and that they explain the credentials and certifications your techs have earned. That’s how you build value. Examples of this might include: 

•  “Our techs have a combined 10,500 hours of training.”
•  “Collectively our guys have over 295 years of experience working on Fords.” 
•  “We’ve invested over $150,000 in diagnostic tools, equipment, technology and software to assist our techs in quickly getting to the cause and cure.” 
•  “Our maintenance technicians are fully certified to perform all necessary fluid exchange services.” 

Customers demand value, and your service department provides it! Happy value sales to you! 

(My special thanks to Jim Phillips of Cox Automotive for permitting me permission to quote from the Service Industry Study.)*

y Charlie Polston, Automotive Customer Retention & Profitability Consultant, BG Products, Inc.

Customers in your service department say that value is their top priority. Does that mean you’re charging too much; that you need to lower your prices; or that customers want cheap service? No! No! No! 

The Cox Automotive Service Industry Study, after interviewing 3,500 dealership service customers, found vehicle owners want a good return on the vehicle maintenance and repair dollars they invest, and that is the definition of value. You get what you pay for; cheap isn’t good and good isn’t cheap. 

There is this crazy wrong impression that dealerships charge too much for service work – way more than anyone else does. It just isn’t so! For example, Cox found the average dealership oil change to be $61, while the quick lube average was $60, and tire stores and repair chains averaged a whopping $75 – for an oil change. 

Fact: Quick lubes, tire stores, and auto repair chains do millions more oil changes than dealerships. 

Fact: Their average oil change price is the same or much higher. 

Conclusion: Cheap price is not a huge motivator – but value is. 

Quality, convenience, and trust rounded out the top four customer priorities – in that order. I find that very interesting because a great definition for value is quality (skilled technicians and precisely engineered parts), convenience (reasonable wait times, loaner or rental cars, shuttle, and streamlined drop-off and pick up), and trust (keeping your word, following through, and showing transparency). 

Speaking of convenience, the study revealed the threshold for wait times was 2.4 hours. Customers that spent less than 2.4 hours at the dealership gave a CSI grade of “very satisfied.” There is this crazy notion in the collective fixed ops mindset that says we have to get them out in 30-45 minutes. 

This rush to push customers out the door is a great excuse to squash any service up sales. In their quest for speed, many advisers never discuss needed maintenance with the customer – or if they do, it is discussed in terms of “do it later.” My friends, never put off until tomorrow the labor that you need to sell today! Strike while the iron is hot – ask vehicle owners to buy tech-recommended, needed maintenance – right now. Your shop can get any fluid maintenance service, filter exchange, or fuel service done in an hour, and the Cox study says the consumers will give you the time. 

I realize this is an article about value but indulge me for a few more paragraphs about time and convenience. If you review the multi-point inspection with customers no longer than 25 minutes into their wait time, then odds are you can buy more time. Most people would rather spend an extra hour at your dealership today, than try to figure out a time to come back, fight traffic, and go through the inconvenience later. For heaven’s sake, ask for the additional tech-recommended maintenance and repair business – ask for it today! 

The reality is if you don’t sell it today, you never will. 

Oh, and by the way, the dealership will make more money doing repairs and maintenance services than oil changes – and so will managers, techs, and advisers. 

Remember, you do oil changes to retain customers so you can sell maintenance services to make money. 

By the way, that’s value. Your dealership becomes their one-stop service shop for all their automotive transportation needs. 

Your labor rate is probably somewhere around $125 per hour – wow, that’s a lot of money; or is it? Bob Greenwood says shops are, in reality, knowledge-based businesses. Your shop manages productivity through billed hours, which come as a result of selling your knowledge. Greenwood, president and CEO of Automotive Aftermarket E-Learning Centre, LTD., goes on to say that the automotive industry is all about competency – and competency is reflected in the labor rate. That’s value! 

Doctors, lawyers, nutritionists, CPAs, college professors, and automotive technicians are all paid in the same manner – according to their knowledge and competency! 

Earlier this summer, I bought a 14-year-old four-wheel-drive SUV so my wife and I could access two of our favorite fishing holes. It was in great shape, but it had a flutter, a stumble at about 40 mph. It annoyed me beyond measure. The shop diagnosed it as a transmission issue; yet $400 later the problem persisted. Then I went to one of the most expensive places in town. Ninety seconds into the test drive the technician diagnosed a misfire. Problem solved. 

Additionally, they found my alternator was on its deathbed. I can’t tell you how much safer I feel taking my sweet wife of 34 years into these remote locations to catch bass. (She usually catches more than me.) I paid more for the right diagnosis and cure – and it was worth it. That’s value. 

Let me make one final point. Value is not automatically perceived by vehicle owners; it has to be sold. It may well be your most important sale.

Make sure your advisers keep “telling your story” and that they explain the credentials and certifications your techs have earned. That’s how you build value. Examples of this might include: 

•  “Our techs have a combined 10,500 hours of training.”
•  “Collectively our guys have over 295 years of experience working on Fords.” 
•  “We’ve invested over $150,000 in diagnostic tools, equipment, technology and software to assist our techs in quickly getting to the cause and cure.” 
•  “Our maintenance technicians are fully certified to perform all necessary fluid exchange services.” 

Customers demand value, and your service department provides it! Happy value sales to you! 

(My special thanks to Jim Phillips of Cox Automotive for permitting me permission to quote from the Service Industry Study.)

The primary purpose of a professional service advisor is to sell service, or as Scott Russeau puts it, “inspire your guest to invest!”

Earlier this year, I attended one of Russeau’s energy-packed workshops. (Okay, it wasn’t a workshop as much as it was a workout!) Russeau is passionate about giving dealership customers a positive, consistent, predictable service drive experience—one that focuses on educating customers and inspiring them to invest in themselves by investing in their cars.

Before we unpack the process, let me tell you a little bit about the man. Russeau, a high-performance fixed ops trainer and coach is as comfortable on the service drive as he is in the classroom. His credibility comes from experience: in the trenches as a technician, on the front lines as a service advisor, in leadership as a fixed ops director, and at the top as a general manager. He gets it, because he’s done it!

Here are five takeaways from the workshop that, if implemented, will have an immediate impact on your service sales success and hence, your bottom line:

Inspire Your Guest to Invest

Inspire – Not pressuring, not begging, not arm twisting, but clearly educating, communicating, offering, and asking. A guest who is inspired takes action; they purchase.

Guest – An honored, unique person that invested their time and energy to enter your service center. “Of all the places they could have taken their car, literally thousands of service centers across America, they chose you,” Russeau said.

Just like a guest in your home, folks on the service drive deserve your highest respect and your undivided attention. You’ve got to treat them like family. They are why you came to work; without them, you are out of business.

Invest – Informing your guests about their vehicle needs and selling tech-recommended service is not something you do to your guests, it’s something you do for them. When they invest in brake pads and a brake fluid exchange, they receive increased safety and stopping reliability in return.

Inspiring your guests to invest in their vehicle is done for the benefit of your guests. They get a greater blessing by having a safe, reliable, trouble-free vehicle that gives power, performance, and that is fun to drive. And don’t forget about saving money. Maintenance is always cheaper than repair, and fuel economy is best when a vehicle is well-maintained. What a great return on their investment!

As an automotive professional, you are in business to make money. So here’s the win-win: the more tech-recommended maintenance and repair that you sell, the more money you make—and the more money your guests save.

System Selling

Russeau warned against offering service a la carte when presenting an estimate. Don’t quote a left outer tie rod for $200 and an alignment for $100; rather quote the suspension “system” repair for $300. You wouldn’t do one without the other, so keep it simple and quote it that way.

“You’re not selling parts (the rods) and labor (time),” Russeau said, “You are selling safety, peace of mind, a smoother ride, reliable vehicle control, and driver confidence.”

Package Pricing Technique

This is similar to system selling, but it is a comprehensive price quote that includes the primary concern and related items, immediate safety needs, and recommended maintenance. The process is used when organizing and presenting the results of the multipoint inspection to the customer.

