What would be the one word to describe what a Service Department needs these days to compete?
There are so many to choose from. However, the one word that keeps coming up when I visit Dealerships across the country is adaptability.
The Dealerships that are doing well, adapt to changing market conditions and Customer demands.
Even if this is your first day in a Dealership, you know that the ability to adapt is the key to Exceeding Expectations.
The dictionary tells us that it means to “adjust to new circumstances.” Boy, if that is not the definition or guiding principle of the Service Department these days, I don’t know what is.
If you think about it, the Service Department is the only “gray” area in the Dealership. Everything else is black and white.
We have the part in stock or we don’t. We have the car on the lot or we don't. We can fund you or we can't. We are open extended hours or we are not.
In the Service Department, they don’t have those hard and fast rules because Customers and the situations that Service Advisors deal with are seldom written in stone. It’s more like an “etchasketch.”
This requires a person that is adaptable, flexible and understanding with the backing of an organization that is adaptable, flexible and understanding. Having either without the other won’t work.
And if you have Service Advisors who do not understand this concept or cannot adapt to a Customers Expectations, you will have problems.
When you have staff that are rigid and inflexible, you end up with Customers getting service that they would describe one of several ways. They say things like “Functional, yet cold” or “They helped me but they were somewhat unfriendly” or “I had to yell at them to get them to listen to me” and lastly “What the %$&^ is wrong with you guys?”
On the flip side, if you have personnel that are really trying to work within your Dealership system and are not “Empowered with Authority” you end up with comments like “I have used you guys in the past and I’ll continue, but not as much as I used to” or “I don’t know if I’ll come back, even though your Advisors are great” and “They were ok, but if I find someone else that is closer or cheaper, I’m going to go with them” and lastly “What the *&^% is wrong with you guys? Don't you want my business?”
The Service Department that has “Empowered with Authority” all of their Advisors will consistently outperform and outsell any other Dealer that has not taken that step.
This means Advisors are Trained to be adaptable and flexible and they do what is in the Best Interests of the Customer.
This leads to a Customer experience that can only be described as “Exceptional at Exceeding Expectations” and "spontaneously helpful." And of course results in unsolicited referrals and an increase in business.
Learn to adapt, be flexible, change as needed and Empower with Authority and your Customers will respond with feverish repurchase loyalty and unsolicited testimonials.
Showing posts with label service absorption. Show all posts
Showing posts with label service absorption. Show all posts
Smothered by the Rut Blanket
What would a Professional Service Advisor do?
Professional Service Advisors are prepared for the day ahead of them and don’t get caught in the “why bother because everyday is the same” rut.
Now, why is this so important? I mean, c’mon, isn’t every day just the same?
Open the door, reset the alarm, start the coffee, turn on the computers, check for night drops, check your email, flip through the stack of carry-overs, etc, etc, etc.
Sounds like the “same ol’, same ol’” to me. No change required. No need to do anything different. You can live your life like a sheeple. Lots of companies need sheeples.
If that is the kind of career and the kind of earnings you want, then go for it. It is easy to be easy. You can let your whole life creep along this way, no problem.
What you have to realize is that it is not the daily routine that gets you; it’s the thinking behind the daily routine. If the day before you looks like and feels just like yesterday, then it must be the same.
And that’s when the rut gets you. Ruts do not grab you suddenly from behind like a mugger on a city street. It is not a full front assault. Because if getting into a rut was like that, we would all take precautions and avoid it.
No, getting into a rut or “stinkin’ thinkin’” is more like being smothered by a soft layer of blankets, one blanket at a time. When you get that first blanket, it’s all warm and cozy (just like your daily routine) and it feels good. Who wouldn’t feel secure in a snugly little blanket?
Then the next blanket gets piled on and you feel even more warm and cozy, just like Grandmas house at night in the winter after a cup of hot chocolate. Doesn’t that sound nice?
And every day another soft blanket gets piled on and before you know it, you are being crushed by a pile of blankets a thousand feet tall. You can’t breathe, you can’t move, in fact, you can’t even get out from under that pile of blankets. It’s so freaking heavy it squeezes the life out of you like hot cheeze wiz. Gruesomely gooey.
Blankets don’t seem so warm and cozy now, do they? Ruts are like that. Softly smothering you while wrapping you up with a false sense of security. And nothing rips through that blanket like a bucket of cold water than the Dealership getting sold, or the manager getting fired. Where is your blanket now Linus?
Earl Nightingale said “A rut is nothing more than a grave with the ends kicked out.”
We all want our days to have some routine and normalcy. It is what makes the world go around. What we don’t want to do is assume that everyday will be the same as the last one and start assuming that our Professional life and career growth stops merely because we have figured out a way to stay “warm and cozy.”
Professional Service Advisors get prepared for their day and their careers because they know that every Customer is different and it is better to be prepared to Take Action that to have Action Taken. And they take that into their Professional life as well. They don’t stand around and wait for the manager to say “Hey, have you completed training this year?” They are constantly taking the time to become better at their profession and better prepared than their competition.
Here is another way to think about it. If this does not describe you, then it’s the Advisor standing next to you getting prepared. Your immediate competition.
Here are 10 ways you can get ready for your day, your career and your Professional life. Get out of your rut.
1.Read more. Read anything that contributes to your abilities, your skill sets and education. You own those 3 free and clear. Making them better pays dividends to you 10 times what you put into it.
2.Practice your skill sets frequently. Role play, write a new greeting, new script, anything that will stimulate your mind and get you thinking about how you can do something better or different for your Customer. This will lead to a sense of satisfaction and just as important, more income.
3.Start a focus group in your workplace with other Advisors. You don’t need permission from anyone, JUST DO IT! Believe it or not, there are other Advisors in your store that have issues just like you. Waiting for someone to help is not going to get it done. Pick a subject that needs attention in your Service Drive, get the other Advisors together and get started on taking care of it.
4.Mentor someone at work. Teaching them the right way to do things will keep you on the right track, stimulate new thinking and may, just maybe, lead you to a new way of doing business.
5.Join a Professional Organization or Association. This will let you connect with others in the car biz while allowing you to gain knowledge and skills. Google it.
6.Join Toastmasters. If you are a true Service Professional and have not taken advantage of learning how to speak on your feet (for nearly nothing by the way) how Professional can you be?
7.Take a class. Writing, Speaking, Computer etc… Get new knowledge!
8.Teach a class at work. Teaching and Mentoring is the new “old school.” Skills and knowledge are being lost in the workplace faster than can be replaced. Someone has to lead the way, why not you?
9.Write down what you have to do the next day before you leave that day, go through all of your carry-overs, go through all of your appointments and make notes so you are prepared to talk to your Customer, check with Parts and make sure the VOR Parts got ordered (can you see where this is going?) etc.
10.GET HUNGRY! GET PASSIONATE! People love doing business with people who are HUNGRY and PASSIONATE about what they do. ( I use Caps to show you how PASSIONATE I am about the Service Business) There is absolutely no better experience than dealing with a Professional who wants to do a better job because they are HUNGRY and PASSIONATE about their Profession.
