While the industry is on track to sell 17 million new vehicles this year, the aftermarket continues to hold an 80-percent share of the service market. What would happen to that if we start putting the customer first, train our staffs and increase our service absorption?
Recently, one of our fixed operations specialists spent two days at a dealership completing a complimentary performance evaluation of their service and parts operations, at the request of the dealer. Once the evaluation was complete, a review meeting was held with the dealer and his management team to identify their “opportunities for improvement” in their fixed operations department. This included outlining the potential for improved processes, strategies, compensation plans, marketing and management practices.
We explained what areas needed attention in order to improve employee productivity and overall departmental performance, and since we are a fixed operations training company, presented a customized training plan for the dealership’s fixed operations team.
As with any good sales presentation, we closed the meeting by outlining the dealer’s training investment, and the dealer responded with:
“Thank you very much but our service operations are not broken. We’re doing just fine and don’t really need any help. We can do this ourselves and don’t need to spend the money for training.”
Take a look at this dealer’s fixed operations performance (see chart), compared to industry guides and consider how you might reply to this dealer.
Well, with this kind of short-sighted thinking, one might respond: “If this operation ain’t broke … break it!”
Wait, it gets worse. This service department is closed on Saturday. Could this have something to do with a 15-percent decline in customer count? Or maybe their below-average CSI is the result of being closed on Saturday? And the obvious question is: If a dealer thinks they can make the necessary changes to improve performance and profitability by themselves, why have they not already done so? What are you waiting for?
Why are your fixed ops employees not on performance-based pay plans that compensate to motivate? Why are your service advisors failing to present maintenance menus that educate and train your customers on how to properly service their vehicles? Are they advising your customers of necessary and recommended repairs that ensure your customers are driving a safe and reliable vehicle? Why are there hourly technicians producing 20 hours or less per 40-hour work week? I’m guessing you’re getting my point by now.
When you hear the objection, “We don’t need to spend the money for training,” when it comes to investing in a fixed ops team, you can’t help but recognize the money being spent to move new and used cars.
For example, the average dealer in America, according to NADA Market Data 2017, is spending about $17,000 for the average used car sold so they can make a gross profit of about $2,000 PRU, and would absolutely love to make this sale 100 times a month or more. NADA Data also shows the average dealer is spending more than $600 PRU in advertising to sell a car.
For those of you who don’t see the value in investing in training for your fixed operations team, consider this: The absence of professional training in the dealership outlined previously is costing this dealer $57,000 per month, for a total of $684,000 a year in added customer pay parts and labor gross profits. That’s the equivalent of selling an additional 342 used cars at $2,000 PRU.
In addition, if the service advisors, the BDC staff, the parts counter team and the fixed operations management team were properly trained on effective customer communication skills that exceed the customer’s expectations on each and every visit, they might just have a positive impact on their current underperforming CSI scores.
These scores have a lasting impact on owner retention, and every survey — from manufacturers, J.D. Power or NADA — will tell you that over 75 percent of those service customers who have all their service work performed at their new car dealership will buy another vehicle from that dealership. Sounds like a big pay raise for the dealer.
The dealer used in my example is a nice guy. He has a good fixed operations team. So what is he lacking? The answer is commitment. Commitment to processes, protocols and accountability for performance. He must first get committed to make the necessary changes if he expects his employees to be willing to change.
In our current market, we’re on track to sell about 17 million new vehicles again! This is great news, but we all know this sales pace cannot last forever. Do you remember 2008? Don’t let the good news happening in your sales department become bad news for your fixed operations by neglecting the back half of your store.
How about we focus on increasing our service absorption to recession-proof our dealerships in preparation for the next downturn in vehicle sales? How about we train our advisors how to always put the customer first all day every day? How about we clean up, paint, remodel our customer reception area to match the showroom?
Fixed operations account for about half of a dealer’s net profits so how about you dealers and general managers devote half of your time and efforts in support of your fixed operations team? Have your salespeople had any form of sales and communication skills training? Have your F&I managers had any form of sales and communication skills training? Have your sales managers had any training in desking deals, appraising vehicles and managing a sales team? I’m guessing you “spent the money.”
Wouldn’t you agree your fixed operations team deserves to be trained as well? Will a properly trained employee outperform an untrained one? If you own or are managing a dealership that “ain’t broke,” I challenge you to “break it” and start getting the return on your investment that you deserve.