First, the advisor organizes the tech recommendations into three categories: primary and related concerns, immediate needs, and recommended maintenance. Next, he reviews each item with the customer. Lastly, he quotes one price for the entire package.

If the customer says yes, you communicate with the tech and he gets to work. If you get hit with a price objection, then “sell up” (read on).

The Sell-Up Process

The priorities are:

1. Primary and related concerns

2. Immediate safety needs

3. Recommended maintenance

Sell up (from bottom to top) means you might drop recommended maintenance from your price quote, but then you would move related maintenance items up to item #1. For example, if the primary concern was hot air blowing out of the A/C, you would move cabin air filter replacement from the recommended maintenance category up to the primary concern category because it is a related item.

Likewise, if the technician finds a weak, corroded battery, then battery replacement becomes an immediate safety concern. Therefore, you would move battery protection pads and terminal cleaning up from the recommended maintenance category to the immediate safety needs category because it is related to the safety concern.

To clarify, let’s say our original quote included a cabin air filter, a battery service, an alignment, and a transmission fluid exchange in the recommended maintenance category. By selling up, you still get the cabin air filter and the battery service, even though you drop the other maintenance items. The package price drops and yet you still retain two services you would not have had if you hadn’t sold up.

Related, Immediate, Maintenance (RIM)

The RIM process has been around for decades, but Russeau’s twist on the process brings a fresh approach to RIM…with amazing results. I’ll fully explain RIM in detail in a future article. For now, I want to leave you with a simple yet effective word track Russeau has crafted to “inspire your service guest to invest.”

“Related to your original concern(s) for your vehicle, your technician has found that your vehicle needs…”

“From the multi-point inspection we discussed earlier, we found a few items that require your immediate attention.”

“Last but certainly not least, your technician has asked me to talk to you about the following maintenance needs…”

“So to take care of everything related to the original concern, all the items that require immediate attention and your maintenance needs, your total investment is $____. May we please take care of that for you today?”

Every process in your dealership falls into one of two categories; it’s either administrative or revenue-generating. Granted, every job description of every service employee has a certain amount of administrative duties, but the majority of the processes they follow must be revenue-generating.

Rex Weaver says it like this (when talking about where to focus your training): “If your training revolves around processes that are administrative and not revenue-generating (like salesmanship), you need to re-shuffle your training schedules.” Weaver, service director of Mercedes Benz and Porsche of Lehigh Valley in Emmaus, Pennsylvania, goes on to say that ongoing, consistent training of your revenue-generating employees is one of the most profitable moves your dealership can make.

“If you aren’t spending time every day in salesmanship training for your advisors, then you have no idea what your ultimate potential can be,” Weaver concludes.

Well said. And speaking of training, most new and used car departments rally the team for sales training every day, yet many service managers I talk to have never had a service sales meeting. Oh, sure, they may have a monthly service meeting, but they rarely discuss sales goals and the selling skills needed by techs and advisors to hit the numbers. That’s got to change.

Your new and used car sales department is, by definition, a sales organization with a sales culture. Your service department must also, first and foremost, be a sales organization with a sales culture. Additionally, revenue-generating employees (advisors and technicians) must have revenue-production-based pay plans. That means no earning cap…the more they sell, the more they make. (Outdoorsmen and hunters understand this concept; “you eat what you kill.” Otherwise, you go hungry.) When your personnel sell lots of maintenance services, they should make lots of money. Passive order-takers deserve to starve.

You don’t bat an eye about offering a spiff to your new and used car sales team to sell vehicles that have been on the lot too long. Oftentimes, you have fun with it and offer a $250 bonus for the first car sold before 10:00 a.m., or something along those lines. Therefore, don’t be reluctant to offer a spiff to advisors for selling preventive maintenance services. Have fun with it. Pay $5.00 for each service sold and start a Century Club for those advisors that sell over 100 services a month. Give them a $100 bonus each month that they earn Century Club status. How about an additional $100 for the first advisor to hit 100 maintenance services for the month?

Advisors are not administrative-process-driven-paper-pushing-clerks….no, no, no. They are revenue-generating, production-based professional sales people!

You wouldn’t tolerate a car salesman who wouldn’t sell cars, right? Then why on earth would you tolerate a service advisor that won’t sell service?

There are only two things in life: knowing and doing. That said, let’s unpack this further. Training precedes knowing. Accountability precedes doing.

Forgive me for stating the obvious, but don’t expect your advisors to sell maintenance if they haven’t been trained in the art of selling. Selling skills, overcoming objections, and closing the deal are learned behaviors. You can’t send someone to training once and call them trained; sales training must be ongoing. Your service sales team must routinely practice, drill, and rehearse.

Countless business studies have shown that people do more and perform at a higher level when there is an accountability structure in place. Everyone’s production increases when they know you are watching. (Obviously, I don’t mean that you should stare a hole through them every minute of the day, but direct observation for a few minutes every day is good.) When an employee knows the boss is looking at their numbers, guess what? Their numbers go up.

The opposite is also true. According to Dave Anderson, some people complain about the money they don’t have from the work that they don’t do! They do just enough to get by. They could do more, but they just don’t want to. Heaven forbid that the employees learned this attitude from the boss! Basically, they have learned that no one above them cares, so why should they?

In closing, here are some characteristics of a healthy sales culture:

Clear Goals and Expectations. If nothing is your goal, you’re sure to get it—nothing. Training, Mentoring, and Coaching (not screaming, ranting, and cursing). Management by fear and intimidation is not leadership.

• Practicing, Drilling, and Rehearsing. The greatest sports heroes and teams never stop training or improving. The world’s greatest musicians never stop practicing.
• Marketing and Merchandising Tools. Equipping your service sales team with menus, multi-point inspection forms, tablets, videos, processes, and point-of-sale materials to help them close the sale.
• Accountability Structure. Don’t overthink this. Decide your top three or four revenue-producing key performance indicators and monitor every tech and advisor every day.
• Celebrate Milestones Publicly. Celebrate and reward your parts and service team when they knock it out of the park one month. Publicly award top achievers who meet their numbers.

Fixed ops is first and foremost a sales organization. Make it a priority in 2019. You can do this.

“You don’t build a business, you build people—then your people will build your business!” –Zig Ziglar

Wow! That’s powerful, isn’t it? Zig Ziglar was my hero for over 40 years. Even after his passing, his words still inspire me.

Business men and women always say people are their most valuable resource; yet all too often they don’t provide the resources and training necessary to grow their people.

To clarify, I’m talking about consistent, intentional, planned training. Practice, drill, and rehearse. Follow-up and accountability. It is so easy to get caught up in the daily grind of taking care of business that training gets pushed to the back burner.

When training does occur, it is often used as punishment. I’ve actually heard service managers tell their advisors, “Whoever doesn’t hit their numbers this month will have to go to training!” Oh brother! Don’t be the moron that says that.

Service departments can never stop training. The “knowledge retention” curve declines quickly, meaning people only remember 10% of what they learn. Therefore, constant reinforcement is necessary to turn knowledge into action, and to turn action into revenue.

Training is never ‘one and done.’ No one is ever completely trained—rather, it is an ongoing career-long process.

Some managers say building their people is a waste of time—they’ll just quit and move on. I have heard it said that it is far better to train your people and have them leave than it is to not train your people and have them stay!

Max Zanan wrote a wonderful little book called “Perfect Dealership” (perfectdealership.com). It is a quick read that’s packed with nuggets of practical advice on running a dealership.

Zanan wraps up the book with the Ten Commandments of Success. Three of them focus on personnel development:

• „Remember, automotive retail is a career, not a temporary gig.

I believe techs get it, and they’ve made a huge investment in their tools to further their careers. I think the biggest challenge dealers have with techs is keeping them at your dealership. Working conditions, work load (read that as not enough work to do), production-based pay plans, and continuing training are all potential deal breakers. Lube techs and service advisors often view their jobs as less of a long-term career path. These folks are way too transient and often bounce from dealership to dealership. I am truly amazed at the turnover of advisors. If a guy is an order-taker at the Toyota store, then he’ll be an order-taker if he gets hired at the Ford dealership across town.