Preparing for the day ahead is not just about the very next day. It’s about being ready for every day, about changing your life and getting out of it what you want.
Professionals get prepared.
Professional Service Advisors are prepared for the day ahead of them and don’t get caught in the “why bother because everyday is the same” rut.
Now, why is this so important? I mean, c’mon, isn’t every day just the same?
Open the door, reset the alarm, start the coffee, turn on the computers, check for night drops, check your email, flip through the stack of carry-overs, etc, etc, etc.
Sounds like the “same ol’, same ol’” to me. No change required. No need to do anything different. You can live your life like a sheeple. Lots of companies need sheeples.
If that is the kind of career and the kind of earnings you want, then go for it. It is easy to be easy. You can let your whole life creep along this way, no problem.
What you have to realize is that it is not the daily routine that gets you; it’s the thinking behind the daily routine. If the day before you looks like and feels just like yesterday, then it must be the same.
And that’s when the rut gets you. Ruts do not grab you suddenly from behind like a mugger on a city street. It is not a full front assault. Because if getting into a rut was like that, we would all take precautions and avoid it.
No, getting into a rut or “stinkin’ thinkin’” is more like being smothered by a soft layer of blankets, one blanket at a time. When you get that first blanket, it’s all warm and cozy (just like your daily routine) and it feels good. Who wouldn’t feel secure in a snugly little blanket?
Then the next blanket gets piled on and you feel even more warm and cozy, just like Grandmas house at night in the winter after a cup of hot chocolate. Doesn’t that sound nice?
And every day another soft blanket gets piled on and before you know it, you are being crushed by a pile of blankets a thousand feet tall. You can’t breathe, you can’t move, in fact, you can’t even get out from under that pile of blankets. It’s so freaking heavy it squeezes the life out of you like hot cheeze wiz. Gruesomely gooey.
Blankets don’t seem so warm and cozy now, do they? Ruts are like that. Softly smothering you while wrapping you up with a false sense of security. And nothing rips through that blanket like a bucket of cold water than the Dealership getting sold, or the manager getting fired. Where is your blanket now Linus?
Earl Nightingale said “A rut is nothing more than a grave with the ends kicked out.”
We all want our days to have some routine and normalcy. It is what makes the world go around. What we don’t want to do is assume that everyday will be the same as the last one and start assuming that our Professional life and career growth stops merely because we have figured out a way to stay “warm and cozy.”
Professional Service Advisors get prepared for their day and their careers because they know that every Customer is different and it is better to be prepared to Take Action that to have Action Taken. And they take that into their Professional life as well. They don’t stand around and wait for the manager to say “Hey, have you completed training this year?” They are constantly taking the time to become better at their profession and better prepared than their competition.
Here is another way to think about it. If this does not describe you, then it’s the Advisor standing next to you getting prepared. Your immediate competition.
Here are 10 ways you can get ready for your day, your career and your Professional life. Get out of your rut.
1.Read more. Read anything that contributes to your abilities, your skill sets and education. You own those 3 free and clear. Making them better pays dividends to you 10 times what you put into it.
2.Practice your skill sets frequently. Role play, write a new greeting, new script, anything that will stimulate your mind and get you thinking about how you can do something better or different for your Customer. This will lead to a sense of satisfaction and just as important, more income.
3.Start a focus group in your workplace with other Advisors. You don’t need permission from anyone, JUST DO IT! Believe it or not, there are other Advisors in your store that have issues just like you. Waiting for someone to help is not going to get it done. Pick a subject that needs attention in your Service Drive, get the other Advisors together and get started on taking care of it.
4.Mentor someone at work. Teaching them the right way to do things will keep you on the right track, stimulate new thinking and may, just maybe, lead you to a new way of doing business.
5.Join a Professional Organization or Association. This will let you connect with others in the car biz while allowing you to gain knowledge and skills. Google it.
6.Join Toastmasters. If you are a true Service Professional and have not taken advantage of learning how to speak on your feet (for nearly nothing by the way) how Professional can you be?
7.Take a class. Writing, Speaking, Computer etc… Get new knowledge!
8.Teach a class at work. Teaching and Mentoring is the new “old school.” Skills and knowledge are being lost in the workplace faster than can be replaced. Someone has to lead the way, why not you?
9.Write down what you have to do the next day before you leave that day, go through all of your carry-overs, go through all of your appointments and make notes so you are prepared to talk to your Customer, check with Parts and make sure the VOR Parts got ordered (can you see where this is going?) etc.
10.GET HUNGRY! GET PASSIONATE! People love doing business with people who are HUNGRY and PASSIONATE about what they do. ( I use Caps to show you how PASSIONATE I am about the Service Business) There is absolutely no better experience than dealing with a Professional who wants to do a better job because they are HUNGRY and PASSIONATE about their Profession.
Preparing for the day ahead is not just about the very next day. It’s about being ready for every day, about changing your life and getting out of it what you want.
Professionals get prepared.
Comfort Zone vs Accountability
As a Dealer, did last year bring you the return on investment that you expected?
As a General Manager did you meet or exceed your net profit projections for the year?
If you are a Fixed Operations Director did you increase your customer pay retail sales for parts and labor over last year?
For all three of you, is your Service Absorption rising year over year? If any of your answers were “NO”, then you must ask yourself...why?
To begin with, your financial statements will show you where the opportunities for improvement (conditions) are but what they won’t show you is how to fix them. To fix them you have to know what’s causing the out of line condition.
Once the cause is determined you can then make the corrections
necessary to properly bring the condition in line with industry guides. For those of you who have ever written a repair order you probably recognized this as the “Three C’s”, Condition-Cause-Correction.
The Technician needs the Condition to properly diagnose the Cause which then enables him to make the necessary Correction. It’s no different for the Dealer, the General Manager or the Fixed Operations director when it comes to making money.
So, now that you have studied your financials carefully to determine the conditions that prevented you from attaining your respective financial goals, let’s determine what the cause might have been. I believe the culprits here are Comfort Zones and Accountability.
Everyone in your dealership has a comfort zone just as you do. The issue is not to get rid of them but to simply move them again and again until you achieve the results you’re looking for and then move them again!
This is important because it enables you to focus on the performance
of your employees. Next, you must hold them accountable for their individual performance.
Currently, most of you are doing that in the New Car, Used Car and F&I departments, which of course is where you devote much of your time and energy anyway, but you fail to do so in the Service and Parts departments.
Allow me to give you some examples to clarify what I’m talking about:
1. If I am a Salesperson and I sold an average of 5 units per month last year, what are you going to do with me? Answer: Train me how to sell 10 units or more per month or replace me with someone who can.
2. If I am a Service Advisor and I sold an average of 1.5 hours per customer pay repair order last year, what are you going to do with me? Answer: I have a job for life!
3. If I am a Sales Manager and my Sales Team averages 5 units per month and my gross per retail unit is at $700, what are you going to do with me? Answer: Train me how to average 10 units per Salesperson and gross $1500 PRU or replace me with someone who can.
