Most technology companies are hungry for growth to increase their profitability. This growth can come from new products via innovation or new markets for their products. A perfect example of this has been Apple. As a personal computer company they used innovation to come up with various new products like the iPod. They found a whole new market for their technology with the iPhone. In addition, they increased their current personal computer market via innovation with the iPad – a computer that is easy enough for anyone to use! Unfortunately, as franchised dealers your ability to have new products depends on the factory and state laws often limit your market area. How can you find more profit when your type of business restricts growth using typical methods?
A dealer recently asked me to run a report of his best selling aftermarket items. It was easy to look at reports in F & I and determine what was selling the best with the most gross profit, but I decided to look at what was not obvious. I ran a report of the customer pay (not internal) repair orders for items that customers had added to their vehicles shortly after their purchase. By excluding the internals, I was able to eliminate the due bills for items sold with the vehicle sale that we already knew about. The four most common items for his dealership were trailer hitches, bug shields, mirrors, and bed-liners. Most likely these items were not “sold” by the service advisor but requested to be installed by the customer. Since his current sales to service retention rate was less than 30% after one year, it made sense to add these items to the list of products already being offered in the F&I office and aftermarket department. If only a small percentage of customers were coming back into his service drive and asking for these items to be added to their new vehicles, then how many were slipping away and having this customization done by a local vendor instead of his dealership? I realize that you might already have a full menu of aftermarket products being sold during the vehicle sale process – but could there be more? One way to find out is to query your repair order database and see if you’re missing out on some items that customers regularly request to be added to their vehicles on the service drive within the first few months.
Unfortunately there is no pre-built report with this data on most DMS systems, so you’ll need to do a little technology work. The first challenge is that there is normally no mileage or sold date field in the labor lines on your DMS. You need to download for the past year the repair order “header” that has the mileage, year, make, model, advisor name, open date and hopefully the vehicle’s delivery date. Next, download all the labor lines for the past year. Using the Vlookup function in Excel, populate the labor lines with the detail you need to start filtering. Using AutoFilter, find your target profit repairs by either mileage or delivery date and then remove the routine service items. If you only requested Customer Pay, then you won’t get due bills or warranty items. When you’re done, you’ll be left with those profit potential aftermarket items. Compare that list to what you currently offer in the aftermarket office and you’re sure to find new markets and products like my dealer friend did. Of course, this is nowhere near the innovations and discoveries that Apple has found, but in our industry, every little bit helps.