• „ Focus on employee development that provides a path for career growth.

Remember what Zig says: build your people and they will build your business. Don’t get cynical because of a handful of jerks that don’t want to grow and get better. Most of your people are good people that want to do better; they aspire to more—more money, more responsibility, more productivity, more respect.

• „Attract a better workforce by having better pay plans, schedules, and training.

I get the part about pay plans and training, but schedules? I’m motivated by money and I thrive on a production-based pay plan, but not everyone does. There is a growing segment of the workforce that values time off and flexible schedules. They aren’t lazy, they don’t want something for nothing, they just want it on their schedule. A three-day weekend and two Saturdays off per month might be a game-changer for these folks. As a manager, don’t have an attitude that says, “hey, I’m in charge and my people will work when I tell them to work.” At least look into what motivates your people and see if you can accommodate them. Maybe you could tie sales production to flex-time off. Going back to pay plans, I’ve seen dozens of advisors that believe the only way to get a raise is to move to a different dealership. Tragically, all too often, they’re right. Just when they start making good money, the pay plan changes and out the door they go.

Action Points:

„ You must be intentional with your training. Schedule a service sales meeting with all fixed ops personnel once a month. Make it a big deal where you feed everyone, celebrate victories, and reward production.

„ Train your service advisors on how to sell. I’d suggest 15-30 minutes per week. Consistently reinforce the message. Spend half the time reviewing last week’s training and the remainder on new material.

„ If you’re hung up on exactly what to do, then subscribe to a blog, podcast, or video series from Dave Anderson. Show one clip at each weekly training session. Give your team access to Dave’s library of free resources (learntolead.com)

„ You might also want to check out all the service advisor sales training resources provided by Jeff Cowan (automotiveservicetraining.com). Jeff has an amazing ability to simplify word tracks that advisors can use to close the sale.

„ Lastly, I work with a team of over 700 fixed ops trainers spread out across North America. Let me know if you’d like to connect with one of them for live in-dealership training.

If you build your people in 2019, if you invest in their development and growth, then they will build your fixed ops department into a vibrant revenue stream for your dealership.

Happy sales to you and Happy New Year!

‘Tis the season to be of good cheer, and fixed ops departments have much to celebrate. The future for dealership parts and service departments is very bright. In fact, there has never been a better time in history to be in fixed ops than right now—and I’ll prove it to you.

Vehicles in Operation Increasing

There are more vehicles on the road today in the U.S. (over 273.7 million) than ever before in history. Compare that to 202 million vehicles in 2001; that’s growth of 71 million vehicles. Every year we manufacture more cars than we scrap, so the vehicle population continues to rise with no end in sight.

Service Centers Declining 

Today there are 225,000 service centers in the U.S. compared with 245,000 in 2001. That’s 20,000 fewer places to have cars and trucks serviced, repaired, and maintained. Sadly, about 4,000 of those shuttered service centers were dealerships. (From 21,900 in 2001 to 17,800 today.) So let’s put these two statistics together: 71 million more cars and 20,000 fewer places to have them serviced. Wow, what an opportunity. The “supply” of service centers is dropping and the “demand” of cars on the road is increasing; therefore, your service department has greater value today than it has ever had.

More Money Spent

Last year U.S. consumers spent $252 billion on customer-pay maintenance and repair. That’s up from $199 billion in 2006—a $53 billion increase in 12 years. We are in a growth industry. Okay, let this sink in; $53 million more is being spent at 20,000 fewer service centers. Wow. Did I mention the future is bright?

Dealership Getting Bigger Share

Of the $252 billion spent on vehicle maintenance, only $37.4 million was spent at dealerships. The sobering news is that number represents only 15% of the total. (100% of all cars were purchased at dealerships, yet only 15% of service dollars were spent at dealerships.) The good news is that dealers gained market share (from 14% to 15%) in the past year, which represented several billion dollars in growth.

As a sidebar, the $37.4 billion dealers collected from customer-pay maintenance and repair represented $20 billion in labor and $17.4 billion in parts. That means the parts-to-labor ratio was .87:1, which is a very, very good number and shows dealerships are starting to grasp the importance of performing preventive maintenance service.

Unperformed Maintenance Dropping 

Speaking of preventive maintenance, here is the most promising statistic from last year: unperformed maintenance dropped from $73 billion to $55 billion; that’s the lowest it’s been in over a decade. Obviously, the less unperformed maintenance, the less service money that was left on the table. The only way to recapture unperformed maintenance dollars is to perform more preventive maintenance services—and the only way to do that is by asking the customer to purchase needed, tech-recommended maintenance.

Seeing unperformed maintenance services on the decline indicates that service managers and advisors are starting to get it and it is paying off.

Time out. I’ve given you five indicators of great growth opportunities in the automotive industry. So, how is your service department doing? Are you experiencing the prosperity and growth in your shop? Is your personal income going up? Are you crazy busy all the time?

Or are your techs running out of work at 3:00 p.m.? Is your shop efficiency under 100%? Are your hours per CPRO under 2.0 hours? Are you saying, “what prosperity?”

If so, help is on the way. In 2019 I’ll be writing a series of articles centered around creating a sales culture in the service department. You can’t save your way to prosperity, you must sell your way to prosperity. The only way to grab your share of the $252 billion preventive maintenance pie is to ask for it. In 2019, I’ll show you how.

Statistics Sources:
AASA Status Report, NADA DATA, Lang Marketing Annual Report, and Auto Care Association Fact Book

Ask any dealer, general manager, or sales manager how many cars they need to sell this month and they’ll immediately know the answer. No matter what day of the month it is, they’ll know where they are and what they need to do to hit the goal.

So, how many labor hours do you need to sell this month? How many hours do you have month to date? How many hours do you need per tech, per day to hit the goal? What would happen to gross if you were to sell just one more hour per tech per day?

Oh, and how’d you come up with the goal? One last question: What is the exact plan you have implemented to sell the needed hours?

If you are struggling with answering these questions, you are in good company. Earlier this year I had the privilege of attending a meeting of automotive professionals in Wichita, Kansas to learn from one of the smartest guys in the industry, Jim Phillips. It was two days of hard-hitting, no-nonsense training. Phillips, a consultant and trainer with Cox Automotive, presented Fixed Ops Essentials to the group and graciously gave me permission to write about his powerful takeaways.

The workshop attendees were some of the best and brightest in the industry and most of them had trouble pinning down exactly how many hours per month they needed to be profitable.

The reason service managers, general managers, and dealers struggle to know how many labor hours they need this month is because they may fail to see fixed ops as a business—specifically, a sales business.

Phillips cited statistics that showed used-car gross profits have dropped from 13.7% in 2011 to 11.7% in 2017. New-car gross has dropped from 4.5% in 2011 to 2.5% in 2017. This trend of increasingly compressed margins will continue for the foreseeable future. So, how do dealerships make up the loss? By looking to that faithful cash cow called fixed ops. Labor gross remains at a whopping 73%—and it’s not going down. Labor (read that as “time”) is your most profitable commodity, but it is also the most perishable. Whatever cars you don’t sell today will still be there tomorrow, whatever parts you don’t sell today will still be on the shelf tomorrow, but whatever time you don’t sell today will be lost forever.

That’s why Phillips says we have to help our techs be more productive and efficient—because time is too valuable (and profitable) to waste.

Phillips challenged the attendees to share their best practices to increase shop efficiency. Here are the takeaways:

Move cars waiting to be serviced closer to the building. If the tech is having to walk to the back of the lot to find a car, he’s wasting a lot of time.

Deliver parts to the techs instead of making them walk to and then wait at the back parts counter.

Sell maintenance services! Most maintenance services are 200% – 300% efficient. (The service flags an hour, but only takes 20 minutes to do).

Upgrade your equipment—make sure technicians have the latest electronics, computers, fluid exchange machines, and diagnostic tools.