4. If I am a Service Manager and my Service Team averages 1.5 HPRO and my Technicians’ productivity is at 80%, what are you going to do with me? Answer: Leave me alone because the other dealers in your 20 Group are about the same!
5. If I am your General Sales Manager and my Sales Team averages 5 units per salesperson, $700 gross PRU, $200 F&I gross PRU and loose $600 per wholesale unit, what are you going to do with me? Answer: I wouldn’t have lasted 6 months let alone a year!
6. 6. If I am a Fixed Operations Director and my Parts and Service Team averages 34% in retail parts gross, 62% in labor gross, averages 1.5 HPRO, shop productivity of 80% with a declining repair order count, what are you going to do with me? Answer: Thank you for being back there because I sure as heck don’t want to fool with that stuff!
Are you starting to see my point?
Most Dealers and General Managers will hold their Sales Team accountable for their performance on a daily, weekly and monthly basis and make any adjustments (moving their comfort zones) on an as needed basis NOW!
Meanwhile their Parts and Service Team remain in their comfort zones to continue to dwell in the land of “underachievers”.
Why does this happen?
My belief is that most Dealers and GM’s are outside their comfort zone in the “back end” of their dealership since their roots are in the “front end.” What can a dealer do to enable him or her to leave their comfort zone and cross over the demarcation line to the back end of their business?
• Measure the performance of the people you intend to manage.
• Your people must know that you are measuring their performance.
• Their performance will be compared to industry benchmarks.
• They must understand that they will be held accountable for achieving or exceeding those benchmarks.
Simply say what you mean but more importantly mean what you say. Again, most dealers don’t hesitate to do this in their Sales and F&I departments. Start making it happen in Fixed Operations.
Now I want you to rid yourself of the usual whiny excuses that I here from dealers when I’m speaking to 20 Groups, Dealer Associations, Dealer groups or individual Dealers. It doesn’t matter whether it’s north, south, east, west or rural versus metropolitan. I hear this all across the U.S.,
Canada and the United Kingdom:
“Don, you don’t understand, my market is depressed.”
“Don, you don’t understand, my Service Manager has been with me for a long time.”
“Don, you don’t understand, I can’t find an Advisor that’s any better.”
“Don, I don’t want to run off my customers by up selling”
Well folks, here is what I do understand.
A depressed market has nothing to do with accountability for performance.
Time on the job does not dictate a good performance on the job.
If you can’t find better people, look harder because they are out there. If you or any of your people are afraid of “running off customers from up selling” then you need to get out of the retail business of selling parts and service. (By the way, the aftermarket already has 70% of your customers’ maintenance)
Don’t you think it’s time to get out of your comfort zone and make the return on your investment that you deserve? Please, drag your Fixed Operations Team out of their comfort zones and start holding them accountable! Once they stop kicking and screaming they will all make more money, they will be happier and your customers will realize you have the best dealership in town.
“The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.” -Peter F. Drucker
Don Reed
CEO
DealerPro Training Solutions
“Pro Solutions-Pro Results”
As a General Manager did you meet or exceed your net profit projections for the year?
If you are a Fixed Operations Director did you increase your customer pay retail sales for parts and labor over last year?
For all three of you, is your Service Absorption rising year over year? If any of your answers were “NO”, then you must ask yourself...why?
To begin with, your financial statements will show you where the opportunities for improvement (conditions) are but what they won’t show you is how to fix them. To fix them you have to know what’s causing the out of line condition.
Once the cause is determined you can then make the corrections
necessary to properly bring the condition in line with industry guides. For those of you who have ever written a repair order you probably recognized this as the “Three C’s”, Condition-Cause-Correction.
The Technician needs the Condition to properly diagnose the Cause which then enables him to make the necessary Correction. It’s no different for the Dealer, the General Manager or the Fixed Operations director when it comes to making money.
So, now that you have studied your financials carefully to determine the conditions that prevented you from attaining your respective financial goals, let’s determine what the cause might have been. I believe the culprits here are Comfort Zones and Accountability.
Everyone in your dealership has a comfort zone just as you do. The issue is not to get rid of them but to simply move them again and again until you achieve the results you’re looking for and then move them again!
This is important because it enables you to focus on the performance
of your employees. Next, you must hold them accountable for their individual performance.
Currently, most of you are doing that in the New Car, Used Car and F&I departments, which of course is where you devote much of your time and energy anyway, but you fail to do so in the Service and Parts departments.
Allow me to give you some examples to clarify what I’m talking about:
1. If I am a Salesperson and I sold an average of 5 units per month last year, what are you going to do with me? Answer: Train me how to sell 10 units or more per month or replace me with someone who can.
2. If I am a Service Advisor and I sold an average of 1.5 hours per customer pay repair order last year, what are you going to do with me? Answer: I have a job for life!
3. If I am a Sales Manager and my Sales Team averages 5 units per month and my gross per retail unit is at $700, what are you going to do with me? Answer: Train me how to average 10 units per Salesperson and gross $1500 PRU or replace me with someone who can.
4. If I am a Service Manager and my Service Team averages 1.5 HPRO and my Technicians’ productivity is at 80%, what are you going to do with me? Answer: Leave me alone because the other dealers in your 20 Group are about the same!
5. If I am your General Sales Manager and my Sales Team averages 5 units per salesperson, $700 gross PRU, $200 F&I gross PRU and loose $600 per wholesale unit, what are you going to do with me? Answer: I wouldn’t have lasted 6 months let alone a year!
6. 6. If I am a Fixed Operations Director and my Parts and Service Team averages 34% in retail parts gross, 62% in labor gross, averages 1.5 HPRO, shop productivity of 80% with a declining repair order count, what are you going to do with me? Answer: Thank you for being back there because I sure as heck don’t want to fool with that stuff!
Are you starting to see my point?
Most Dealers and General Managers will hold their Sales Team accountable for their performance on a daily, weekly and monthly basis and make any adjustments (moving their comfort zones) on an as needed basis NOW!
Meanwhile their Parts and Service Team remain in their comfort zones to continue to dwell in the land of “underachievers”.
Why does this happen?
My belief is that most Dealers and GM’s are outside their comfort zone in the “back end” of their dealership since their roots are in the “front end.” What can a dealer do to enable him or her to leave their comfort zone and cross over the demarcation line to the back end of their business?
• Measure the performance of the people you intend to manage.
• Your people must know that you are measuring their performance.
• Their performance will be compared to industry benchmarks.
• They must understand that they will be held accountable for achieving or exceeding those benchmarks.
Simply say what you mean but more importantly mean what you say. Again, most dealers don’t hesitate to do this in their Sales and F&I departments. Start making it happen in Fixed Operations.
Now I want you to rid yourself of the usual whiny excuses that I here from dealers when I’m speaking to 20 Groups, Dealer Associations, Dealer groups or individual Dealers. It doesn’t matter whether it’s north, south, east, west or rural versus metropolitan. I hear this all across the U.S.,
Canada and the United Kingdom:
“Don, you don’t understand, my market is depressed.”
