July 2012, Auto Dealer Today - WebXclusive
At many dealerships around the country, the service department became something of a life preserver during the recession, keeping a dealership afloat while vehicle sales were down. At Lupient Chevrolet, the service department morphed from a life preserver in 2009 and 2010 to a profit powerhouse in 2011.
Lupient Chevrolet General Manager Tom Schmitz said the service department’s performance in 2011 was the result of several things, what he called a “perfect storm” in fixed ops. The outcome of that perfect storm was an annual increase of roughly $900,000 in profit for fixed ops and a more-than 20 percent improvement in the service department’s CSI scores.
The storm began brewing in 2009 when Lupient Chevrolet, located in Bloomington, Minn., was slated by General Motors to lose its franchise along with hundreds of other dealers. Schmitz, however, was unwilling to let that happen and began an aggressive campaign to not only appeal the manufacturer’s decision but also keep things moving in sales and service in order to show their customer base “that we were not going away.” He said, “We went out and we actively purchased brand-new cars from other dealers at broker prices,” and sold the nearly-new vehicles as used on Lupient’s lot.
Although keeping inventory on the lot while they had appealed GM’s decision was a large factor in keeping the store alive, ramping up business in the service department was also extremely important during that time. In addition to purchasing vehicles from other dealers around the country during the intended wind-down period, Schmitz said, “We were doing everything we could to be sure that we kept the service department up and running because we knew that we did not want to send the message, contrary to what our competitors were mailing, [that the dealership was shutting down].”
In 2009, Lupient Chevrolet received notice that General Motors was revoking its franchise. Instead of winding down its new-car operation, management forged ahead by purchasing new vehicles from other GM dealers to resell, and the dealership ramped up business in service to help stay afloat. Ultimately, the dealership's franchise was reinstated, and the service department is now a profit powerhouse.
A boon to the service department during that time was that fact that, despite GM’s intent to take away the dealership’s Chevrolet franchise, the store was named an authorized service provider for Saturn after that particular GM brand met its demise in late 2009. “That was a big, big push for our fixed [ops],” he stated. “We embraced it. We were aggressive with trying to recruit Saturn owners to come to this store for service. We also … were able to retain a number of key Saturn employees that were from the other stores, so that when the Saturn owners came here, they had a familiar face.” He added, “The Saturn owners tend to be very religious on their maintenance, so that helped menu sales. It helped our profitability, [and] it helped our parts flow.”
In mid-2010, the dealership received word that GM had indeed reversed its decision to terminate the store’s franchise. With Lupient Chevrolet out of the termination crosshairs, it was time to get the business back to where it really needed to be.
The downside to focusing primarily on survival for so long is that some of the finer points of conducting business can fall by the wayside, at least temporarily. The service department had worked hard to both retain its own customers and bring in refugee Saturn customers, but focus had been lost somewhat when it came to efficiency and, to a degree, customer satisfaction. While in survival mode, the department’s focus was on simply getting customers in and getting them taken care of. He added, “We were … not paying a lot of attention to hours per RO and effective labor rate and all those kinds of things,” said Schmitz. “We were just trying to … survive as a business.”
It had also been difficult during that time to find and keep a service manager. Donovan Brummond stepped into the role in early 2011. Schmitz had worked previously with Brummond, who served as service manager at another Lupient GM store. Schmitz credited him with much of the service department’s improvement in performance over the last year, including a CSI score that moved from the mid-70s when Brummond first started to over 93 percent.
Regarding the operation of the service department when he started, Brummond observed, “I don’t think they had the opportunity to really tweak and try to get things dialed in because they just were in such a different mode, basically trying to get by.”
To help get the service department back on track, the dealership enlisted the services of DealerPro Training Solutions. Once the dealership was able to put the wind-down behind it, Schmitz said, “It was basically, ‘OK, we know what to do, but now we’ve been away from it for a year. Now we need to relearn it.’ … We hired DealerPro to help us rediscover those processes.”
Brummond said the key to getting things on track has been to make small changes. “We started to make little adjustments—simple things like greeting people as soon as they came through the door,” he explained. That practice in particular is very important to him, he said. It comes down to the idea of simply being a good host. “This is our house, and if you have a guest in your home, you don’t just expect them to wander around your house, you … show them around,” he explained. “When they leave, you walk them out.”
He also combined the responsibilities of the car runners/shuttle drivers so that they now also serve as greeters in the service department. “We have couple people who are designated, but if they’re out doing other things, everybody knows that if [a customer] pulls through the door or walks in, somebody had better head right over and say hi, find out where they need to go and get them there,” he said.