Reward efficiency. Tie efficiency and productivity to the technicians’ pay plan.

Move fluids and oils to a centralized location.

Enhance digital communication to speed up the multi-point inspection information transfer between techs and advisors.

In short, minimize or eliminate any activity that takes the tech out of his service bay, away from the car. (When their hands aren’t on the car, they’re not making money and neither is the shop.)

Some of you may be thinking, “Hey, my techs aren’t that busy; they have the time.” If that’s true, then you have a different problem: the advisors aren’t selling enough time. Phillips explained that some shops are masters of processes, but lousy at selling. Therefore, it’s important to add a sales element and a sales incentive to the process.

Another best practice centers around creating a pay plan for advisors that encourages collaboration and teamwork, while still having a little friendly competition. How about this:

Pay advisors $5.00 for each hour they sell and $1.00 for each hour the shop does. Therefore, they make $6.00 for every hour they sell and $1.00 for every hour the other advisors sell.

 Additionally, pay a $5.00 spiff bonus for each maintenance service sold and a monthly bonus when CSI goals are met.

Nothing kills momentum and moral faster than techs running out of work by 3:00 p.m. because the advisors aren’t selling enough—or advisors that stop selling because they fear that the techs can’t get the work out fast enough. There’s often lots of finger pointing, grumbling, and complaining at the monthly service meeting, but the solution is simple; sell the service and efficiently get it done!

Years ago, Phillips used to hear dealers say, “My service department is losing money, but hey, F&I is profitable…so we’re okay!” That’s stinking thinking, because today every department must be profitable!

Phillips offered three tips for increasing fixed ops profitability:

• Increase your margin (make more gross)
• Decrease expenses
• Sell more maintenance services

Therefore, if your margin is good and if your expenses are under control, then your advisors need to sell more maintenance services. If your margins are low, raise them…and sell more maintenance services. If your expenses are high, lower them…and sell more maintenance services. No matter what other steps you take, it is critical that your advisors sell maintenance services. You can’t save your way to prosperity; you must sell your way to success.

Despite the complexities of the automotive business and the constant pressure from customers and OEMs, if you are selling maintenance services, your revenue will increase.

Happy Thanksgiving! I hope you have time to relax, reflect, count your blessings, and enjoy your family and friends!

Every year the number of higher mileage older vehicles increases. And every year dealership service departments lose more market share.

Vehicle owners almost always defect to the aftermarket as their vehicles get older and accumulate more miles. What’s worse is that many service managers, advisors, and technicians just shrug their shoulders and let them go. They accept this defection as a fact of life; “it’s always been this way and it always will be,” they think.

This negative thinking is so pervasive that it becomes a self-fulfilling prophecy. They expect the customers to take their service business elsewhere, and they do!

This has got to stop.

Unless you are crazy-busy all the time, you need to hold on to aging vehicles and reach out to those who have already forsaken you. It’s not like you’re being greedy…you just want it all!

The Opportunity

Look at this graphic: the opportunity is huge—and increasing every year.

Older Vehicles

The average vehicle on the road is 12.2 years old. That’s 20% older than a decade ago. Think about that; it means half of the cars on the road are over 12.2 years old. Older vehicles need more maintenance and repair.

„Higher Mileage

The average vehicle on the road has accumulated mileage of 120,500 miles—roughly 10,000 miles annually. That’s up slightly from 2013 when accumulated mileage was 115,000 miles. Higher-mileage vehicles need more maintenance and repair.

„ Vehicles in Operation

There are 24 million more cars on the road than there were 10 years ago—273 million vehicles. I’ve been tracking this number for almost four decades and it goes up every year. Lots and lots of older vehicles with higher mileage need lots and lots of maintenance and repair.

„ Domestic vs Import

In 2007, domestic vehicles made up 66.7% of all the vehicles on the road…today it has dropped to 54.4%. Conversely, import vehicles on the road have risen from 33.3% in 2007 to 45.6% today. In a few years, imports will have the largest share of the American fleet.

Okay, so what? There are a lot more domestic dealers than import dealers, so domestic service departments need to be ready. If you are a RAM dealership, realize that you might have a BMW sports car in the service bay next to a Cummins diesel pickup. The core maintenance services on these two vehicles are remarkably similar and don’t require special tools, fluids, or parts.

Action Points

Why not create a business within a business? I’m talking about a “garage” in your service department. This is really not a radical concept, because you probably installed a “jiffy lube” in your shop years ago.

Now it’s time to install a garage that works on all makes, all models, all years, all mileages…the higher the better. Just start with one or two techs. They don’t have to be OEM factory certified A-level techs (which are getting harder and harder to find). There is a bigger pool of competent, hard-working, B- and C-level techs that might jump at the chance to work in your shop.

You might want to consider a simplified maintenance menu and create a marketing piece inviting customers to bring their “other car” to your shop.

Ask the parts department to provide estimates that give vehicle owners an aftermarket option on replacement parts. They’ll likely retail for 30%-50% less and the profit margin might be greater. (I’m sure this idea will cause some of you heartburn; but remember I’m talking about older, higher-mileage cars). If they defect to an aftermarket shop, they won’t be using OEM parts. Obviously, your profit drops to zero when customers defect.

You can do this…at least give it a try. You sold them the car, it ought to be yours to service…for life!

Breaking News: You take more money to the bank grossing $0.70 per dollar than you do grossing $0.02½ per dollar!

According to the NADA DATA report released earlier this year, the average new car gross is 2 ½% and it’s been dropping every year for almost a decade. Service labor gross, on the other hand, has consistently been at 70% gross for as long as I can remember.

So, why do dealers and general managers work so hard chasing 2 ½% gross while largely ignoring 70% gross? I genuinely don’t understand. I’m serious; if you know the answer, please email me at This email address is being protected from spambots. You need JavaScript enabled to view it. and I’ll include it in a future article.

I want to be clear: I am not suggesting dealers diminish their efforts to sell new and used cars, nor am I downplaying the importance of variable ops. I’m just saying that, as an owner or general manager, if you would devote some of your time, talent, business savvy, sales experience, and leadership to fixed ops, the financial impact to your bank account would be remarkable.

Let’s look at the numbers to back this up:

NADA says the average car sells for $34,670, so at 2 ½%, that’s $867 gross profit. According to yourmechanic.com, Lang Marketing, and many other sources, consumers spend $9,000 during the first 10 years of ownership to maintain a car. If you figure a parts-to-labor ratio of 1:1, a labor gross of 70%, and parts gross of 35%, then that is $4,750 gross profit. That’s $475 gross per year. Granted, in the early years, a vehicle needs less maintenance than it does later in life. (Yourmechanic.com estimates the first year of maintenance to be $150 with each year increasing $150…hence the second year is $300, the third year $450, etc.)

The cynic would say, “Hold on, Charlie, by the time the vehicle owner starts spending serious money on maintenance, they have long ago defected to the aftermarket.”

This is unfortunately true in many dealerships, but that’s why retention is so important—even the OEMs see the long-term value of retention and include it as a key performance indicator in evaluating a dealership’s overall health (more on this topic in a future article).

Recapping the main point, the average new car sale produces a one-time gross profit of $867…once. The average service customer produces a recurring annual gross profit of $475…every year. (Note: The average age of vehicles is 12.1 years. Wow!)

The only way to capture that recurring service gross is to sell preventive maintenance. Here are some items for your next service sales meeting. (It will have even more impact if the dealer or general manager attends the meeting.) Consider the following sales training topics:

„ Eric Twiggs, a training coach at ATI, says one of the most important things in sales is attitude…not the attitude of the customer, rather the attitude of the advisor. For example, if the service advisor perceives that his customers all live hand-to-mouth and can barely afford basic necessities, then his attitude causes him to never offer tech-recommended services.

Twiggs says an advisor must realize that his perceptions are not always the customer’s reality.

In other words, teach advisors to set their perceptions aside and lay out all the technician-recommended service and repair. Don’t over-think this; just review the multi-point inspection form and the estimate with the customer and ask them to buy.