“Don, you don’t understand, my Service Manager has been with me for a long time.”
“Don, you don’t understand, I can’t find an Advisor that’s any better.”
“Don, I don’t want to run off my customers by up selling”
Well folks, here is what I do understand.
A depressed market has nothing to do with accountability for performance.
Time on the job does not dictate a good performance on the job.
If you can’t find better people, look harder because they are out there. If you or any of your people are afraid of “running off customers from up selling” then you need to get out of the retail business of selling parts and service. (By the way, the aftermarket already has 70% of your customers’ maintenance)
Don’t you think it’s time to get out of your comfort zone and make the return on your investment that you deserve? Please, drag your Fixed Operations Team out of their comfort zones and start holding them accountable! Once they stop kicking and screaming they will all make more money, they will be happier and your customers will realize you have the best dealership in town.
“The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.” -Peter F. Drucker
Don Reed
CEO
DealerPro Training Solutions
“Pro Solutions-Pro Results”
Use the "3T System" to make more money in Fixed Ops.
Making more Money in Fixed Operations is everyone's goal.
Think not?
Just go tell your Dealer Principal that this month you've decided that making money is not important... and see what happens to you, Mr. /Ms. Jobless.
Making money is much easier when you use a system to do it and it is much better than just wishing for more Money. Use the "3T System" to drive more dollars to the bank.
The first T stands for "Tell Everybody" what you want to accomplish this month. It is also called "Create a Compelling Vision" and the more Compelling it is, the more people are drawn to it.
Additionally, it must be specific, memorable and most importantly, reinforced at every opportunity!
It cannot be the same old tired "We need to do better or else!" stuff. They have already heard it before.
If it is, people will just ignore it. Start the month off with a kickoff meeting detailing exactly what it is you must accomplish, what role each person has and how you will be holding people accountable.
Remember, the more specific you are, the better your results!
The second T stands for "Teach me Something New." Everybody wants to be part of the newest, latest and greatest.
New is fun...New is exciting...New is way better than "old and stale." Let me give you an example.
When was the last time a you offered to make a sandwich for a guest in your home, and they said to you "Please make mine using old stale bread, month old lunchmeat and could you put some expired mayonnaise on it"?
Not gonna happen. It's the same way in the Service Department.
People want to feel like they are part of a new challenge and accomplishing new things. Don't make them a stale old sandwich and expect them to eat it.
Teach them something new about their job, the Customer, the Dealership...anything!
And the last T stands for "Train to Win!"
Bobby Jones said it best when he said "If you fail to get the proper instruction you'll only get better at making yourself worse." Train to Win means the best Training by the Best Method yields the Best Results!
Train your personnel using the Best Methods available (like DealerPro VT) and you will consistently improve and reach new Goals!
Think not?
Just go tell your Dealer Principal that this month you've decided that making money is not important... and see what happens to you, Mr. /Ms. Jobless.
Making money is much easier when you use a system to do it and it is much better than just wishing for more Money. Use the "3T System" to drive more dollars to the bank.
The first T stands for "Tell Everybody" what you want to accomplish this month. It is also called "Create a Compelling Vision" and the more Compelling it is, the more people are drawn to it.
Additionally, it must be specific, memorable and most importantly, reinforced at every opportunity!
It cannot be the same old tired "We need to do better or else!" stuff. They have already heard it before.
If it is, people will just ignore it. Start the month off with a kickoff meeting detailing exactly what it is you must accomplish, what role each person has and how you will be holding people accountable.
Remember, the more specific you are, the better your results!
The second T stands for "Teach me Something New." Everybody wants to be part of the newest, latest and greatest.
New is fun...New is exciting...New is way better than "old and stale." Let me give you an example.
When was the last time a you offered to make a sandwich for a guest in your home, and they said to you "Please make mine using old stale bread, month old lunchmeat and could you put some expired mayonnaise on it"?
Not gonna happen. It's the same way in the Service Department.
People want to feel like they are part of a new challenge and accomplishing new things. Don't make them a stale old sandwich and expect them to eat it.
Teach them something new about their job, the Customer, the Dealership...anything!
And the last T stands for "Train to Win!"
Bobby Jones said it best when he said "If you fail to get the proper instruction you'll only get better at making yourself worse." Train to Win means the best Training by the Best Method yields the Best Results!
Train your personnel using the Best Methods available (like DealerPro VT) and you will consistently improve and reach new Goals!
When Performance is Measured—It Improves
If you are a baseball fan like I am, you have most likely watched a game or two on TV or have gone to the ballpark to root for your favorite team (St. Louis Cardinals for me). In doing so, you have undoubtedly noticed the constant display of Player Statistics at the bottom of your TV screen or boldly displayed on the huge electronic scoreboard. For each batter who comes to the plate we see their Batting Average, RBI’s (Runs batted in), # of Home Runs, OBP (On base percentage), and for pitchers we see their ERA (Earned run average), number of games won versus lost, number of starts, how many innings pitched, etc. We even see the speed of every single pitch he makes displayed on the screen. Why? Maybe it’s because we as fans want to see and evaluate the performance of each player. Maybe it’s because the team’s coaches want to see and evaluate their individual player’s performance as well as that of the team. Maybe it’s because the opposing team’s coaches and players want to see and evaluate the other players’ performance. Or, just maybe it’s all of the above. When performance is measured it improves.
Top Performers are identified as such through constant, on-going performance evaluations. If you can’t evaluate their performance then how can you identify their status as a Top Performer? All of the players inducted into the Baseball Hall of Fame do not have the same stats. They are all different yet they all excelled in the sport of baseball and became the best players in the game. As a Dealer, General Manager or department manager you can learn a lot from this analogy because unless you have the stats on every individual on your team you cannot possibly evaluate their performance. You can’t identify their strengths or their weaknesses. You can’t measure improvement or failure accurately or fairly. You don’t know who needs training and what they need trained on. Now let’s take this concept of “you can’t manage what you don’t measure” and look at it from the perspective of “Front End” versus “Back End.”
The vast majority of Dealers have processes in place to measure the performance of their sales team every single day so they can evaluate their performance. Here are some typical examples:
Finance & Insurance Department:
• Gross Profit Per Retail Unit-New & Used
• Finance Penetration as a percent of total vehicle deliveries
• Extended Service Contract Penetration as a percent of total vehicle deliveries
• GAP Penetration as a percent of total vehicle deliveries
• Lease Penetration as a percent of total vehicles financed
• Number of contracts pending loan approval
• Total F&I Gross Profit produced Month to Date
This is typically measured for each Finance Producer as well as the entire F&I department and is done so DAILY so that you can effectively identify the Top Performers from the Underachievers and act accordingly.
