There are 7 Measurable and Improvable Key Performance Indicators that every Fixed Operations Director/Service Manager needs to be aware of.
They are RO Count, HPRO, Labor Gross Margin, Parts Gross Margin, EFL (Effective Labor Rate), Total Gross Profit and Total Net Profit.
When you have a constant update on these measurables and a mandate to improve their numbers you can have a really impressive Financial Statement at the end of the month.
Think about what a 10% increase in RO Count would mean to your Advisors, or a .3 increase in HPRO. What would that translate to in real dollars and cents at the end of the month?
If you are the average store in America and you are at the average labor rate you can expect to have a $5400.00 increase in Gross Sales per Advisor for every 10% increase in RO count. Is that a number to get your attention?
How about a .3 increase in HPRO? That equates to an additional $10,800.00 in Gross Sales per Advisor. Can you see why that would be an important measurable?
How about the Gross Profit Margins? If you decrease unauthorized discounts by just 10% in your store you can expect to have a $1600.00 per Advisor recapture of Lost Profit. (or more)
Effective Labor Rate is not only a matter of proper Labor Rate billing it also a direct reflection of unauthorized discounts as well.
And finally, if you are working your numbers, and want an increase in RO Count, HPRO, EFL, Labor and Parts Gross to translate into higher overall Gross Profit, all you have to do is start measuring daily and start holding personnel accountable for performance.
In theory, it sounds easy, doesn’t it?
In practice, it is one of the most difficult things to do on earth if there is not a clear plan of action backed up by a firm resolve to see it through.
And if you are interested in Net Profit, then you have to know your expenses inside and out. Some easy questions to ask are “What are we spending in Policy Adjustment compared to Marketing?”
So the real question Mr. or Ms. Dealer, are you happy with your Financial Statement and if not, what are you going to do about it?
3 Important Steps to Increase Service Sales
Ooooohhh, you got a shiny new car. I got to admit….you look good in it! It’s all you…the color… the styling….all your friends and neighbors are just gonna scream when you pull it into the driveway…they’ll say things like “Nice ride” or “Man, that is saaaaawwweeeetttt!”
And for the next few months you are constantly looking for excuses to take that baby for a spin! Need a double A for the tv remote??? “I’ll be right back” is the only thing you shout as you rush out the door to a store clear across town just so you can “cruise it baby!” Know what I’m talking about?
You probably are not even thinking about this next question.
“What percentage of your customers take delivery of their new or used vehicle and then, once they get home, remove that maintenance manual so they can review their required and recommended maintenance schedule?”
asks Don Reed of DealerPro Training Solutions.
The answer, not many. The reason is, they are just like you and me. The last thing on our minds is “When will I need to take it in for my first service?”
All this means is that the purchaser, who has become your new potential Service Customer, will need to know what maintenance is required in order to keep their vehicle in top running condition.
If you are in Service there should be a word that just popped into your head. Can you say “Opportunity?
In order to capitalize on your potential ”opportunity” you will need to do at least 3 things.
1st, provide a friendly, inviting environment to have service completed. Some things you will need to have are Friendly People (not fake friendly), clean waiting rooms and restrooms (a real must!), adequately comfortable chairs to sit down (not the plastic high school lunchroom chairs), access to refreshments (does not have to be gourmet) and probably the number one item in the customer’s mind, a promise to meet the customers time expectations.
2nd, have personnel that are not only knowledgeable about the maintenance required, but can explain it in a manner that a customer can understand with a friendly, caring attitude. No condescending, no derogatory or demeaning statements, no expectation of compensation. Just a sincere and caring attitude in favor of the customer.
Lastly, a thorough inspection of the customer vehicle when in for service. Every time. When completed, the customer should receive a copy and complete explanation of what was found and the overall condition of the vehicle. Every time. By doing this the customer and you will begin to build a relationship. One that will lead to continued customer loyalty to the brand and the Dealership and future business for you.
Are there many more things you need to do? Yep. These are just 3 of the most important. There are a lot more steps to take in increasing your service market. If you can accomplish these 1st 3, you’ll be on your way to having increased service business, returning loyal customers and increasing profit.
Now, go get your car and take it for a ride…somewhere there is a double A about to go bad and you are going to need a new one!
And for the next few months you are constantly looking for excuses to take that baby for a spin! Need a double A for the tv remote??? “I’ll be right back” is the only thing you shout as you rush out the door to a store clear across town just so you can “cruise it baby!” Know what I’m talking about?