„ Twiggs goes on to warn about confirmation bias. This was a new term to me, but it means using a singular event to confirm what you already believe—even though the evidence doesn’t support your conclusion.

For example, if the advisor believes your services are over-priced and thinks, “Oh, brother, I’d never come here for service work,” then the first time a customer questions the price, it confirms his wrongly-held belief.

I have seen this happen to many advisors and they just shut down. Their thinking goes something like this: “Yep, I knew our prices were outrageous…nobody in their right mind would pay this kind of money.” The result is they become spineless order takers.

„ Don’t sell your own wallet. This happens daily on the service drive. An advisor knows his wallet is getting pretty thin, and it’s still four days until payday. Since he can’t afford $750 for an AC compressor, he assumes the customer can’t either. His perception is not the customer’s reality, but his attitude kills the deal and the sale is lost.

„ Zig Ziglar said it best, “Your attitude more than your aptitude determines your altitude!” Amen. Savvy managers help their advisors maintain the right attitude toward the dealership and toward the customers. Management must continually remind fixed ops personnel that selling preventive maintenance is a high calling and a noble mission.

These concepts are profound because of their simplicity. Fifteen-minute service sales meetings once a week will help your advisors maintain the right sales attitude. I know dealers spend a lot more time training their new and used car sales team—chasing a 2 ½% one-time gross. Surely 15 minutes a week is time well spent—chasing recurring 70% gross.

This got me to thinking about my wardrobe; who’s making the most money on my clothes, the menswear department at Macy’s or my local dry cleaners? My shirts are very traditional—long sleeve with button-down collars. I can usually catch the brand I like on sale for $50 per shirt. My dry cleaners charge $2.65 per shirt and I take them in about 20 times per year—that’s $53 annually.

To recap, the retailer makes $50 one time, but the dry cleaners make $53 recurring annually. Frankly, I don’t know how long I keep my shirts, but I bet it’s somewhere around three years.

Conclusion: There’s a lot more money to be made servicing cars (and dry cleaning shirts) than there is selling cars (and selling shirts)! Car dealerships do both. (When I say both, I’m referring to sales and service—however, if you want to add dry cleaning, I’ll take medium starch in my shirts!)

The greatest challenge in the automotive industry today is finding leaders who will lead, managers who will manage, and directors who will provide direction. The centerpiece of effective leadership, management, and direction is accountability:

1. Personal Accountability—holding yourself accountable for the desired outcome
2. Top Down Accountability—holding others accountable to perform implemented processes

Service departments are famous for implementing processes and not holding employees accountable to consistently perform the task. For example:

• Advisors must do a walk-around on every vehicle that enters the service drive…with the owner present. They don’t, and there are no consequences.
• Every technician must do a comprehensive inspection on each vehicle. They don’t, and no one follows up to see why not.
• Advisors are required to follow up on declined work by calling the customers within 48 hours. They don’t, and management seems to have forgotten all about it.

Accountability isn’t a four-letter word. Dave Anderson says accountability is not something you do to somebody, it’s something you do for somebody. It’s management saying, “I care enough about you to hold you accountable. I care more about your future than your feelings. I’m hard on you because I know you can do it…and I believe in you.”

There is a common belief among service managers that techs and advisors don’t want to be held accountable. They have bought into a lie that says accountability is punitive—punishment, big brother, micro-managing—or something distasteful to employees. In fact, the opposite is true.

A few years ago I was consulting with a group of seven dealerships, and to say they were a dysfunctional family would be an understatement. There was drama and strife everywhere, and their business was in decline. I brought the techs and advisors together (without any managers) and simply asked them what was up. They listed a few minor issues and personality conflicts, but their main issue was lack of accountability. I was floored. This group of educated, professional adults wanted management to “inspect what they expected.”

Their frustration was centered around the fact that management demanded processes be followed, then didn’t correct, coach, mentor, and lead when employees didn’t follow the process. The message from management was “do it or else;” yet nothing happened to those who didn’t perform. The techs and advisors quickly learned that management didn’t really care and, therefore, they didn’t, either.

Quoting Dave Anderson again, “you will lose the respect of the best if you don’t deal with the worst!” Anderson goes on to say that leaders shouldn’t desire “to be liked” –their goal should center around “being respected.”

If you are respected, people will follow you—and ultimately like you. The leaders of the above dealer group lost all credibility because they failed to hold their team accountable. The net result was not just internal drama; it affected hours per RO, maintenance service sales, CSI, retention, and fixed ops profitability. All that could have been avoided by simply holding team members accountable. Surely, it can’t be that simple. Yes, it’s that simple.

The dealer saw what was happening and hired a new fixed ops director. Within 90 days things started to change, and six months later several of the service departments had record months. He didn’t come in and fire everyone, although some managers couldn’t be salvaged. He just laid out the expectation, provided clarity on how to meet his expectations, and did weekly follow-up (accountability) to make sure his processes were being followed.

His monthly service sales meetings are exciting, attitudes have improved, and everyone’s income has gone up! It’s a beautiful thing.

The primary reason the new fixed ops director made such a difference and turned seven dealerships around is because he practiced personal accountability. That means when he accepted the responsibility of being fixed ops director, he became accountable for the outcome.

Accepting responsibility for a task is meaningless and won’t produce any results if you don’t hold yourself personally accountable for the outcome.

Jeff Peevy, President of Automotive Management Institute, has written extensively about this topic. Peevy says:

• Personal accountability doesn’t require heavy supervision
• Personal accountability creates a thirst for knowledge
• Personal accountability pursues quality

It starts at the top. If the leader doesn’t accept personal accountability, then respect will be lost and the leader’s authority will evaporate…and you can forget about your team members ever practicing personal accountability.

Top down accountability—accountability to the manager—is important, but when your team members accept personal accountability, then you, as a leader, have hit the sweet spot. Your personal accountability has now replicated itself and now your team members have it in the fiber of their DNA.

So, what’s at stake?

The National Automobile Dealers Association put out a fascinating statistic that I had never seen before. According to NADA, 49% of total dealer gross came from fixed ops in 2017. That’s up from 45% in 2015. Of course, I’m sure you already know that most of the dealership’s net income comes from fixed ops gross.

The point is simply this: accountability increases revenue sales, gross profit, and net profit. There is a high price to pay for ignoring the impact of accountability throughout your dealership…and a huge reward for training your team to master the art of accountability!

Dealership service departments have a great opportunity to increase traffic on the drive by pursuing recent used car buyers—those who bought from your dealership and those who bought elsewhere.

First, let’s look at the statistics (according to Lang Marketing):

 Almost a million vehicles were lost in 2017 due to hurricanes Harvey and Irma, creating a surge in demand for new and used vehicles.

 There were 42.4 million used cars sold in 2017; that’s up over two million units from 2014 when 40.3 million used cars were sold.

 The average age of used vehicles sold in 2017 was 4.5 years old. That is down from five years old not too long ago. (Newer vehicles typically bring higher prices, which may explain the next statistic.)

 The average sales price for used cars in 2017 was $19,500. That’s $1,400 more per car than in 2010 when the average sales price was $18,100.

Jim Lang of Lang Marketing makes the following observations:

“Higher used vehicle prices are generally positive for the aftermarket since they make it easier for consumers to justify investing in the repair and maintenance of older vehicles. Higher used vehicle prices also raise the value threshold for scrapping cars and light trucks, thereby keeping older vehicles on the road longer.”

So, as prices go up, many consumers are motivated to not only keep their old car but to spend some money on it to make it last a few more years. Yea! But the sobering fact is most vehicle owners aren’t spending that money at their local dealership; rather, they are heading to the aftermarket.

You’re okay servicing older vehicles in your shop, right? And you’re okay servicing any make or model, right? If you’re an import store that sold an F-150 pickup off your used car lot, then you’re okay having that vehicle serviced in your shop, right?

Most independent garages and franchised aftermarket shops are ready, willing, and able to work on anything. I’m suggesting your dealership should be, also.