New & Used Sales Departments:
• Gross Per Retail Unit-New & Used
• Number of units sold Month to Date
• Number of “UPS” Month to Date
• Number of Demos Month to Date
• Number of Written Proposals Month to Date
• Closing Ratio of UPS to Closed deals
• Number of Appointments for the day
• Number of T.O’s
• Conduct a lot walk to view inventory additions/deletions
• Number of Phone UPS Month to Date
• Wholesale Profit/Loss Month to Date
• Internet Sales Leads Month to Date
• Number of Internet Sales closed Month to Date
• Results from advertising campaigns
• Used Vehicle Reconditioning Cost PUVR
Most of these measurements are calculated for each Salesperson and each Manager for the same reasons as listed above for the Finance Producers and they are done DAILY. Most sales departments start their day with a brief Sales Meeting to review many of the items listed above. These are the typical 23 “Front End” processes that separate the average Dealer from the Top Performing Dealer. How would you rate your Sales Department?
Okay, now let’s cross over the demarcation line to the “Back End” of your dealership and take a look at the Service & Parts Departments and identify the typical processes for evaluating their performance DAILY. I emphasize DAILY not monthly.
Parts Department:
• Wholesale Parts Sales
• Counter Retail Sales
• Repair Order Sales
• Gross Profit Margin
• Lost Sales
• Fill Rate
My experience has been that far too many Dealers, GM’s and Parts Managers measure all of the above for the department but too often fail to do the same for each parts employee. For example do you run a DAILY Exception Report for each employee to identify the “Unauthorized Discounts?” Do you review a Performance Report DAILY by employee to identify their performance on parts margin—Wholesale, Retail Repair orders and Retail counter? Do you compare your performance to the benchmarks in our industry? Do you measure dollar sales per employee? Do you measure transactions per employee? Remember, if you only measure the performance of the department, you can’t effectively identify the Top Performers from the Underachievers. You can’t identify their individual strengths and weaknesses.
Service Department:
• Technician’s Flat Rate Hours Produced
• Technician’s Clock Hours Worked
• Hours per Repair Order by Advisor
• Number of Repair Orders Month to Date—Retail-Warranty-Internal by Advisor
• Number of Appointments Scheduled
• # of Carryovers
• Shop Productivity
Again, based on my experience and that of my 20 Trainers working in dealerships all across the country, we can’t find very many Dealers, GM’s, Service Directors/Managers and Parts Managers who measure anything else. Those who do measure more invariably will produce more. Measure things like their Advisors’ Unauthorized Parts & Labor Discounts, Policy Adjustment, Parts Margin, Labor Margin, # of Up-sells, Closing Ratio of Up-sells, Un-sold Hours per day, # of Menu Presentations, Closing Ratio on Menus, # of Inspection presentations, etc.
For Technicians let’s measure how many completed Inspections per day, # of additional repairs sold from inspections, # of comebacks, HPRO and the number of RO’s.
To sum it up, I see most dealers measuring about 23 stats per day in their Sales Departments and only about 13 stats per day in Service & Parts. If you follow my recommendations listed above that number jumps to about 30 stats per day and the good news is it costs you absolutely nothing! Now take a pen and check off all of the stats you measure DAILY in your Sales Department and then check off all of the ones you measure DAILY in your Service & Parts Departments. How did you score—Top Performer or Underachiever? It’s all in the stats!
Don Reed—CEO DealerPro Training Solutions
Top Performers are identified as such through constant, on-going performance evaluations. If you can’t evaluate their performance then how can you identify their status as a Top Performer? All of the players inducted into the Baseball Hall of Fame do not have the same stats. They are all different yet they all excelled in the sport of baseball and became the best players in the game. As a Dealer, General Manager or department manager you can learn a lot from this analogy because unless you have the stats on every individual on your team you cannot possibly evaluate their performance. You can’t identify their strengths or their weaknesses. You can’t measure improvement or failure accurately or fairly. You don’t know who needs training and what they need trained on. Now let’s take this concept of “you can’t manage what you don’t measure” and look at it from the perspective of “Front End” versus “Back End.”
The vast majority of Dealers have processes in place to measure the performance of their sales team every single day so they can evaluate their performance. Here are some typical examples:
Finance & Insurance Department:
• Gross Profit Per Retail Unit-New & Used
• Finance Penetration as a percent of total vehicle deliveries
• Extended Service Contract Penetration as a percent of total vehicle deliveries
• GAP Penetration as a percent of total vehicle deliveries
• Lease Penetration as a percent of total vehicles financed
• Number of contracts pending loan approval
• Total F&I Gross Profit produced Month to Date
This is typically measured for each Finance Producer as well as the entire F&I department and is done so DAILY so that you can effectively identify the Top Performers from the Underachievers and act accordingly.
New & Used Sales Departments:
• Gross Per Retail Unit-New & Used
• Number of units sold Month to Date
• Number of “UPS” Month to Date
• Number of Demos Month to Date
• Number of Written Proposals Month to Date
• Closing Ratio of UPS to Closed deals
• Number of Appointments for the day
• Number of T.O’s
• Conduct a lot walk to view inventory additions/deletions
• Number of Phone UPS Month to Date
• Wholesale Profit/Loss Month to Date
• Internet Sales Leads Month to Date
• Number of Internet Sales closed Month to Date
• Results from advertising campaigns
• Used Vehicle Reconditioning Cost PUVR
Most of these measurements are calculated for each Salesperson and each Manager for the same reasons as listed above for the Finance Producers and they are done DAILY. Most sales departments start their day with a brief Sales Meeting to review many of the items listed above. These are the typical 23 “Front End” processes that separate the average Dealer from the Top Performing Dealer. How would you rate your Sales Department?
Okay, now let’s cross over the demarcation line to the “Back End” of your dealership and take a look at the Service & Parts Departments and identify the typical processes for evaluating their performance DAILY. I emphasize DAILY not monthly.
Parts Department:
• Wholesale Parts Sales
• Counter Retail Sales
• Repair Order Sales
• Gross Profit Margin
• Lost Sales
• Fill Rate
My experience has been that far too many Dealers, GM’s and Parts Managers measure all of the above for the department but too often fail to do the same for each parts employee. For example do you run a DAILY Exception Report for each employee to identify the “Unauthorized Discounts?” Do you review a Performance Report DAILY by employee to identify their performance on parts margin—Wholesale, Retail Repair orders and Retail counter? Do you compare your performance to the benchmarks in our industry? Do you measure dollar sales per employee? Do you measure transactions per employee? Remember, if you only measure the performance of the department, you can’t effectively identify the Top Performers from the Underachievers. You can’t identify their individual strengths and weaknesses.
Service Department:
• Technician’s Flat Rate Hours Produced
• Technician’s Clock Hours Worked
• Hours per Repair Order by Advisor
• Number of Repair Orders Month to Date—Retail-Warranty-Internal by Advisor
• Number of Appointments Scheduled
• # of Carryovers
• Shop Productivity
Again, based on my experience and that of my 20 Trainers working in dealerships all across the country, we can’t find very many Dealers, GM’s, Service Directors/Managers and Parts Managers who measure anything else. Those who do measure more invariably will produce more. Measure things like their Advisors’ Unauthorized Parts & Labor Discounts, Policy Adjustment, Parts Margin, Labor Margin, # of Up-sells, Closing Ratio of Up-sells, Un-sold Hours per day, # of Menu Presentations, Closing Ratio on Menus, # of Inspection presentations, etc.
