Last year, NADA stated the national average for service absorption was at 56 percent. That being said, I would hope every dealer and fixed ops manager would make it their mission in the coming year to put forward a plan to move aggressively toward achieving 100 percent absorption. In other words, let’s start thinking big.
Let’s look at some strategies that will enable you to do just that.
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? For example, do you employ service writers (a.k.a. administrative clerks) or service advisors (a.k.a. salespeople)? Do you have a high percentage of one-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 sense?
To aggressively work toward that worthy 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 manager and used car manager. Since one can’t effectively manage what one does not measure, 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:
Every single one of these metrics requires some form of sales management for both managers. In working with many dealers across the country I have found that most dealers do a fine job of devoting their time, resources and capital to support and evaluate the performance of their sales management team and hold them accountable for their results; however, far too often 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 service directors make the commitment right now to start measuring the performance metrics for your sales team? Get out of that administrative chair, get on your feet and focus your efforts on managing sales. Take a walk through the shop and observe a technician performing a 27-point courtesy inspection of your customer’s vehicle. Show those technicians that you care and thereby reinforce the notion that the inspection process is important to you and your customers. Do not tolerate “pencil whipping” the inspection process. Your technicians’ goal is to ensure every customer leaves your dealership driving a safe and reliable vehicle.
Start your day with a brief (15 minutes or less) daily 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 and so on. Next, spend 30 minutes or so in the service drive observing the customer reception process and maybe shake a few hands with a “Welcome to our dealership! I’m your service director — 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, spend some time during the active delivery to observe your advisors’ review of the “Three C’s” with each customer and ensure that the customer’s vehicle is always brought to them, versus just sending them out the door to find it for themselves. Make sure those advisors are, in fact, scheduling the customer’s next appointment before they leave this one. 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, and your customers will experience the “WOW” factor.
Each 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 result 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 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 their technician’s recommendations and/or maintenance requirements. This must be your company policy — no exceptions! The same holds true for the sales department, right? When you give customer choices, they can make informed decisions, which ultimately results 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 more than 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, be bold and measure everyone’s performance daily. You must lead, coach and train your fixed operations team to remain focused on achieving their goals and processes so they can all become top performers. Most important, do not tolerate underachievers. You must replace administrators now with salespeople. Your goal of 100 percent service absorption is now coming into view. It might take a year or two, but you will get there. It all starts by becoming a fixed ops sales team.