There are 267 million cars on the road in the United States and that’s increasing every year. Combine that with the fact that the number of service bays are declining every year and you have the perfect opportunity for fixed ops growth…if you pursue it.

Action Point #1: First, let’s look at the low-hanging fruit. I’m talking about being intentional in retaining your pre-owned car buyers—making them lifetime service buyers. I see a plethora of new car retention programs designed to keep consumers loyal, but rarely do dealers aggressively pursue their used car buyers. That’s tragic and doesn’t make good business sense.

The action point is to give your used car buyers access to all of the retention programs available to your new car buyers. Things like “Engines for Life,” lifetime warranties, complimentary roadside assistance for life, and scores of other incentives to keep them coming back.

But you can’t stop there. Customer loyalty in and of itself won’t make you any money. You can’t deposit loyalty in the bank. Forgive me for stating the obvious, but you can only deposit money in the bank, and the only way that will happen is when the service advisors sell something!

Don’t assume your advisors understand the big picture. Take the time to have a service sales meeting and lay out your two-fold used car buyer retention strategy:

1: Get them back on the service drive.

2: Sell tech-recommended services to keep their cars trouble-free and fun to drive…and to keep them coming back!

Action Point #2:
Secondly, equip your advisors with word tracks that are brief and easy to learn. For example, if you implement some type of lifetime engine warranty on all of your used cars, you might coach your advisors to check vehicle history and say, “Mr. Customer, I see you are already enrolled in our Engines for Life Program. In order to keep your coverage intact, you would want our performance oil change package, right?”

Or you might have them say, “All of our pre-owned vehicles come with Lifetime Roadside Assistance as long as you choose our “better” or “best” oil service. Which one of the oil change packages best meets your driving needs?”

The intent here is to give your advisors an opening sentence—a proven phrase that will “get them started” on the road to a sale. Most professional advisors can take it from there if you can just give them a starting point.

Action Point #3: Lastly, proactively reach out to “lost souls”—vehicle owners that haven’t been on your service drive in over a year. Most folks have their oil changed twice a year, so if you haven’t seen them in that amount of time, they’ve defected to the aftermarket. Oh, you’ll see them again if they have a catastrophic failure that’s covered under warranty, but for routine maintenance, you’ve lost them.

Go get them back! How about a car care clinic on a Saturday morning? Make it a grand party with hot dogs and those inflatable bounce thingies for the kids. All fixed ops personnel will be needed, from “A” techs to lube dudes to porters. The centerpiece of the event is a free multi-point inspection performed on every vehicle.

Granted, it’s a lot of work, but if you regain 20-30 lost customers, it’s a great success. Plus, you’ll sell lots of labor hours simply by having your techs get their hands and eyes on every vehicle.

So many used cars, so little time. Go start rounding them up. It’s worth it! My personal thanks to Jim Lang of Lang Marketing. For more information on the Lang iReport, you can visit langmarketing.com.

Earlier this year I ran across a book by Max Zanan called “Perfect Dealership.” It is a must-read for all of your dealership management and leadership team leaders. Seldom do I quote so extensively from another writer, but Zanan’s observations are so spot-on that I felt I had to let you hear directly from him.

The book takes an in-depth look at all departments in the dealership, yet Zanan reminds us the wisdom of becoming masters of the basics. What follows are selected insights from the chapter on parts and service, used by permission:

Sales-to-Service Introduction

All departments in the dealership must work toward a common goal. A lot of times I see that there is a total disconnect between the service and sales departments. There should be regular meetings between the general sales manager and the service manager to coordinate the transition of customers from sales to service and back to sales. In other words, never let go of the customer. It is in everybody’s interest to ensure customer retention.

The sales department absolutely must introduce every customer to the service department — and I am not talking about a nominal 30-second walk-around. This must be an active introduction to make the customer feel comfortable and know where to go when the first oil change is due. It is a good idea to introduce service advisors and the service manager.

New-Car Clinics

Dealerships must schedule new-car clinics on a regular basis (monthly or quarterly). These new-car clinics need to be promoted in the showroom and on the dealer’s website. They should take place at night, so customers can visit after work. Snacks and soft drinks should be provided. Technicians should teach customers how to use basic controls and answer questions. Again, these clinics serve a dual purpose: helping customers learn how to use their new car and also gain familiarity and feel comfortable with the service department.

Brag on Techs and OEM Parts

It is a good idea to display your technicians’ certificates and relevant information in the customer waiting area, so customers know that factory-trained technicians using OEM parts are working on their cars. Factory training and OEM parts are the reasons to use the service department instead of an independent mechanic. Furthermore, OEM parts and OEM-trained mechanics are the only reason to charge higher prices compared to independents.

The Service Sales Department

Every time I visit a service department, I have a feeling that service advisors are the opposite of the salespeople. You cannot assume you will make a sale, but it seems to be the mindset with many service writers that cars inevitably break—so they have a passive strategy.

Another problem that contributes to the lack of sales in service departments is understaffing. I am a big believer that an effective service advisor needs to spend time with each customer in order to get to know him or her and the car so he or she can upsell the necessary work. In order to do that, the service advisor needs to see no more than 12 to 15 customers per day. If your service advisors are seeing more than 15 customers per day, what you have is order-takers. And order-takers do not make money!

Service managers must have regular sales meetings to outline their goals and methods for accomplishing them.

Service Advisor Walk-Around

It is critical to make a positive first impression and build a long-lasting relationship with every customer. One specific way to do so is to conduct a walk-around when the customer comes in for scheduled maintenance or repairs. During an active walk-around, a service writer inspects the car with the owner, which can dramatically increase the chances of up-selling additional maintenance or repair work. An active walk-around is essential when you consider that parts and service is an extremely profitable business for dealerships. The profit margin on labor is about 75%, and on parts it is between 40 and 50%. A Perfect Dealership trains its service advisors to perform an active walk-around at all times, so it becomes a natural part of their daily routine.

Multipoint Vehicle Inspection

Multipoint vehicle inspection (MVPI) must be utilized on every single car, and maintenance and repair recommendations must be made on this MPVI.

Menu selling should be utilized with every customer, similar to what we do in the F&I department. This approach ensures 100% presentation of proposed maintenance and repairs to 100% of customers, 100% of the time.

Wear a Uniform

The Perfect Dealership transmits professionalism at every level. We need to make sure that service advisors, porters, and even cashiers wear a uniform. First, a uniform identifies employees and showcases professionalism that many dealerships lack. It goes without saying that uniforms must be clean, and name tags should be worn by all employees.

Training

The Perfect Dealership trains its staff on a regular basis. Service technicians must be up-to-date with factory training. Service writers need sales training and phone-skills training. And every employee in the service department needs customer-service training. 

Quick Lube Operations

Perfect Dealerships offer quick lube service without an appointment in order to compete with independents. Unfortunately, many dealers are not maximizing sales opportunities in their quick lube and express service operations. A lot of dealers are caught up with an idea that if they change the oil in 15 minutes or less, they are doing a great job. The point is not to rush through the process but to maximize the revenue by up-selling items such as air filters, wiper blades, light bulbs, belts, and cabin filters. To ensure maximum up-sell opportunity, an A-skilled tech should oversee the work of lube technicians.

Good stuff, isn’t it? I know what you’re thinking, “Hey, I already know all this stuff—I’ve heard it before!” Okay, you know it. The question is, are you doing it?

If you follow Zanan’s recommendations, not only will you have a perfect dealership, but a profitable one, too!

This article is for leaders—dealers, general managers, and service managers—the men and women who have been given a sacred trust to shepherd their employees and the dealership to success.

Once you, as a leader, have embraced the message, then I think it would be a good idea to pass this article on to your employees.

Shakespeare wrote in “Hamlet” Act III Scene I “To be or not to be.” A motivational speaker and personal trainer that I know says, “What you be, they are becoming.” One of my favorite authors says it like this, “Your employees pay more attention to what you do than what you say.” Behavior is caught, not taught.