For Technicians let’s measure how many completed Inspections per day, # of additional repairs sold from inspections, # of comebacks, HPRO and the number of RO’s.
To sum it up, I see most dealers measuring about 23 stats per day in their Sales Departments and only about 13 stats per day in Service & Parts. If you follow my recommendations listed above that number jumps to about 30 stats per day and the good news is it costs you absolutely nothing! Now take a pen and check off all of the stats you measure DAILY in your Sales Department and then check off all of the ones you measure DAILY in your Service & Parts Departments. How did you score—Top Performer or Underachiever? It’s all in the stats!
Don Reed—CEO DealerPro Training Solutions
Optimism Abounds in Fixed Operations
Over the past couple of months I’ve conducted several workshops for NADA and the Detroit Auto Dealers Association. In attendance were Dealers, GM’s and Service Directors and I was amazed at the level of optimism displayed by all. Dealers are selling more cars and trucks. Retail service traffic is increasing and net profits are improving. Great news for us all!
Many dealers tell me that the dealership closings in their markets have resulted in more customers coming into their dealerships for both sales and service. This of course is a positive trend but my concern is this: “What are you going to do with the additional service customers when they show up?” Have you prepared your service team for these new opportunities? Do you have a customer friendly appointment process, on-line, on the phone and in person? Do you have the proper selling processes in place to professionally engage your customers? Once you get these new customers do you have the right processes in place to keep them coming back?
In my last article for ADM I addressed the Five Rules of Engagement for service customers whereby I outlined how a dealer must hold their service team accountable for following the Rules as outlined below:
• Rule #1: Offer an Appointment to 100% of the incoming service calls
• Rule #2: Conduct a Vehicle Walk-around with the customer
• Rule #3: Present a Maintenance Menu at the time of write up
• Rule #4: Complete a Vehicle Health Check with every RO
• Rule #5: Conduct an Active Delivery of the vehicle back to the customer
Interestingly enough, J.D. Powers conducted a recent study of new car dealers’ service departments measuring a dealer’s performance in following Rules 2 thru 5 and Worldwide Phone Pops evaluated the dealers performance with Rule #1 after shopping over 9000 dealerships nationwide. Let’s review the results of each of these.
Starting with Rule #1, Worldwide Phone Pops states that 57% of all Service Advisors do not ask the customer for an appointment. Why would a dealer allow that to happen? Why would you not hold everyone accountable to offering 100% of your service customers an appointment? (My dentist does!) To make matters worse, Phone Pops states that 38% of operators keep customers on hold too long causing hang ups. So the question is are you going to let this happen to all of the new opportunities that we are all so excited about? Would it be acceptable for your salespeople to only offer 57% of your phone ups an appointment to come into your dealership to test drive a new or used vehicle? Do your phone ups stay on hold for prolonged periods of time waiting for a salesperson to speak to them?
The survey from J.D. Powers shows that Rule #2 did not fare much better since only 53% of the Service Advisors conducted a walkaround. My guess is this means that the remaining 47% of Advisors performed the function of a clerk preferring to stay at their work station waiting for the customer to come to them. When you install a walkaround process you will discover that your customers like it and your CSI will most likely go up along with your sales and gross profits.
The walkaround is a perfect lead in to a Maintenance Menu presentation, Rule #3. Survey shows that only 29% of Service Advisors made recommendations for other maintenance or repairs. Even more interesting is the fact that 46% of the customers said YES to have additional work performed on their vehicle at the time of write up. That sounds like a Closing Ratio of 46%! How would you like that closing ratio on extended service contracts in your finance department? What happens when the 29% becomes 100%? Most likely your menus sales will triple!
Rule #4 is what I call the Vehicle Health Check or multi-point inspection. It’s really like giving your customer’s vehicle a “physical check up” to insure they are in fact driving a safe and reliable vehicle. Survey shows when an Advisor calls a customer and reviews the results of the Vehicle Health Check and makes recommendations for additional repairs or maintenance services that a whopping 56% of them said “YES”. Now we have a 56% closing Ratio which in my book is a great job! Are your Technicians inspecting 100% of the vehicles in your service department every single day? Are your Service Advisors reviewing the results of the inspection with every customer?
The Active Delivery, Rule #5, is one of the most important processes for building owner retention and increasing CSI. This process is quite simple and costs you absolutely nothing: Always retrieve the vehicle and bring it to the customer—never send the customer to find their vehicle. J.D. Powers states that 23% of Advisors had their customer wait alone while their vehicle was retrieved and 5% of Advisors waited with the customer while the vehicle was retrieved and 16% of Advisors escorted the customer to their vehicle. So, let’s be generous and give the Advisors a combined compliance ratio of 44%. By now I’m sure you see where I’m going with this scenario-----56% of the customers were simply told where the vehicle was. When you deliver a new or used vehicle to a customer do you tell them where it’s parked and tell them to have nice day finding it? Again, this is a very simple process that costs you absolutely nothing. Why not make it a rule starting today!
Yes, optimism abounds in fixed operations and that optimism will turn in to record sales, record profits and record CSI scores for those dealers who choose to make the Five Rules of Engagement company policy and then holds their service team accountable for 100% compliance. You might hear a few moans and groans from your underachievers but remember—you are not running a Democracy here!
Don Reed
CEO-DealerPro Training Solutions
Many dealers tell me that the dealership closings in their markets have resulted in more customers coming into their dealerships for both sales and service. This of course is a positive trend but my concern is this: “What are you going to do with the additional service customers when they show up?” Have you prepared your service team for these new opportunities? Do you have a customer friendly appointment process, on-line, on the phone and in person? Do you have the proper selling processes in place to professionally engage your customers? Once you get these new customers do you have the right processes in place to keep them coming back?
In my last article for ADM I addressed the Five Rules of Engagement for service customers whereby I outlined how a dealer must hold their service team accountable for following the Rules as outlined below:
• Rule #1: Offer an Appointment to 100% of the incoming service calls
• Rule #2: Conduct a Vehicle Walk-around with the customer
• Rule #3: Present a Maintenance Menu at the time of write up
• Rule #4: Complete a Vehicle Health Check with every RO
• Rule #5: Conduct an Active Delivery of the vehicle back to the customer
Interestingly enough, J.D. Powers conducted a recent study of new car dealers’ service departments measuring a dealer’s performance in following Rules 2 thru 5 and Worldwide Phone Pops evaluated the dealers performance with Rule #1 after shopping over 9000 dealerships nationwide. Let’s review the results of each of these.