You probably are not even thinking about this next question.
“What percentage of your customers take delivery of their new or used vehicle and then, once they get home, remove that maintenance manual so they can review their required and recommended maintenance schedule?”
asks Don Reed of DealerPro Training Solutions.
The answer, not many. The reason is, they are just like you and me. The last thing on our minds is “When will I need to take it in for my first service?”
All this means is that the purchaser, who has become your new potential Service Customer, will need to know what maintenance is required in order to keep their vehicle in top running condition.
If you are in Service there should be a word that just popped into your head. Can you say “Opportunity?
In order to capitalize on your potential ”opportunity” you will need to do at least 3 things.
1st, provide a friendly, inviting environment to have service completed. Some things you will need to have are Friendly People (not fake friendly), clean waiting rooms and restrooms (a real must!), adequately comfortable chairs to sit down (not the plastic high school lunchroom chairs), access to refreshments (does not have to be gourmet) and probably the number one item in the customer’s mind, a promise to meet the customers time expectations.
2nd, have personnel that are not only knowledgeable about the maintenance required, but can explain it in a manner that a customer can understand with a friendly, caring attitude. No condescending, no derogatory or demeaning statements, no expectation of compensation. Just a sincere and caring attitude in favor of the customer.
Lastly, a thorough inspection of the customer vehicle when in for service. Every time. When completed, the customer should receive a copy and complete explanation of what was found and the overall condition of the vehicle. Every time. By doing this the customer and you will begin to build a relationship. One that will lead to continued customer loyalty to the brand and the Dealership and future business for you.
Are there many more things you need to do? Yep. These are just 3 of the most important. There are a lot more steps to take in increasing your service market. If you can accomplish these 1st 3, you’ll be on your way to having increased service business, returning loyal customers and increasing profit.
Now, go get your car and take it for a ride…somewhere there is a double A about to go bad and you are going to need a new one!
Menus Can Make a Difference
Most dealers today understand the value of an F&I department, and history shows that this department can be a significant profit center when the right processes are implemented, enabling managers to sell additional products and services to every customer who takes delivery of a new or used vehicle. One of those processes is menu selling.
These menus are designed to offer the customer choices for protecting their vehicle, credit, payment, etc. Most menus will give the customer the opportunity to choose from three or four different options such as Platinum, Gold, Silver or Bronze coverage. We know that if the customer chooses any one of these options, it results in an automatic upsell, which of course means more gross profit in the car deal.
Additionally, the finance producer is usually required to present these menus to 100 percent of your customers with no exceptions! This process breeds consistency and ensures that every customer is treated the same, meaning that each and every customer receives a feature/benefit presentation on all of the products contained in the menu. Starting today, why don’t you install this same process in your service department?
Menus can be just as effective in your service department. Here are five steps to properly implement maintenance menus:
1. Create your own menu
2. Train service advisors how to make a feature/benefit presentation
3. Require this process to be followed with every customer on every visit
4. Measure menu sales for each service advisor
5. Hold managers and advisors accountable for performance
Designing a maintenance menu can be very time consuming if you do it right, but I can assure you the time will be well spent. You can choose to design a paper menu or you might prefer an electronic one. Technology is a wonderful thing when it’s used properly. I prefer the electronic menus, which require nothing more than Internet service.
Electronic menus cost less, allow for more pricing flexibility, are easy to use, offer 100-percent accountability tracking for advisors, are customer-friendly and are available 24/7 for your customers. Research shows that online menus partnered with an online appointment process will generate about 20 percent more in sales per repair order than those written by your advisors. Do the math in your store and you’ll probably see an opportunity to add at least $50 per repair order. The fact is, online customers will go to your online menu and “sell themselves” because 100 percent of the customers are presented the menu when they log in.
All maintenance menus should start with the manufacturer’s requirements and recommendations based on months in service and/or mileage. From there, you must add services for local driving conditions as well as the customer’s own driving habits. For example, the driving conditions in Mesa, Ariz., are not the same as those in Bangor, Maine, and a truck owner towing boats does not have the same driving habits as one hauling a horse trailer in the mountains.
Training your advisors on how to make a feature/benefit presentation starts with taking a plain sheet of paper and drawing a line down the middle of the page. On the left, you should list all of the features outlined in your menu. On the right, list the corresponding benefits of each feature, which are the reasons a customer will say yes to a menu presentation. Remember, your advisors must understand that customers only buy benefits; they don’t buy features. An example would be a tire rotation. Nobody wants to buy a tire rotation (a feature), but they do want to have longer-lasting tires to save money (a benefit). Electronic menus also have full-color video feature/benefit presentations that enable the customer to actually see the benefits as well as hear about them.
