Article

Your Service Plan for the New Year: No Cost Changes That Produce Net Profits

February 2008, Auto Dealer Today - WebXclusive

by Don Reed - Also by this author

Well, it’s that time of year again, huh? 2007 is gone and the New Year is already here, so let’s discuss what is new about this New Year. To start with, let’s ask ourselves this question: “What am I going to do differently this year versus last year?” It’s a great question for many dealers, and those of you who want or expect to achieve different results (net profit) than last year must answer it. I’m sure you have heard the old saying: “If you continue to do what you’ve always done, you’ll continue to get what you’ve always got.” That being said, it sounds to me like we must discuss the changes that need to take place in order for you to achieve different results!

Chances are if you had a bad year in 2007 and lost money, you are probably looking for ways to cut expenses so you can save your way into a profit. A dealer I spoke to recently said his new vehicle sales were down by about 30 percent last year, and he’s losing money “big time” in the new vehicle department. To try to counteract his losses, he’s eliminating his owner follow-up program in the service department in order to save $1,500 a month. WOW—what a bright idea! Stop supporting your profitable service department so you can subsidize your unprofitable sales department. Wonder what happened to his new vehicle advertising budget. You guessed it; he increased it!

That’s almost as bad as the dealer who laid off a service advisor (profit producer) because his “front end” sales were weak. If you subscribe to this kind of thinking, then you really don’t need to read any further. Just get on out there and layoff some more productive, profitable employees, so you can save your way into going out of business!

If you want to focus on “controllable” expenses, then take a long look at policy adjustment and shop supplies. Implement a log for each of these and require your manager to review it with you weekly, and once everyone knows you are watching these accounts they will start to go down. Policy adjustment should not exceed 1 percent of labor sales. Now, let’s focus on producing revenue.

Your plan for achieving 100 percent service absorption should focus on what you are going to do differently to increase sales and gross profits. It’s not just about advertising and marketing; it’s about processes—processes that give the customer reasons to come back. These processes include how to take an incoming phone call and convert it into an appointment, how to make an outgoing phone call to sell repairs and maintenance, properly informing customers of all repairs and costs, and advising them when their next maintenance service is due. Implement processes that will exceed the customer’s expectations on every visit to your dealership.

Now, here is an exercise for you complete tomorrow morning. If you are in management, stand at the service department’s entrance when they open up for business. Say “good morning” to everyone and grab yourself a cup of coffee and just stand in the service write-up area and observe. Ask yourself these questions:

  • Do your advisors look and act professional?
  • Are your customers enjoying their dealership experience?
  • Do you have a clean and comfortable waiting area with hot coffee, tea and hot chocolate?
  • Is there a shuttle service available for rides to work or the shopping mall?
  • Is your service manager/director working as a greeter in the service drive with your advisors?
  • Did your service manager/director conduct a sales meeting to review today’s sales goals with your advisors before the customers arrived?
  • Did every technician have a vehicle parked in their respective stall with the RO, so they could start turning wrenches immediately, as opposed to waiting for their advisor to give them their first RO?
  • Are your parts personnel pulling the necessary parts for your technicians and delivering the parts to their stall?
  • How long are your customers waiting in line to speak to an advisor?
  • Who’s answering the phones during this busy time of the day?
  • Does every advisor give every customer the opportunity to accept an additional purchase?
  • Are all of your customers advised of the manufacturer’s maintenance requirements?

When you see an employee do a good job and putting smiles on customers’ faces, just walk over, shake their hand and say, “Thanks, I appreciate your effort.”

This project will take about an hour of your time, and if you haven’t done this in a while, then you might want to bring a legal pad and pen along with you to take notes.

These processes will require no special tools or equipment, no new software, no additional advertising and probably no more people, all of which require no additional expense.  However, to master the processes a little extra training might be required.

Vol 5, Issue 1

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