BG Products Industry News

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/

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!