“Don’t put all of your eggs in one basket.” You probably got this wise advice from your grandmother, your daddy, or a wise friend. Yet I see service managers violate this proverb every day and suffer huge losses. Let me illustrate with a couple of true stories:
A rural Nissan dealer had a dynamic git-er-done technician with a strong work ethic and a passion for preventive maintenance. This guy understood that the more thorough he was when doing a multi-point inspection, the more money he’d make. Even though he was a master certified Nissan technician, it was never “beneath him” to do an inspection.
He made lots of needed maintenance recommendations and it resulted in lots of service sales. In fact, the first quarter of 2015, the shop sold a record $66,000 of additional maintenance services. The service manager didn’t hold the other techs and lube dudes accountable to do inspections…and they didn’t. The git-er-done technician was so busy that he couldn’t do all the work he sold; therefore, a lot of the maintenance work was done by the other techs. There was enough gravy for everyone, so why bother cross-training the other guys? Mr. Git-er-Done had it under control. Everybody was fat and happy.
Then his wife got transferred out of state and he left the dealership. (You know where this is headed, don’t you?)
The next quarter, maintenance sales dropped from $66,000 to $16,000! That’s a $50,000 loss in 90 days, which became a $200,000 annual loss! The service manager and his fixed ops team had all their hopes and dreams wrapped up in one man—when he left, their dreams faded away. Did they know what to do? Sure, but their ambition had atrophied to the point that they simply wouldn’t act. To this day they haven’t recovered.
“Give portions to seven, yes to eight, for you do not know what disaster may come upon the land. Sow your seed in the morning, and at evening let not your hands be idle, for you do not know which will succeed, whether this or that, or whether both will do equally well.” – King Solomon
Another dealership, a suburban Honda store, had a young service advisor that was a quick learner. This guy was so naïve that he did something remarkable: he did what he was told to do! The dealer brought in a top-notch service advisor trainer that taught the advisors to offer vehicle owners every maintenance service that the techs recommended. That meant every tech-recommended service, to every customer, every time. The young advisor listened and learned and sprang into action. The other two advisors already “knew it all” and after the training, for them it was business as usual.
The first quarter of 2015, their maintenance sales topped $200,000. Later that year, the young advisor left.
The first quarter of 2016, their maintenance sales barely topped $100,000…a 50% loss year-over-year. They are on track to lose $300,000 in maintenance sales in 2016.
I blame the service manager. Instead of building on the success of the young advisor, instead of requiring his other two advisors to step up the pace, instead of replacing non-performers with new personnel, he just let it ride. Now everyone is singing the blues about how “slow” it is and how “ain’t nobody buyin’ nothin’ on the service drive.” Instead of taking action, everyone is just sitting on their hands riding out the “downturn” and hoping for the best.
Between 2000 and 2007, when times were good, most dealerships put a heavy emphasis on new and used car sales with fixed ops being an afterthought. When the bottom fell out of the economy in 2008 and 2009 and new vehicle financing was very challenging, many dealers lost significant revenue. Fixed ops revenue became a necessity; however, many dealers weren’t prepared. For several decades, fixed ops had been a necessary evil, reacting to customer complaints and fixing broken stuff. It had never been seen as a proactive sales organization and a vital profit center. On the other hand, dealers and general managers who had diversified their portfolio had always seen the value in fixed operations. Therefore, when times got tough, the infrastructure was in place and the sales culture was in place for fixed ops to “cover the nut.”
The crisis of 2008 and 2009 has passed, vehicle sales are coming back strong, manufacturing is up, and life is good! Savvy dealers will continue to diversify their portfolio and keep their fixed operations strong.
New and used car sales go in cycles, while fixed operations revenue will always increase for those dealers who keep parts and service at the forefront of their business plan.
So how do you diversify your portfolio?
First of all, you must understand that it flows from the top. If dealers and general managers see fixed operations as a sales organization, then all of the personnel under them will, also.
New and used car salesmen need to understand the value of parts and service to the overall dealership operation. If they view separate departments as “them” and “us,” then everybody is fighting to protect their little kingdom and don’t see the dealership as one business and one team.
Techs and advisors have to buy in. Parts personnel have to buy in. Lot porters, cashiers, and all other fixed ops personnel have to buy in.
This takes a lot of work. It’s called LEADERSHIP!
Action points to create a more diversified fixed ops strategy:
- Aggressively pursue fleet business. Go visit them, take a service menu, offer them some type of deal.
- Sell tires (we used to send that business down the road to the Goodyear store).
- Provide complete vehicle detailing.
- Have a fast lube center so people don’t have to go to Goober Lube to get a quick oil change
- Use your fast lube center as the gateway to sell other preventive maintenance services—sell service!
- Work on all makes and models of vehicles.
- Have options on parts (for example: aftermarket parts vs. OEM parts).
- Do complete preventive maintenance, including fluid exchanges and fuel system services.
- Provide extended warranties on services components at no additional charge to the customer.
- Be the one-stop auto shop: so that when people in your area think about automobiles, they think about you.
- Have extended service hours on weeknights and Saturdays.
- Pick up and deliver customers’ vehicles at their home or workplace.
A diversified portfolio is the best customer retention tool the dealership has. It’s also the ultimate profitability strategy.
Bad stuff happens: chaotic presidential elections, $40 a barrel oil, terrorism, economic downturns, unemployment, and the list goes on and on. The mission is not to survive bad times, but to thrive. It’s not just to hang on by your fingertips and hope for the best, but it’s about growth no matter what happens with the external conditions beyond your control.
Those with a diversified portfolio see trouble as “a pebble on the beach,” not the whole oceanfront.
Author: Charlie Polston
Charlie Polston is an Automotive Customer Retention and Profitability Consultant with BG Products, Inc. Charlie has been with BG’s Fixed Operations Division for over 34 years. He has trained over 5,000 dealers, managers, and technicians – and has been a frequent workshop leader at NADA’s annual convention.