Now, you must require every advisor to follow this process every day with each customer they greet, both warranty and customer-pay. This is not an option for your finance producers, and it should not be an option for your service advisors. You will never get 50 percent service contract penetration in F&I by offering contracts to only those customers who might buy them, right? It’s no different in service.
You can’t manage what you don’t measure, so it’s imperative that you keep a record of each advisor’s sales performance. I’m talking about sales per RO, hours per RO, profit margins on parts and labor, effective labor rate, closing ratio on menu sales, and closing ratio on inspection upsells. You’re most likely measuring every measurable statistic in your sales and F&I departments every day, so start doing the same for your service and parts departments. Then, you will have complete accountability for their individual performance.
These five steps outlined in this article will boost your bottom line starting with day one. Your customers will become trained on how to pay attention to preventative maintenance, which will give them a much more pleasurable ownership experience and save them money over time. If you doubt me, just go visit any aftermarket service facility and observe their processes since they now own 84 percent of the parts and service business in America.
Don Reed, CEO DealerPro Training Solutions
These menus are designed to offer the customer choices for protecting their vehicle, credit, payment, etc. Most menus will give the customer the opportunity to choose from three or four different options such as Platinum, Gold, Silver or Bronze coverage. We know that if the customer chooses any one of these options, it results in an automatic upsell, which of course means more gross profit in the car deal.
Additionally, the finance producer is usually required to present these menus to 100 percent of your customers with no exceptions! This process breeds consistency and ensures that every customer is treated the same, meaning that each and every customer receives a feature/benefit presentation on all of the products contained in the menu. Starting today, why don’t you install this same process in your service department?
Menus can be just as effective in your service department. Here are five steps to properly implement maintenance menus:
1. Create your own menu
2. Train service advisors how to make a feature/benefit presentation
3. Require this process to be followed with every customer on every visit
4. Measure menu sales for each service advisor
5. Hold managers and advisors accountable for performance
Designing a maintenance menu can be very time consuming if you do it right, but I can assure you the time will be well spent. You can choose to design a paper menu or you might prefer an electronic one. Technology is a wonderful thing when it’s used properly. I prefer the electronic menus, which require nothing more than Internet service.
Electronic menus cost less, allow for more pricing flexibility, are easy to use, offer 100-percent accountability tracking for advisors, are customer-friendly and are available 24/7 for your customers. Research shows that online menus partnered with an online appointment process will generate about 20 percent more in sales per repair order than those written by your advisors. Do the math in your store and you’ll probably see an opportunity to add at least $50 per repair order. The fact is, online customers will go to your online menu and “sell themselves” because 100 percent of the customers are presented the menu when they log in.
All maintenance menus should start with the manufacturer’s requirements and recommendations based on months in service and/or mileage. From there, you must add services for local driving conditions as well as the customer’s own driving habits. For example, the driving conditions in Mesa, Ariz., are not the same as those in Bangor, Maine, and a truck owner towing boats does not have the same driving habits as one hauling a horse trailer in the mountains.
Training your advisors on how to make a feature/benefit presentation starts with taking a plain sheet of paper and drawing a line down the middle of the page. On the left, you should list all of the features outlined in your menu. On the right, list the corresponding benefits of each feature, which are the reasons a customer will say yes to a menu presentation. Remember, your advisors must understand that customers only buy benefits; they don’t buy features. An example would be a tire rotation. Nobody wants to buy a tire rotation (a feature), but they do want to have longer-lasting tires to save money (a benefit). Electronic menus also have full-color video feature/benefit presentations that enable the customer to actually see the benefits as well as hear about them.
Now, you must require every advisor to follow this process every day with each customer they greet, both warranty and customer-pay. This is not an option for your finance producers, and it should not be an option for your service advisors. You will never get 50 percent service contract penetration in F&I by offering contracts to only those customers who might buy them, right? It’s no different in service.
You can’t manage what you don’t measure, so it’s imperative that you keep a record of each advisor’s sales performance. I’m talking about sales per RO, hours per RO, profit margins on parts and labor, effective labor rate, closing ratio on menu sales, and closing ratio on inspection upsells. You’re most likely measuring every measurable statistic in your sales and F&I departments every day, so start doing the same for your service and parts departments. Then, you will have complete accountability for their individual performance.