Starting with Rule #1, Worldwide Phone Pops states that 57% of all Service Advisors do not ask the customer for an appointment. Why would a dealer allow that to happen? Why would you not hold everyone accountable to offering 100% of your service customers an appointment? (My dentist does!) To make matters worse, Phone Pops states that 38% of operators keep customers on hold too long causing hang ups. So the question is are you going to let this happen to all of the new opportunities that we are all so excited about? Would it be acceptable for your salespeople to only offer 57% of your phone ups an appointment to come into your dealership to test drive a new or used vehicle? Do your phone ups stay on hold for prolonged periods of time waiting for a salesperson to speak to them?
The survey from J.D. Powers shows that Rule #2 did not fare much better since only 53% of the Service Advisors conducted a walkaround. My guess is this means that the remaining 47% of Advisors performed the function of a clerk preferring to stay at their work station waiting for the customer to come to them. When you install a walkaround process you will discover that your customers like it and your CSI will most likely go up along with your sales and gross profits.
The walkaround is a perfect lead in to a Maintenance Menu presentation, Rule #3. Survey shows that only 29% of Service Advisors made recommendations for other maintenance or repairs. Even more interesting is the fact that 46% of the customers said YES to have additional work performed on their vehicle at the time of write up. That sounds like a Closing Ratio of 46%! How would you like that closing ratio on extended service contracts in your finance department? What happens when the 29% becomes 100%? Most likely your menus sales will triple!
Rule #4 is what I call the Vehicle Health Check or multi-point inspection. It’s really like giving your customer’s vehicle a “physical check up” to insure they are in fact driving a safe and reliable vehicle. Survey shows when an Advisor calls a customer and reviews the results of the Vehicle Health Check and makes recommendations for additional repairs or maintenance services that a whopping 56% of them said “YES”. Now we have a 56% closing Ratio which in my book is a great job! Are your Technicians inspecting 100% of the vehicles in your service department every single day? Are your Service Advisors reviewing the results of the inspection with every customer?
The Active Delivery, Rule #5, is one of the most important processes for building owner retention and increasing CSI. This process is quite simple and costs you absolutely nothing: Always retrieve the vehicle and bring it to the customer—never send the customer to find their vehicle. J.D. Powers states that 23% of Advisors had their customer wait alone while their vehicle was retrieved and 5% of Advisors waited with the customer while the vehicle was retrieved and 16% of Advisors escorted the customer to their vehicle. So, let’s be generous and give the Advisors a combined compliance ratio of 44%. By now I’m sure you see where I’m going with this scenario-----56% of the customers were simply told where the vehicle was. When you deliver a new or used vehicle to a customer do you tell them where it’s parked and tell them to have nice day finding it? Again, this is a very simple process that costs you absolutely nothing. Why not make it a rule starting today!
Yes, optimism abounds in fixed operations and that optimism will turn in to record sales, record profits and record CSI scores for those dealers who choose to make the Five Rules of Engagement company policy and then holds their service team accountable for 100% compliance. You might hear a few moans and groans from your underachievers but remember—you are not running a Democracy here!
Don Reed
CEO-DealerPro Training Solutions
Does 100 Percent Service Absorption Interest You?
I hope you answered “Yes” to the question above. So, let’s begin with defining what “service absorption” means.
It is calculated by taking your total gross profit from the sale of parts and labor, which is sales minus the cost of parts and labor sales and dividing that total by your dealership’s fixed expenses. Do not include any variable sales expenses such as sales commissions or floor plan interest.
To put it simply, if one can achieve 100 percent service absorption, then all of the dealership’s fixed expenses are paid for by the service and parts departments, which means that the sales department is producing net profit on the very first unit it sells. For example, if your sales gross profit is $4,000, your sales commission is $1,000, and your floor plan interest is $500, then you have $1,500 in variable expenses to deduct from gross profit, which leaves you with a net profit of $2,500.
Based on our financial evaluations of RV dealerships across the country, we find that most dealerships are well below 45 percent. That means it is difficult for the average dealer to believe that 100 percent service absorption is indeed attainable since he or she never did it nor do they know of any other dealer who achieved such a feat.
Well let me assure you that it can be done if you are willing to change.
The most significant change needed is to change your attitude toward your service department. First, you must believe your service department will become a profit center. Currently, many dealers perceive this department as a support department for the sales department and to prep units for delivery, then handle warranty headaches after the sale.
Once the warranty period expires, there does not seem to be much effort to keep the customer coming back for retail repairs. After all, during the “season,” the shop is booked for two weeks or longer on any given day, so why worry about retail repair work? This attitude needs to change because retail customers will spend thousands of dollars on parts and labor, which have the highest profit margins of any product you sell. Additionally, we know the RV owners who have their RV serviced at the dealer who sold it to them are much more likely to buy their next unit from that dealer.
We find that the dealers who have low service absorption also suffer from low shop productivity. Shop productivity is defined as the number of hours sold on retail, warranty, and internal repair orders, divided by the number of clock hours the technicians actually work. For example, 100 hours sold on all repair orders divided by 200 technician hours actually worked, equals 50 percent shop productivity.
Our experience shows that most dealers fall into the range of 50-55 percent shop productivity. Are you starting to get a picture of the opportunity for improvement? How can you be booked out two weeks in appointments when your technicians are only 50 percent productive? What happened to the other 50 percent of their working hours?
Technicians, for the most part, are hard working employees. They brave the cold, the heat, the rain, and the snow to perform whatever service or repair is printed on the face of the repair order, and most of the time they complete the service or repair to the satisfaction of the customer. However, do they complete the service or repair in as short a time as possible? More importantly, do they have the incentive to complete service or repairs as quickly as possible? It’s called “performance based compensation.” At most RV dealerships, the answer is “No,” since technicians are simply paid by the number of clock hours worked with no regard for the number of hours sold. If you are a technician, what difference does it make to you if you spend four hours completing a two hour job? Conversely, if you were paid two hours to complete a two hour job, would you try your best to finish in two hours so you could get another repair order to get paid on? If you completed that same two hour job in 90 minutes and still got paid for two hours, would that be a good thing or a bad thing? If you are a good technician, a good employee, and you have a good attitude, you just gave yourself a pay raise. You also, just gave the dealer a pay raise.
Now, let’s assume that you install this “performance based pay plan” in your shop and your technicians’ productivity jumps to 75 percent from the current 50 percent. You just realized a 50 percent increase in labor gross profit. If your dealership is currently profitable, this 50 percent increase in labor gross profit then becomes 100 percent net profit. Take a look at your total labor gross profit for last year and increase it by 50 percent, and then ask yourself if it would be worth changing your attitude to put that much money in your bank account. What would it cost you to do that? Nothing!
by: Don Reed
It is calculated by taking your total gross profit from the sale of parts and labor, which is sales minus the cost of parts and labor sales and dividing that total by your dealership’s fixed expenses. Do not include any variable sales expenses such as sales commissions or floor plan interest.
To put it simply, if one can achieve 100 percent service absorption, then all of the dealership’s fixed expenses are paid for by the service and parts departments, which means that the sales department is producing net profit on the very first unit it sells. For example, if your sales gross profit is $4,000, your sales commission is $1,000, and your floor plan interest is $500, then you have $1,500 in variable expenses to deduct from gross profit, which leaves you with a net profit of $2,500.