One of the seemingly smaller process tweaks he mentioned is making sure the service department determines the best method of reaching the customer when needed, whether it’s by phone call, text message or email. If the technician encounters something in the course of working on the vehicle and needs to obtain authorization to make a repair, it is important to be able to get in touch with the customer quickly. “I think a lot of service departments make the mistake of … calling and leaving messages and playing phone tag with the customer when you have a technician [waiting on authorization],” Brummond said, adding that it was critical to make certain technicians don’t have a lot of down time. “Your technicians are the people making you money, so having them stand around is an absolute disaster.”
For customers who choose to wait on their vehicles, Brummond decided to invest in a pager system, much like the ones used in casual dining restaurants. He liked the idea of having that option for customers who want to wait on their vehicles at the dealership but don’t want to be confined to the waiting room; they can instead look around the showroom or wander the lot. Brummond said the pager system is more efficient and more pleasant than paging them over a traditional PA system.
"I think a lot of service departments make the mistake of ... calling and leaving messages and playing phone tag with the customer when you have a technician [waiting on authorization] ... Your technicians are the people making you money, so having them stand around is an absolute disaster."
- Donovan Brummond, Service Manager, Lupient Chevrolet
One of the bigger changes in the service department was the customer check-in process. “We do a walk-around [of] the vehicle with them, point out anything that’s an issue … just so we get an overview of the vehicle itself and the customer and know how they feel about the vehicle. You can tell a lot from that little bit of extra time spent with them,” explained Brummond. The customer is then presented with a maintenance menu covering services that are due based on time and mileage such as oil changes, tire rotation, fluid replacement and so on, obtaining the customer’s authorization at that time for the services they want.
In addition to the walk-around and maintenance menu presentation, another process that has helped to boost profits is the mandatory 27-point inspection given to all vehicles at each visit. “It doesn’t matter if [the vehicle] was just here … We do the same inspection on every vehicle, every time, and we get that information back to the customer,” he said. The mandatory inspections have helped to generate more profit in parts. “Obviously … selling more work sells more parts,” he said.
“It’s not rocket science, but it’s amazing what it takes to get everybody to do it and do it consistently,” Brummond observed. To help with that, he set the service advisors up on a pay plan that is sales-oriented. “It’s a bonus structure,” he explained. “They gain a bigger percentage the more that they present and sell.” If the technician does not perform the inspection, the service advisor loses that opportunity to sell, so of course the advisor is going to make certain the technician completes the inspection.
Brummond also tracks individual’s performance daily. “I track basically everything. I have a daily spreadsheet I use,” he said. He looks at technicians’ performance and their percentage of efficiency, while tracking advisors’ performance gets a little more complex and follows things like total labor sales, total parts sales, total ROs, menu and inspection upsells, and more. He provides employees with a daily report on their performance and usually does a monthly analysis on ROs that he goes over with each advisor. “There’s never a question. If you ask any of my guys how they’re doing, they could tell you the dollar to the month, hours per RO, everything right down the list.”
Brummond said their pricing structure has also helped boost service profits. They keep some of the more competitive service and repairs at lower prices, while more technical repairs that require a more skilled technician are charged accordingly. The dealership also has a body shop on site, so when an advisor encounters a cosmetic issue during an inspection, he can get an estimate and sometimes the cosmetic issue can be taken care of at the same time the car is in for repair or maintenance. “Convenience, convenience, convenience, all the time,” he stressed, and said the idea is to “make sure that they’re coming here and only here for everything … It’s our ultimate goal.”
He wants to eventually transition service advisors to using tablet computers for vehicle walk-arounds and electronic maintenance menu and pricing presentation. Brummond favors taking small steps toward a long-term goal, rather than introducing a radical change. “If you’re not prepared for it, it’s almost always a disaster. So we’re trying to make sure we do the little things one at a time.”
Schmitz said the biggest goals for the dealership when it comes to building on its service business are to increase new vehicle sales and convert the 25 to 30 percent of service customers who are orphaned Saturn owners into Chevrolet owners. “What we’re trying to do is sell more Chevys in order to build up that service business again,” said Schmitz. “It takes sometimes two or three years of ownership to get them to the point where they’re buying maintenance again … This was the whole reason, going back to that wind-down, why we felt it was so important to be selling as many [nearly] new Chevrolets as we could so that when we came out of the wind-down we wouldn’t be so far behind the eight-ball.”
Brummond said Schmitz, the GM, is “exceptional” at managing used cars and knows the business well. “He basically turned the new cars into the used-car business [during the wind-down] … and was able to turn sales and … retained a lot of customers in doing so.” In 2011, the dealership sold 985 new Chevrolets, which Brummond said will “obviously help us back here.”
Vol. 9, Issue 4