These five steps outlined in this article will boost your bottom line starting with day one. Your customers will become trained on how to pay attention to preventative maintenance, which will give them a much more pleasurable ownership experience and save them money over time. If you doubt me, just go visit any aftermarket service facility and observe their processes since they now own 84 percent of the parts and service business in America.
Don Reed, CEO DealerPro Training Solutions
The 3 MMMs of Change
Ok. You are practicing the 3 Ws of Leadership and not getting it done.
Wanting.
Waiting.
Wishing.
Most definitely the 3 Worst strategies in Leadership when it comes to changing behavior.
If you want to make changes in behavior you need to turn your W into a M.
Measure
Monitor
Manage
The single most important element to effecting change is to Measure what it is you are trying to change. If you are trying to change a Service Advisors bad Sales presentation, you can’t go up to them and say “You suck and you need to get better” and expect to get a new and improved Service Advisor.
However, if you approach the same Advisor and you say “Hey there Sam, I have been measuring (key word here) your performance over the past week and I noticed that you presented 21 ASRs (Additional Service Requests) and you closed 3 of them. I have an idea here that will help you make more Sales” you might get a different response and begin to make a change in their behavior.
When you Measure what you are expecting (a take on the “You must Inspect what you Expect) you not only understand what needs to change, you also have a tool to gauge how much change is needed and you can determine when you have achieved a marked level of improvement.
This is when you begin to Monitor their efforts. Monitoring is exactly what it sounds like. You will observe, inspect and counsel based on the Measurements you have taken from the previous days/weeks/months. Monitoring is checking up.
And when people feel like there is someone checking up on them and their performance they perform better.
Which brings us to Manage. We don’t Manage people, we Lead people. We Manage things.
And the number one thing you will want to Manage is the results the personnel are achieving followed by the Actions they are taking to achieve those results or the lack thereof.
This is why daily Monitoring is so important. When you are checking up every day on what you are expecting you can easily see what Actions are being taken by your personnel.
It’s these Actions that need to be Managed.
Don’t like the results from Menu presentations, check what Actions the Advisors are taking in the Service Drive during the Writeup process. Not happy with the Gross Profit Margins, take a look at how many Discount Actions are taking place.
Most times it is not one single Action that requires adjustment. Almost always you will find several small Action steps that add up to one big Negative Result.
Take Discounts from the above statement. Many times Discounts can be traced back to a particular cause, like poor Sales Training for example.
Maybe the reason Silly Sam the Advisor gives so many Discounts is because he has never been Trained how to make a proper Sales presentation. And maybe he has never been Trained on the proper way to prepare an estimate. And maybe he has never been Trained on the proper way to prioritize his time.
Sam then takes several small Action steps. Because he does not not prioritize his time, he rarely has enough time to prepare for making a proper ASR so he throws together an estimate as he is dialing the phone and begins to mentally Discount the estimate so that he can make the Sale. Small Action steps that add up to one big Negative Result.
So, his answer to making more Sales is to give more Discounts. Basically, he has been performing in a manner he believes is the correct way to make a Sales presentation. He is in a situation called “Un-Managed Actions”.
Manage the Results you wish to Achieve.
Use the 3 Ms for making a change for the better in your Service Department.
Wanting.
Waiting.
Wishing.
Most definitely the 3 Worst strategies in Leadership when it comes to changing behavior.
If you want to make changes in behavior you need to turn your W into a M.
Measure
Monitor
Manage
The single most important element to effecting change is to Measure what it is you are trying to change. If you are trying to change a Service Advisors bad Sales presentation, you can’t go up to them and say “You suck and you need to get better” and expect to get a new and improved Service Advisor.
However, if you approach the same Advisor and you say “Hey there Sam, I have been measuring (key word here) your performance over the past week and I noticed that you presented 21 ASRs (Additional Service Requests) and you closed 3 of them. I have an idea here that will help you make more Sales” you might get a different response and begin to make a change in their behavior.
When you Measure what you are expecting (a take on the “You must Inspect what you Expect) you not only understand what needs to change, you also have a tool to gauge how much change is needed and you can determine when you have achieved a marked level of improvement.
This is when you begin to Monitor their efforts. Monitoring is exactly what it sounds like. You will observe, inspect and counsel based on the Measurements you have taken from the previous days/weeks/months. Monitoring is checking up.
And when people feel like there is someone checking up on them and their performance they perform better.