The Draconian parenting philosophy of “Do what I say not what I do” has never worked and it never will. Yet I see this happening every day in the business world; managers have one set of standards for their employees and a different set of standards for themselves. (Good heavens, I’m starting to sound like Dave Anderson!)

So, are you a student, a disciple, or a disciple-maker? Let’s start by defining each:

Student: A learner (a person who is trained but never produces)

Disciple: A learner and a doer (a person who applies what they have learned; result: increased revenue via addition.)

Disciple-Maker: A learner, a doer, a believer, and a teacher (a person who is held accountable by their superiors to continue applying what they have learned; result: increased revenue and exponential growth via multiplication.

Rather obviously, the goal of every owner and manager ought to be to become a disciple-maker—and to have teammates that share the passion. What you be, they are becoming. It starts at the top. Let’s look at some examples that better explain each category:

Student example: Management sends a service advisor to a sales training seminar. However, the manager does not attend. When the service advisor returns from the training, he immediately goes back to doing what he has always done. He never applies anything he has learned. The manager doesn’t know what the advisor learned, therefore he does not have the ability to hold the advisor accountable. Nothing changes. It was a total waste of time and money. Unfortunately, this is the pattern that happens most often in the automotive business. Management is under the mistaken belief that the key to success is having trained service advisors. It’s not. The key to success is having trained service advisors who are held accountable to sell maintenance service—who are held accountable to apply what they have learned.

Disciple example: In this scenario, again, the manager does not attend the training. However, the service advisor has enough drive, energy, and desire that he does apply what he has learned. However, after a few days or weeks, because there was no accountability and the manager doesn’t really know or understand what he’s doing or why it doesn’t take long for him to return to his old ways.  And even though he applied it for a short time, it didn’t become part of his DNA.

This is so tragic because the advisor is all fired up—ready, willing, and able to produce—yet due to a lack of support from the manager, everything fades away. This is one reason there is such a high turnover in the automotive industry. Weak managers who don’t believe in training now have a self-fulfilling prophecy: “See, I told you so. All this training gets us nowhere; it’s a waste of time and money.”

Disciple-Maker example: The manager and the advisor attend the training together. The general manager and the dealer go, also! It sends a message that training is important; that training matters. There’s going to be accountability to a standard. It’s a new day. Things are going to change. There’s a new sheriff in town. Now when the advisor returns from the training, management all the way up to ownership knows what is required of the advisor to succeed. Therefore, everyone is held accountable up and down the management chain. What’s the net result?

The sales training works because the advisors are held accountable. They now have become disciple-makers who teach and train customers, who themselves become disciple-makers with their friends and family. In other words, the service advisor’s sales presentation is so clear that not only do the customers buy the maintenance services, they “buy-in” to the concept that preventive maintenance saves them money. This is true success. This is what you’re looking for, isn’t it?

So managers, ask yourself, “Am I a student?” (Which doesn’t make me or the dealership any money), “Am I a Disciple?” (Which will add a little bit to the bottom line, but not much), or “Am I a disciple-maker?” (A game-changer, a guy who is out there getting it done and holding my people accountable to get it done.)

Excuses: These are some of the most common excuses for not becoming a disciple-maker:

1. Can’t afford the time “I’m too busy. We’re short-handed.”

Let’s take a reality check for just a minute. I understand the fact that a dealer can’t attend every training event for every department every time. And I understand that a service manager can’t attend every OEM technical training class that he sends his technicians to or every sales training class his advisors attend. But the more engaged you, as a leader, are in understanding what your people are learning, the more effective you’ll be at holding them accountable to do it.

At the very least attend one training event a month with them. Additionally, you could commit to being present at the beginning of most meetings held at your dealership, simply to welcome everyone, thank them for being on your team, and to let them know you support the processes and techniques they are learning.

2. Can’t afford the money “I hate to invest in people that I don’t think will be around very long. We have a high turn-over rate with our advisors and managers and we just don’t want to invest in them.”

It has been said that it is far better to train people and have them leave than it is to not train them and have them stay! If you invest in the training and hold them accountable to implement what they’ve learned, then your team will increase their production and give you a great return on investment.

3. Too lazy to do it; unmotivated “Quite frankly, I just don’t care.”

(Obviously, nobody is going to say this out loud but this is the attitude that many in management have.) Their thinking goes something like this: “I’m just not that passionate about it. I’m making an average salary, I have average personnel, we have an average dealership, things are going along pretty good. I just don’t want to put out the effort to get to that next level.” In other words, what you’re doing is “good enough” and you don’t want to invest the time, money, energy and effort to be great. By the way, you know the old saying, “the enemy of great is good.”

It’s easy to get worn out in the automotive service business. Long hours, customer expectations and demands, computer issues, technicians—it can suck the life out of the most optimistic among us.

That’s why we all need to be energized with fresh ideas. Just a reminder that I’m writing to managers and leaders—you are the folks that need refreshing the most. Attending training seminars with your service team will refresh you. If nothing else, do it for yourself.

In summary, if you’re looking for maximum return on the time and money you invest in having your people trained, this is the way to get it. Disciple-makers make disciples that go on to make disciples. This is contagious multiplication. What you be, they are becoming! “Go ye therefore and make disciples.”

“What is true environmentalism? The Obama administration told us you can’t be about jobs and growth and protect the environment. I simply reject that! We can do both,” according to Scott Pruitt, Administrator of the US Environmental Protection Agency.

“I think true environmentalism is really environmental stewardship. We have been blessed with wonderful, abundant natural resources in this country…and to whom much is given, much is required,” Pruitt continued.

“We need to be about managing the resources God has given us. So, we can do both—providing jobs and growth while being good environmental stewards.”

Last fall I had the privilege of sitting down with Administrator Pruitt to discuss the EPA’s impact on the automotive industry and to gain some insight on what the future holds concerning regulatory mandates. The event, “A Fireside Chat with the EPA” was attended by hundreds of professional automotive fixed ops consultants from all across North America and around the world.

Obviously, the laws and policies that come out of Washington, D.C. affect all Americans, but no agency has more impact on our industry than the EPA. From regulatory bans on lead in gasoline to emission mandates to compliance demands as a result of the Clean Air Act, the EPA has had a profound impact on automobiles.

On the topic of regulation, Pruitt said “One of the greatest issues for businessmen regarding energy and the environment is regulatory uncertainty—is a businessman supposed to follow the regulation (created by a federal agency) or the statute (created by Congress)?”

“The previous EPA created regulations that were not tethered to any statutes. Capital will not be put at risk by businesspeople if there is regulatory uncertainty.”

The Administrator on many occasions has said that the purpose of a regulation is to “make things regular.” In other words, regulations should bring clarity, not confusion. If there was ever an industry that needed consistency, clarity, and certainty, it’s the automotive industry.

Therefore, I asked him about Corporate Average Fuel Economy standards, which are actually set by the National Transportation Safety Board with input from the EPA. The CAFE standard for 2025 is a whopping 54.5 mpg. For our industry to attain that number, which is almost 20 mpg higher than it is today… well, I just don’t see it happening.

Specifically, I asked him to explain the process in order to find out if there’s any way to roll CAFE back to a more attainable number.

According to Pruitt, “the mid-term review in April 2018 is important…in looking ahead to 2025. In essence, the review is to evaluate if the projections were correct…or overly optimistic.”

“The Obama administration rushed the mid-term review by pushing it up 16 months to January 2017.

The EPA under the Trump administration will be doing the review at its appropriate time in April 2018.”

I think it will be very interesting to see what they find out. I am assuming they will find out that the projections were way out of line and I hope they will recommend a lower, more realistic target. We’ll see.

Pruitt went on to say, “Concerning the design of vehicles, we shouldn’t go to Detroit and say, ‘manufacture a segment, a percentage, of your fleet that no one wants to buy!’ Rather, we need to look at what vehicles people are actually buying and then strive to make them fuel-efficient with acceptable emissions.”