Based on our financial evaluations of RV dealerships across the country, we find that most dealerships are well below 45 percent. That means it is difficult for the average dealer to believe that 100 percent service absorption is indeed attainable since he or she never did it nor do they know of any other dealer who achieved such a feat.
Well let me assure you that it can be done if you are willing to change.
The most significant change needed is to change your attitude toward your service department. First, you must believe your service department will become a profit center. Currently, many dealers perceive this department as a support department for the sales department and to prep units for delivery, then handle warranty headaches after the sale.
Once the warranty period expires, there does not seem to be much effort to keep the customer coming back for retail repairs. After all, during the “season,” the shop is booked for two weeks or longer on any given day, so why worry about retail repair work? This attitude needs to change because retail customers will spend thousands of dollars on parts and labor, which have the highest profit margins of any product you sell. Additionally, we know the RV owners who have their RV serviced at the dealer who sold it to them are much more likely to buy their next unit from that dealer.
We find that the dealers who have low service absorption also suffer from low shop productivity. Shop productivity is defined as the number of hours sold on retail, warranty, and internal repair orders, divided by the number of clock hours the technicians actually work. For example, 100 hours sold on all repair orders divided by 200 technician hours actually worked, equals 50 percent shop productivity.
Our experience shows that most dealers fall into the range of 50-55 percent shop productivity. Are you starting to get a picture of the opportunity for improvement? How can you be booked out two weeks in appointments when your technicians are only 50 percent productive? What happened to the other 50 percent of their working hours?
Technicians, for the most part, are hard working employees. They brave the cold, the heat, the rain, and the snow to perform whatever service or repair is printed on the face of the repair order, and most of the time they complete the service or repair to the satisfaction of the customer. However, do they complete the service or repair in as short a time as possible? More importantly, do they have the incentive to complete service or repairs as quickly as possible? It’s called “performance based compensation.” At most RV dealerships, the answer is “No,” since technicians are simply paid by the number of clock hours worked with no regard for the number of hours sold. If you are a technician, what difference does it make to you if you spend four hours completing a two hour job? Conversely, if you were paid two hours to complete a two hour job, would you try your best to finish in two hours so you could get another repair order to get paid on? If you completed that same two hour job in 90 minutes and still got paid for two hours, would that be a good thing or a bad thing? If you are a good technician, a good employee, and you have a good attitude, you just gave yourself a pay raise. You also, just gave the dealer a pay raise.
Now, let’s assume that you install this “performance based pay plan” in your shop and your technicians’ productivity jumps to 75 percent from the current 50 percent. You just realized a 50 percent increase in labor gross profit. If your dealership is currently profitable, this 50 percent increase in labor gross profit then becomes 100 percent net profit. Take a look at your total labor gross profit for last year and increase it by 50 percent, and then ask yourself if it would be worth changing your attitude to put that much money in your bank account. What would it cost you to do that? Nothing!
by: Don Reed
The 7 Measurables and the Financial Statement
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?
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
Service Absorption Rule #3
“Maintain a 6 to 1 ratio of C/P RO count to total vehicle sales” says Don Reed, CEO of DealerPro Training Solutions.
That sounds simple enough. If you are currently selling 100 New and Used a month, then that pencils out to 600 Customer Pay Repair Orders per Month, not including Warranty and Internal. It’s the CP RO count we are after.
So, you just realized that your RO count is low, right? What are you going to do about it? If you are thinking that you need a big production that costs a lot of money and the only thing that you can do is advertise to get more Customers in the door, think again.
Certainly advertising can be a part of the overall strategy to bring customers back in. “You don’t need to spend more money-you need to spend more of your money wisely” says Don. Which means that you need to look at reallocating some of what you already spend elsewhere (Sales) and give it to Service where you can realize a much better ROI.
“The average dealer is spending $500 to sell a new customer while spending $8.40 to keep the customers they have.”
And, if you do the math on a 500 RO (Customer Interaction) Service Drive and the typical 100 car store, you can expect to pay $50000.00 to get results that are somewhere north of say $145,000.00 in Gross Profit from the sale of those cars, or, you can spend $5000.00 in your Service Department ($10.00 per Customer) for a $153,000.00 Gross Profit return.
Thats 30 times over what you invested…vs a 2.9% ROI in Sales. 30 times! If I asked you to give me a $10.00 bill and I told you that in exchange for that $10.00 I would give you back $300.00, would you do it? Of course you would!
While advertising is part of the overall strategy and is part of your planning, it is another tool to be used in conjunction with everything else you do in Customer retention and marketing.
In fact, there are at least 20 different things that you can do right away (in the next few months) that will have an immediate impact on your RO count. Most of them require nothing more than a little elbow grease and awareness.
Send me an email at lbuchholz@dealerprotraining.com and put “Send me the 20″ in the subject line and I’ll send you back 20 ways you can increase RO count in your service department.
In the meantime, measure your current numbers using the 6/1 Rule and see where you stackup. If you are struggling, it might be time for a fresh look.
Getting to 100% Service Absorption is a decision. Decide to have better Absorption this year
That sounds simple enough. If you are currently selling 100 New and Used a month, then that pencils out to 600 Customer Pay Repair Orders per Month, not including Warranty and Internal. It’s the CP RO count we are after.
So, you just realized that your RO count is low, right? What are you going to do about it? If you are thinking that you need a big production that costs a lot of money and the only thing that you can do is advertise to get more Customers in the door, think again.
Certainly advertising can be a part of the overall strategy to bring customers back in. “You don’t need to spend more money-you need to spend more of your money wisely” says Don. Which means that you need to look at reallocating some of what you already spend elsewhere (Sales) and give it to Service where you can realize a much better ROI.
“The average dealer is spending $500 to sell a new customer while spending $8.40 to keep the customers they have.”
And, if you do the math on a 500 RO (Customer Interaction) Service Drive and the typical 100 car store, you can expect to pay $50000.00 to get results that are somewhere north of say $145,000.00 in Gross Profit from the sale of those cars, or, you can spend $5000.00 in your Service Department ($10.00 per Customer) for a $153,000.00 Gross Profit return.
Thats 30 times over what you invested…vs a 2.9% ROI in Sales. 30 times! If I asked you to give me a $10.00 bill and I told you that in exchange for that $10.00 I would give you back $300.00, would you do it? Of course you would!
While advertising is part of the overall strategy and is part of your planning, it is another tool to be used in conjunction with everything else you do in Customer retention and marketing.
In fact, there are at least 20 different things that you can do right away (in the next few months) that will have an immediate impact on your RO count. Most of them require nothing more than a little elbow grease and awareness.
Send me an email at lbuchholz@dealerprotraining.com and put “Send me the 20″ in the subject line and I’ll send you back 20 ways you can increase RO count in your service department.
In the meantime, measure your current numbers using the 6/1 Rule and see where you stackup. If you are struggling, it might be time for a fresh look.
Getting to 100% Service Absorption is a decision. Decide to have better Absorption this year
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