Which brings us to Manage. We don’t Manage people, we Lead people. We Manage things.
And the number one thing you will want to Manage is the results the personnel are achieving followed by the Actions they are taking to achieve those results or the lack thereof.
This is why daily Monitoring is so important. When you are checking up every day on what you are expecting you can easily see what Actions are being taken by your personnel.
It’s these Actions that need to be Managed.
Don’t like the results from Menu presentations, check what Actions the Advisors are taking in the Service Drive during the Writeup process. Not happy with the Gross Profit Margins, take a look at how many Discount Actions are taking place.
Most times it is not one single Action that requires adjustment. Almost always you will find several small Action steps that add up to one big Negative Result.
Take Discounts from the above statement. Many times Discounts can be traced back to a particular cause, like poor Sales Training for example.
Maybe the reason Silly Sam the Advisor gives so many Discounts is because he has never been Trained how to make a proper Sales presentation. And maybe he has never been Trained on the proper way to prepare an estimate. And maybe he has never been Trained on the proper way to prioritize his time.
Sam then takes several small Action steps. Because he does not not prioritize his time, he rarely has enough time to prepare for making a proper ASR so he throws together an estimate as he is dialing the phone and begins to mentally Discount the estimate so that he can make the Sale. Small Action steps that add up to one big Negative Result.
So, his answer to making more Sales is to give more Discounts. Basically, he has been performing in a manner he believes is the correct way to make a Sales presentation. He is in a situation called “Un-Managed Actions”.
Manage the Results you wish to Achieve.
Use the 3 Ms for making a change for the better in your Service Department.
Automotive Dealer Associations Looking for Speakers
If you are an Automotive Dealer Association President or Manager and you need a Speaker at your next Dealer meeting, we need to connect.
Don Reed has been a Top 10 NADA Convention Speaker 4 years running. He just completed a Dealers Association meeting for the Detroit Auto Dealers Association where he received stellar reviews.
21 of the attendees completed an evaluation with 20 of them rating the Workshop Content as “Excellent” the highest rating possible. And 21 out of 21 rated Dons Presentation and Subject Knowledge as “Excellent” as well.
You can find a lot of speakers who know something about a Dealership.
It is a lot more difficult to find someone who not only knows the Dealership, they can tell you how to make it Profitable. Consistently.
Send me an email. rheywood@dealerprotraining.com
Don Reed has been a Top 10 NADA Convention Speaker 4 years running. He just completed a Dealers Association meeting for the Detroit Auto Dealers Association where he received stellar reviews.
21 of the attendees completed an evaluation with 20 of them rating the Workshop Content as “Excellent” the highest rating possible. And 21 out of 21 rated Dons Presentation and Subject Knowledge as “Excellent” as well.
You can find a lot of speakers who know something about a Dealership.
It is a lot more difficult to find someone who not only knows the Dealership, they can tell you how to make it Profitable. Consistently.
Send me an email. rheywood@dealerprotraining.com
How Many Dealerships Would Still Be In Business If They Had 100% Service Absorption?
ALL OF THEM!
Join the 200K Club!
DealerPro Training Solutions
THE $200K CLUB
Join the $200K Club … and gain an extra $200,000
Service Gross Profit—Guaranteed!
MORE IS BETTER!
Q: How many thousands of dealers would still be in business if they achieved 100% service absorption?
A: All of them.
Think about it. Are you leaving service dollars on the table?
The Service Gold Mine
Good times or bad, when you keep customers coming back to your dealership for service, you can cover 100% (or more) of your dealership’s overhead. When your service department absorbs all your overhead, that’s 100% service absorption. Some dealerships can even exceed this ideal.
Join the $200K Club
And gain an extra $200,000 Service Gross Profit—Guaranteed!
Serious situations call for serious solutions—DealerPro Training Solutions. So if you are serious about success and having your Service Department pay all your Dealership’s overhead, contact me today at rheywood@dealerprotraining.com
WHY THE DEALERPRO $200K CLUB?
Because a $200,000 increase in Service Department Gross Profit is a very attainable goal. In fact, it is a goal that practically every DealerPro dealership achieves, usually within about a year.
We started the Club to recognize that achievement … and to make it clear to every dealer that there are rich rewards to be had for joining the DealerPro $200K Club.
Training and Gaining
When you join the DealerPro $200K Club, it is an active membership. Every member of your Service team becomes fully engaged in making more money for you.
Fact: Each trained Service Advisor can add the equivalent of 22 more new car sales to your bottom line every month.
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