How does your net profit look so far this year? Are you making all of the money you deserve? If you answered “yes,” then I congratulate you for a job well done. However, if you answered “no,” then I must ask what you’re going to do about it? If you are like many other dealers/managers, you might be focusing all of your efforts on cutting expenses as opposed to increasing revenues. Do you really believe you can save your way to a profit?

Often times when the front-end starts selling fewer vehicles, and the “red ink” starts to flow to the bottom line of those departments, the dealer will approach his fixed operations team, the ones making a net profit (black ink), and instruct them to start cutting costs.

I recently received several e-mails from service managers asking for advice on how to handle their dealer who has instructed them to lay-off a service advisor to help cut costs. The dealer stated that the manager could then fill-in for the missing advisor, who by the way was writing 18 repair orders a day. Do you see a problem with this logic? The front-end is losing money, so let’s go to the back-end, which is making money, and cut back their ability to remain profitable by eliminating a “revenue producer.” Smart move, huh?

Let’s get serious about service and analyze what the real consequences are of this action. First, do you really believe your service manager will be able to spend the time needed to properly service 18 customers a day? After all, the advisor spent the entire workday with 18 customers. Now you’re asking the manager to handle that job, plus managerial duties. Something’s got to give!

Usually, most managers can’t stop managing. So the majority of these 18 customers will be dispersed among the remaining advisors, who were already working with 18 customers a day themselves. That means if you have two remaining advisors, they are each now working with about 27 customers a day. That results in about 50 percent more time on the phone, probably 50 percent more time with the dispatch process and twice as much time delivering vehicles back to the customer when completed. The problem with this scenario is that the remaining advisors do not have 50 percent more time available on the clock.

Now, your remaining “revenue producers” will produce less revenue because they don’t have the time to sell. They don’t have time to conduct vehicle walk-arounds with customers or make proper phone calls to up-sell to customers.  Also, follow-up calls become neglected and maintenance menus are not presented to every customer.  Now, your CSI, service absorption and service net profit are all heading south.

So, let’s compare this scenario to the sales department. Since the front end sales are slowing down, do these dealers then layoff their salespeople, and instruct the new car sales manager to start taking “UPS” and stop managing? Do they inform the used car manager to stop wholesaling, stop appraising trades, stop working the auction and start taking “UPS?” How about the finance director; do they tell them to stop working the banks for approvals and making menu presentations to buyers so they can take “UPS?”

What about advertising? Do these dealers cut their variable advertising by 50 percent, or do they increase advertising? Do they stop conducting “event sales,” or do they schedule another one? Speaking of advertising, what do you think happens to the fixed operations advertising budget (assuming they have one)? You’re right, it just got cut! If you’re one of these dealers or general managers, I ask you, “What is it about making more money that you don’t like?”

The time has come to get serious about service and examine the opportunities for profit improvement that are abound in service. For example, how many sales opportunities do you have per day in your service drive? In my example above, the three service advisors averaged 18 repair orders per day for a total of 54. Let’s say that 20 percent (11) are internals; that leaves 43 customers (opportunities) to work with. How does that number compare to your showroom floor? Let’s assume there are 10 salespeople in this dealership, and they each average three “UPS” per day for a total of 30. Many dealers have at least 50 percent more sales opportunities per day in service versus sales, just like my example. Why would you want to cut costs in servicing your loyal customers while increasing your costs to bring in new ones?

Research shows that over 70 percent of service customers who bring their vehicle back to their new car dealer for ALL service and maintenance needs will buy their next vehicle from that dealer. Do you have a process in place to identify who these customers are? Are you maintaining regular contact with them? Does your sales department monitor the mileage on these customers’ vehicles, and advise those customers on special financing, rebates, etc.? How about sending the loyal customers a letter or e-mail advising them of you need high-quality used vehicles, like theirs, and you have buyers waiting. I’m sure we all could come up with a good list of the many reasons why we want these vehicles as trade-ins and would certainly like to deal with a repeat customer versus a new one.

In comparing the salesperson to the service advisor, who has the most sales opportunities per day? Who gets the most phone calls per day? Who gets the most sales training? Who gets the mot marketing support? Don’t you think it’s time to get serious about service?

Vol 4, Issue 6