“NADA shows the national average for service absorption last year was about 56 percent. With that being said, every dealer and fixed ops manager should make it their mission to move aggressively toward achieving 100 percent absorption. Now is the time to start thinking big!” — Don Reed, CEO, DealerPRO Training
Develop Your Strategy
Let’s look at some strategies that will enable all of you to achieve big. Our focus will be on the retail service customer since that is the greatest opportunity for increasing gross profit.
It all begins with your perception of how the service and parts departments should be structured and managed. Do you have a culture of administration or a culture of sales?
- Do you employ service writers (administrative clerks) or service advisors (salespeople)?
- Do you have a high percentage of 1-item repair orders (administration) or a low percentage of 15 percent or less (sales)?
- Are you experiencing a declining customer pay repair order count (administration) or is your customer base expanding (sales)?
- Is your CSI rating stagnant (administration) or improving (sales)?
- Is this starting to make any sense yet?
To reach the goal of 100-percent absorption, a fixed operations director must be a good sales manager and employ many of the same management strategies used in the front end by the general sales manager, new car nanager and used car manager. To manage effectively, we must identify the performance metrics that guide successful sales operations as well as service operations. Here is a comparison of these metrics for both departments:
|General Sales Manager||Fixed Ops Director|
|N & U Gross Per Retail Unit||Hours Per Repair Order|
|Salesperson’s Closing Ratio||Service Advisor’s Closing Ratio|
|N & U Inventory Turns||Parts Inventory Turns|
|N & U Days Supply||Technician Parts Fill Rate|
|F&I Turnover Ratio||Technician Inspection Ratio|
|F&I Finance Penetration||Advisor Menu Penetration|
|F&I Gross Per Retail Unit||Dollar Sales Per Repair Order|
|F&I EC Penetration||Labor & Parts Margin|
What Should You Do?
Every single one of these metrics requires some form of sales management for both managers. Most dealers do a fine job of supporting and evaluating the performance of their sales management team and holding them accountable for their results. However, when it comes to doing the same for the fixed operations team, there seems to be a different set of standards, usually attributed to a lack of accountability.
So how about you making the commitment right now to start measuring the performance metrics for your service sales team? Get out of that administrative chair, get on your feet and focus your efforts on managing service sales. Take a walk through the shop — show those technicians that you care about he inspection process. Do not tolerate “pencil whipping” the inspection process. Your technicians’ goal is to ensure that each and every customer leaves your dealership driving a safe and reliable vehicle.
Start each day with a 15-minute sales meeting with your service advisors, reviewing yesterday’s performance and today’s plan for reaching your goals on HPRO, profit margin on parts and labor, up sell penetrations, closing ratios, etc. Next how about 30 minutes in the service drive observing the customer reception process and maybe shake a few hands with a “Welcome to our dealership. How can I assist you today?” Evaluate and coach your advisors on their walk-arounds, their menu presentations and their customer communication skills.
At the end of the day how about you spend some time during the active delivery to observe your advisors’ review of the “Three C’s” with each customer? Ensure that the customers’ vehicles are always brought to them versus just sending them out the door to fend for themselves. Make sure those advisors schedule the customers’ next appointments before they leave this one. Maybe shaking a few hands with a “thank you for your business” would be a great way to end your day. Showing your employees that you are a “proactive leader” will instill a sense of confidence in them as well as a sense of accountability for their individual performance. Your customers will experience the WOW factor!
Each and every day in fixed operations you must have a focus on managing sales opportunities that will benefit your customers. This of course, will increase gross profits and results in more net profit. Technicians must always be looking for sales opportunities by performing a complete and thorough vehicle health check with every RO. Service advisors must always walk around the customers’ vehicles looking for sales opportunities and review the vehicle’s repair and maintenance history for other opportunities. Both of these processes result in recommendations for proper maintenance and/or repairs. It’s important to note that we never want anyone trying to sell any customer anything that they don’t need.
Fixed operations directors should however, ensure that every customer is properly advised of their vehicles’ repair and maintenance needs. Remember it’s the customer’s vehicle and it’s their money so let them decide what they think is best for them and make sure your advisors are not making the decision for them by not presenting all service recommendations or requirements. This has to be your company policy — no exceptions! The same holds true for the sales department, right? When you give customer choices they then have the opportunity to make informed decisions, which ultimately result in more sales.
Now, I am a firm believer that fixed operations directors, service managers, body shop managers and parts managers are hard working individuals and face some tough challenges in our very competitive marketplace. The aftermarket competition currently is reaping over 80 percent of the parts and service industry sales. That sounds like some strong competition to me so don’t you agree it’s time to do something about it?
Establish your sales goals for all departments and outline your plan for implementation. Think big and be bold! Measure everyone’s performance daily.
You must lead/coach/train your fixed operations team to remain focused on their goals and processes for achieving them so they can all become top performers. Most importantly, do not tolerate underachievers. You must replace them with salespeople not administrators. 100 percent service absorption is now coming into view, it might take a year or two or three but you will get there. It all starts by developing a fixed ops sales team.