3 Ways to Boost Upsell and Compensation
By improving the customer experience, creating a spiff program, and financing repairs, you will create new opportunities to increase your service revenue — and your advisors’ paychecks.
September 2016, Auto Dealer Today - Feature
When describing the service advisor role, former dealership GM turned consultant John Napoleon gets right to the point: “The position starts with its name, ‘service,’ and the person in that position must understand what service means. In my opinion, it’s the toughest job in the dealership.”
Even good advisors can get better and generate more income for themselves and the dealership when provided the motivation and tools to do so. The right motivation includes advisor communications and observation and presentation skills development. The right tools include upsell spiff programs and on-the-spot credit financing for service estimates. In combination, they can help advisors boost their key performance indicators (KPIs).
It should come as no surprise that some of the brightest minds advising dealers today have turned their attention to the service department. Auto Dealer Today spoke with several such experts, and with their help, let’s take a look at three ways you can equip your service advisors for success.
1. Improve the Customer Experience.
“Customer satisfaction must always be another key goal and advisor measurement,” Napoleon notes. “While that should be a given, without great CSI, the other KPIs do not matter. When we look at the KPIs for advisors, they are hours per repair order, effective labor rate and how well the advisor is doing at holding door rate versus discounting to sell the job.”
Napoleon lists the rule-of-thumb advisor KPIs thusly:
- 1.7 hours per repair order, including “quick lane” (this is a blended number),
- 2.5 hours per repair order, excluding “quick lane” (for advisors who do not write oil changes), and
- Effective labor rate equaling 90% of door rate.
“Dealers and service managers evaluate their advisors on those metrics,” Napoleon says. “But the question is always, ‘How do we get them there?’”
The answer? By following the basics, which include a high percentage of walkarounds, multipoint inspections, and a complete and confident explanation of mechanical inspection recommendations to the customer.
However, as Napoleon notes, “Too often, inspection reports are stapled to the service paperwork and not shown to the customer before the work is done. That can shortchange the customer and dealership because the customer might have approved additional work had the advisor not ‘hidden’ the report.”
2. Create a Spiff Program.
Advisors practicing the basics are more likely to meet their KPIs. Given the realities of the job, any help to close and generate more business is useful.
The low-hanging fruit is tire sales. Replacement tires sales drive around-the-wheel profits — brake work, chassis services, alignments — and help retain more of the 93% of customers who would otherwise defect to buy tires if they aren’t offered the opportunity at your dealership.
“It becomes clearly evident that, if you can keep customers from leaving by owning the tire sale, you will likely sell more vehicles and spend less on advertising to bring defected customers back,” says David Boyle, COO of Tire Profits. “And, as a side benefit, you enjoy the additional service revenue.”
Adding a spiff program (or “incentive funds”) to a sales program can put extra income in your advisors’ pockets. When applied to specific product sales like tires, for instance, spiff programs can encourage more selling effort on those products. Whether the incentive monies are from an OEM, vendors or internal, their use drives sales and sales revenue through targeting, which rewards focus.
“A spiff program works when used in tandem with an advertising campaign. A tire sales advertising campaign, for instance, pulls tire-buying customers into the dealership,” says Sean Ugrin, founder and CEO of Spiffit. “It incentivizes advisors to sell tires and helps close more opportunities.”
Noting that greater campaign conversion results whenever a dealer combines a “push” (the spiff) with the “pull” (your marketing), Ugrin offers a case study: In February, a Toyota dealer with whom he works sold 81 tires. The addition of an automated, recurring 30-day spiff program in March increased sales to the point where the same dealer sold 304 tires in June — a 275% increase in volume.
“We see even greater results when a spiff is used to complement a tire and alignment inspection system. Typically, there is a lift in sales when a system is installed, followed by a sales plateau,” Ugrin says. “A recurring spiff provides the necessary motivation for service advisors to consistently optimize the use of inspection systems.”
The result? A second lift in sales volume and a shortened payback period on the system investment.
3. Finance Service and Repairs.
To capture service recommendations that exceed the customer’s budget, there are companies like Confident Financial Solutions (CFS) and experts like the company’s chief revenue officer, Tim Clay. CFS offers an auto-repair financing program advisors can offer customers who may lack the funds they need to complete or begin needed repairs.
The service funds applicants on the spot, and Clay says he finances about half of all applicants, including those with low-to-mid-500 credit scores, breaking repair costs into more affordable monthly payments. The average loan amount financed by the company is $1,500, though approval for up to $7,500 is possible. Eighty-three percent of loans are financed for more than the repair cost, leaving additional funds available for future work.
“A customer comes into the shop needing brakes, but the inspection shows an alignment and perhaps other work, including warranty, and suddenly the customer is faced with not just a $200 brake job but more than $750 in recommended work,” Clay says. “That’s a hard bump for advisors to sell, but customers more quickly buy those additional service recommendations when the advisor can break them down to $37 a month, for instance.”
Clay notes CFS provides a favorable alternative to credit card financing, resulting in increased credit approvals and immediate access to capital for auto service customers. He says the average RO financed by CFS is nearly five times the customer pay average, as reported by the National Automobile Dealers Association (NADA), which is just under $300. Clay adds that many dealerships report a 20% or greater increase in monthly service revenues as a result of signing up for the company’s service.
Advisors have a tough job. They have to juggle demands, personalities and the clock, all the while attempting to engage customers in a way that makes them advocates of your dealership. Put the right people in those slots. Listen to the personnel recommendations of your service manager. Train them well, equip them with tools for success, and watch them grow your business.
Jim Leman has been writing about retail dealership operations, challenges and solutions since 1992. Reach him at [email protected].