It continues to amaze me how much a relatively minor portion of the vast Aftermarket is influencing the actions of automotive dealership service and parts. Of course, the aftermarket size versus the dealer size is like comparing, say, the size of a grape versus a watermelon, the dealers being the grape of course. It’s common knowledge to those who care that the aftermarket captures some five times plus the labor and parts volume of dealerships, even though franchised dealerships generate 100% of the opportunity.
Here, take this
When serious competitive service franchises began appearing (some 50+ years ago now), such as J.C. Penny (yep), Montgomery Ward (no kidding), and Sears (so sad), they began growing primarily because they locked into services dealers weren’t interested in doing. Probably the number one item was tires (we can’t waste our time doing unprofitable dummy work, was generally the dealer attitude), and secondly air conditioning installs. Yes Virginia, many cars and trucks didn’t have them unless special ordered, so the aftermarket jumped in with both feet with an economical install at half the dealer price.
The beneficial situation for the customer was that these mini-shops were located next to the huge “shopping mall” (a relatively new concept where one could peruse their butt off and spend even more nickels and dimes). Eventually these frontrunners lead to a proliferation of Firestones, Meinkes, Precision Tunes, etc., franchises and even more competition. Later (80’s) the quick lube concept popped up its competitive head (thanks to Pennzoil), and by the late 90’s these super-convenient-located mini-shops were being built only blocks apart in some areas!
All this while, the factory builds were shaky at best (that’s a compliment), especially the domestic brands, where there were enough warranty flat rate hours and parts sales to fill up one-half to three-fourths of the service department capacity every month. Sending service business elsewhere was necessary just to keep up with the current vehicles’ numerous warranty maladies, huge repair needs, and massive maintenance requirements. Keep in mind these were the days of three to four hours per customer repair order, warranty too, since most components were repaired, not replaced.
“Our goal is to provide the independent shop experience from day one, including cementing the guest/ASM relationship permanently.”
While all of the above was going on, the many service stations, which primarily provided fuel and very simple services such as oil changes, were rapidly turning into purveyors of adult beverages and breadstuffs. Independent shops, often formed by disgruntled ex-dealer techs sick of warranty (the flat rate times kept dropping for the exact same work – what the?), were growing at a rapid pace capturing even more patrons for all types of service work. And that pace continues today at some 84,000 registered locations and growing (compared to maybe 17,000 dealerships – what’s today?).
Over a rather short recent period compared to the total years of automobile-dom, vehicle quality has improved dramatically so that warranty labor and parts income crashed from up to 75% of the flat rate volume to as little as 15% (not including fickle recalls). At the same time, manufacturers, always competing, decided to eliminate or hyper-extend some 80%+ of a vehicle’s maintenance requirements so that first owner vehicles require tiny amounts of maintenance compared to just twenty-five years ago. Look ma, no upkeep!
This brings me to now, and the drive for dealers to compete for service and parts business like never before. It’s obvious that the first item on the manufacturers’ list was to clone themselves to the competitors they perceived as the strongest competitors – that being the quick service centers.
Unfortunately, the one item impossible to overcome is location, so even with “freebie” first basic services offered by many, customers more often chose to pay for the convenience of a location. So, another fix to combat the darn location issue is to open extra hours and promise a very fast in and out, sometimes promising that with no appointment (we all know where that idea ended up). And, if the dealers wash and vacuum vehicles, pay for free food and drinks, install work areas with “free” Wi-Fi, and even more better, places to get your toenails sharpened – that is bound to overcome location. And ta-da, let’s price it so attractively that it will be a no brainer when the free stuff is over to overcome the pesky location factor! Hey, how about complimentary loaners – that will do the trick.
Well, it’s not exactly working so well. I am seeing dealer service profits sliding like the hills around the Pacific Highway, and the personnel and other expenses related to providing all these special extras growing like the Las Vegas tourist taxes. It’s not that copying the perceived competition isn’t understandable; but through all this extraordinary effort and expense it isn’t paying great dividends, if any for some who are losing their donkey.
Overcoming location is the most difficult of all customer-retention obstacles as I see it, and I’m speculating that it is for most of you. Unmanaged traffic patterns, disheveled and inadequate roadways, and time demands make the location factor even more impactful. On the other hand, there is an almost uncultivated method, which tends to minimize most any negative factors – a personal relationship with a technically skilled automotive mentor and coach. Where are these useful creatures located? They’re at the independent shops dealers helped create (70% +++ customer retention).
Maybe this professor…
The really good news is that wise dealership management can create a similar retention situation by committing to establishing an aggressive program similar to an independent shop, by rethinking the assistant service management staff (ok – advisors).
In the past four years I have worked diligently with a good-sized dealer group (30) to aggressively train these most important employees in technical and verbal skills which has helped gain the group a whopping 25% increase in customer repair order count. Now, getting the work performed in a timely manner is the largest issue.
Each ASM has been taught to be diligent about building and maintaining his or her personal book of business, while the call centers help ensure guests remain with the same manager at each visit. The ASM staff now supervises the tech staff for the first time, and we are continuing to saturate them with technical information and standards to utilize in supervising the shop personnel. When techs have completed a job successfully and on time, the protocol is that they are “thanked” by their new boss every time, a simple but effective way to create more positive behaviors.
A hard and fast rule is that every guest is educated about their future tire and brake needs (planning the budget), the next “required” service interval, contents, and the group’s “everyday low price” before they depart – no coupons needed to get a fair price. All cashiering is done by each ASM too, which helps to ensure the Active Delivery Process is intact.
While not perfected yet, the impact of these operational fundamentals has been amazedly positive, including vastly improving the overall morale of service as well as parts personnel. Yes, a few managers didn’t make the cut; but the absolute importance of the ASM position to the future retention in service, and ultimately another vehicle sale, left no choice but to retain/recruit the very best – nothing less.
Our goal is to provide the independent shop experience from day one, including cementing the guest/ASM relationship permanently. Another bonus is the ASM staff turnover has been minimal – no professional wants to leave an established book of business to start another somewhere else. Consequently, CSI is excellent too in a less stressful environment for both the guest and the ASM.
If you have a hankerin’ to see the written job function for these professional ASMs (we use it for performance assessments), email me a note to EKovalchick@dealer-communications.com and put on the subject line, “Gimme that ASM Job Function brother,” so I knows what to send ya. It will be almost painless, I promise.
Author: Ed Kovalchick
Ed Kovalchick is the CEO and founder of Net Profit Inc., Alabaster, AL, an international fixed operation consulting and training firm located in Alabaster AL. Mr. Kovalchick and his firm have assisted hundreds of dealers and manufacturers, and conducted workshops throughout the world for thousands of students since 1979. He has written columns for Dealer Magazine since its inception. Reach him at Ed@NetProfitGroup.com.