Okay, time out. Let that soak in for a minute. Here’s a member of President Trump’s cabinet, a cabinet secretary who runs a powerful federal agency, saying let the people decide. Let the market dictate the direction. Let’s find out what people want and help the manufacturers meet the demands of the market and at the same time achieve environmental mandates. Wow, what a common-sense approach! How refreshing.

“If you make vehicles that people don’t want to buy, then it’s counter-productive,” Pruitt concluded.

It’s counter-productive because people will hold on to gas-guzzling, high-emission, older vehicles longer. That’s bad for the environment and for new car sales.

I pointed out to the Administrator about government involvement designed to influence vehicle manufacturing: specifically concerning mandates for increased fuel economy and decreased emissions. This was the desired outcome, yet the new engine designs are susceptible to fuel deposits and that has had the reverse effect: deposits actually reduce fuel economy and increase emissions.

So, the federal government’s mandates have caused the exact opposite of what they were intended to do. Therefore, I respectfully asked the Administrator, “When does the government need to get out of the way?”

Pruitt responded, “My philosophy is that the market is the better governor of those things. The government, when it mandates certain things or implements price controls, it can have a detrimental effect. It’s always best when technology and innovation control the market. American innovation and technology, when left to drive the process, always work best. Government is slow and reactionary while industry moves to get things done quickly and efficiently.”

It seems to me that the EPA has been a political hot potato since its creation in the 1970s. EPA policies have a polarizing effect in our society with strong emotions on both sides. Pruitt summed it up like this:

“So much of what we do at the EPA has been politicized…and it shouldn’t be. What’s ‘Republican’ or ‘Democrat’ about cleaning up a superfund site? Nothing! Clean water and clean air should not be political…so we are working hard to change the discourse and have meaningful discussion.

In the past, the EPA exercised regulatory overreach and lost sight of its core mission. We are trying to bring clarity as we go forward.

We have lost civility in our discourse—we need to get back to a reasonable discussion.

We need to celebrate the achievements in innovation and technology that we have made in this country with respect to clean air and clean water. We need to embrace how far we’ve come.”

Well said, Mr. Administrator. Well said.

My personal thanks to Scott Pruitt for taking time out of his busy schedule to sit down and discuss the issues that impact our industry. Due to his vision and leadership, I believe the relationship between Washington, D.C. and the automotive industry will be stronger and have more synergy than ever before. The best is yet to come.

Happy New Year! I hope you enjoyed a relaxing time with family and friends over Christmas and had a few days to recharge your batteries. Service directors will need to be at the top of their game in 2018 because dealers will be depending on fixed ops more than ever to keep the dealership profitable.

The prognosticators are saying there will be one million fewer cars sold in 2018, so parts and service will be called on to pick up the slack. (Savvy dealers already know that fixed ops is the backbone of profitability, but there’s nothing like declining new car sales projections to cause everyone to get religion about the cash cow we call the service department.)

There are two critical opportunities you must introduce new and used car buyers to your service department: The first, of course, happens at the time of vehicle delivery when the salesman brings the buyer out on the service lane to meet the service advisor. The second occurs at the new and used car buyers’ clinic.

The following is a true story that happened last summer. Dewey and I have been friends for over 30 years, so he knows what I do for a living and he sent me a lengthy email explaining his experience. Everything in italics is in Dewey’s own words.

My wife and I were looking for a good, used, larger vehicle to better meet the needs of our family. However, due to some incredible incentives, we decided to purchase a new vehicle instead. The overall buying experience was very good and very pleasant! Our salesman was just super and the whole experience from his greeting to the test drive to meeting the new car manager to the finance presentation was well done.

A few days later, we got a letter congratulating us on our purchase followed by an email and call inviting us to their customer appreciation event for new car buyers. My wife and I accepted the invitation.

There were about 50 people there, some with families, but at least 35 of us were “new car buyers.” They had barbecue set out and lots of tables set up on the show room floor. After checking in, the first person I met from the dealership was a man that was very busy setting up and serving drinks and very hastily moving around. I said, “Hi, is Vinny, my salesman, going to be here tonight?” I got a very quick and disconnected response of, “I don’t know anybody by that name, nor do I know any of the salesmen.” Wow, that was not a good first impression at all and actually, it was rude. He had an employee shirt on, but there was not a greeting of “Hello, I’m glad you’re here!” And then to not know any of the salesmen! I seriously thought he was a low-level employee that got the job of setting this all up.

When the meeting started, to my surprise, the rude guy turned out to be the SERVICE DIRECTOR! He ran the entire meeting. I was not impressed and already thinking, “this is not the way to retain new customers.”

He handed out an agenda for the meeting…one he said would only last about 30 minutes. What a joke! He basically just read the agenda. My impression was that he did not want to be there or doing the meeting. The agenda said we would meet several employees, but as it turned out, just one service advisor showed up at the end and there were no parts people, not a single salesman, no techs, and no upper management. He did mention that the general sales manager was there, but he was way too busy to come out and say hi. The service director pointed at him in his office and he didn’t even look up, he just waved. Are you kidding me?

The service director went on to brag about how great they were: number one in sales and service, service experience award winner, fixed right first award winner, how large they are (average 100 cars a day) …yet no other employee, other than the one late-arriving service advisor, was present to say thank you or be up front.

The service director also bragged about their waiting area and the fact that they had 96 different flavors of coffee in their machine for their guests. Yep, that’s why I bought my van there and would want to have it serviced there! (Sarcasm).

The service director briefly discussed oil changes, and I was really surprised when he downplayed the importance of the “oil change due” reminder. The only maintenance he discussed was an oil change and his attitude was like it was no big deal.

Thankfully the meeting ended and it was time to hand out the door prizes! One person had a question about their home link garage system not working and that led to another 30 minutes of questions and now the service director was getting impatient. Clearly, he did not want to be there and finally said, “I will take more questions individually, let’s do the door prizes and get you all out of here!” By this time, I knew I would NEVER be bringing my van here for service! If I have warranty issues I’ll go somewhere else for service and probably to a very good independent shop to have oil changes and routine maintenance performed.

I left without saying anything. I love my new van, but I will never bring it to him for service. I’m confident that I will find a much more appreciative and thankful shop or dealership who truly wants to have me as their customer for life.

Wow! What an ugly story. Talk about a textbook example of how to chase customers away!

Let’s unpack this just a little bit. The attendees at the meeting had purchased 35 new cars, so that means they had spent almost $1 million. At 5% the dealership grossed roughly $50,000 on these 35 cars.

The average vehicle owner spends about $600 annually for maintenance, so for 35 vehicles over a 10-year period, that’s over $200,000 revenue and $120,000 gross for fixed ops. That’s how much these customers will spend somewhere…but, if they respond like Dewey, it likely won’t be at this dealership! No wonder dealerships only get about 14% of the annual customer-pay maintenance and repair revenue. AND just think how many future new and used car sales will be lost due to a lack of loyalty to the dealership.

So, if other attendees felt like Dewey, then here’s 35 precious people that were royally turned off by an unfriendly, impatient service director and a team of managers that couldn’t be bothered to show up and say thank you.

The leadership of this dealership needs to remember that you sell cars to make customers so you can sell maintenance services to make money! They apparently believe that once they’ve sold someone a car that they’re done. What a costly mistake.

Here are some action points: 

• Teach your sales, service, and management team how to do a new car clinic that keeps the customers loyal to the dealership!
• Teach them to make the customer feel welcome and appreciated. The employees who host the customer appreciation clinic need to be the epitome of graciousness, warmth, and hospitality.
• Teach your management team that they must be present, engaged, and have their game face on. (No waving from the office without looking up. Wow, how unprofessional and utterly clueless.)

In closing, you might want to consider creating an incentive for the sales person who has the highest sales-to-attendance percentage. This will encourage them to phone, text, and send email reminders encouraging their customers to attend. Double the incentive if the sales person shows up also.

The new car buyers’ clinic matters. It’s a big deal. It will get your customers started out on the right path to many years of driving pleasure. It keeps them loyal to the dealership and it makes you lots of money.

Happy sales to you.