Are you making customers or making money? The correct answer, of course, is “yes.” Obviously, you can’t make money without customers; yet simply having a large customer base won’t automatically make you any money.
One west coast dealer summed it up perfectly when he told me, “we sell new cars for the purpose of making a customer so we can get them into our service department for maintenance—so we can make some money!” This is a profound truth from a man who gets it! As we say in Oklahoma, this is a guy who knows who’s putting the butter on his bread – it’s fixed ops!
He went on to say, “With variable ops (new and used cars), you start over every month, really every day. Yet with fixed ops (parts and service), you have a consistent clientele, a consistent revenue stream, a consistent loyalty. The future of the automotive business is maintaining the car in our service department; it’s the only way we can make any money.”
Follow the Money Trail
The service department typically produces 70% gross, while new car sales produces about 5% gross. So which is better, chasing $.70 on the dollar (service sales) or $.05 on the dollar (new car sales)? I’ll take $.70 on the dollar any day!
Not only does fixed ops produce the most gross profit, it produces the most net. According to the 2013 NADA Data Statistics (for the average dealership), the new car sales department produced $72,600 net, the used car sales department produced $85,200 net, and fixed ops brought in a whopping $313,000 net.
New vehicle sales have made a comeback, and the last half of this year looks even stronger; yet the biggest share of the money that dealers take to the bank still comes from parts and service!
The Service Drive is the Other Sales Floor
Just to clarify, you can’t make money waiting for warranty work to roll onto the drive. You can’t bring in serious revenue by hoping something breaks so you can fix it. You’ll never get rich on oil changes. Good customer satisfaction and customer retention numbers, while important, won’t add dollars to the bottom line. (These are merely the means to the end).
The only way to add dollars to the bottom line in fixed ops is to SELL SERVICE. The only way to grow the department is to sell service. The primary job of a service advisor is to sell service.
Listen, the pressure is on, the stakes are high, the profitability of the dealership depends on it; this is serious business. The general sales manager won’t tolerate salespeople who can’t sell cars; it’s high time the service manager stop tolerating service advisors who can’t sell service!
Quality Trumps Cheap Every Time
Speaking of selling, be sure your service advisors are selling the value of your greatest asset: Quality! Any moron can write up a cheap oil change, but it takes a true automotive professional to extol the value of quality parts and quality work performed by quality technicians. You are never going to be the cheapest guy on the block. You will never win the price battle, so quit focusing on that and, instead, sell value.
Brian Canning, a 30-year veteran of the automotive business says it best: “Unapologetically recommending the best parts and the best services to meet and exceed our customers’ expectations is the key to selling with confidence and without reservation. This is true because we believe it to be true and because we passionately believe in the great things we do for our customers!”
Do your advisors truly believe that your service department does quality work and your parts department sells quality parts, fluids, and chemicals? Do they trust the technicians? Do they have their own vehicles serviced in your shop? Do they recommend your shop to their friends? If not, then you have a problem.
Spend Your Time Where it Counts
Savvy dealers and general managers spend a good chunk of their time in fixed operations. Earlier this year, I conducted a two-day training workshop for a mid-sized dealer group in the New England area. I trained service advisors and service managers on day one and conducted a leadership and accountability session for general managers and service managers on day two.
Here’s the thing that blew me away: both owners were present for both meetings. We’re talking about two days from bell to bell with the dealers present and fully engaged in the discussion.
My friends, when fixed ops personnel see their dealer giving that kind of time to their department, it sends a strong message of commitment and support. The boost it gives to morale and the message it sends about accountability are priceless. The takeaway here for dealers and general managers is to take an active role in your parts and service departments, especially during training sessions. I’m not saying you have to lead the training, just be there and weigh in as you see fit.
After all, remember who’s butterin’ your bread!