Why are we allowing this to happen? Let's talk market penetration and untapped owners instead of crying wolf. If a dealership had a planning potential for 1,000 new vehicles, how long would (could) we be satisfied with annual sales of 310 to 320 vehicles, a market penetration of 31% to 32% or less? We have developed highly skilled sales staff for selling vehicles. Why do we ignore selling in fixed operations? This is exactly what we are allowing to happen to our service and body shop business. Why are we willing to give up 68% to 69% of our market share, the market share we created and the customer whom we had the first chance to lock into our continued business and, therefore, our profit cycle?
By factory design we get 100% of the high-skilled technical warranty work. As franchised dealerships this work comes to us as the only ones who are allowed to do this type work and get paid to do it--for now. Do not be surprised if in the future this valuable work is authorized to be accomplished elsewhere.
MARKET SHARE
The customer pay market for labor sales that we create by selling new vehicles is enormous. To calculate your unique ANNUAL customer pay labor dollar amount, multiply your total new vehicle count for the last 6 years times 10 flat rate hours per year times your customer pay effective labor rate. For example, selling 1,000 vehicles a year average for the last 6 years times 10 flat rate hours average per vehicle per year times an effective labor rate of $50.00 = $3,000,000.00 of customer pay labor each year created by your selling new vehicles.
Leasing is changing our marketplace and the ownership of vehicles. Maintenance is still required by this contract and damages may be assessed if this service is not performed. Are we informing our owners of these facts? If we do not, we are doing our owners (and ourselves) a disservice.
PARTS-A HELP OR A HINDRANCE?
We should have concern when we will sell our parts at wholesale to our competition with a gross profit on these wholesale parts sales of 17% to 20%, and yet we will not sell it to our own service and body shops at these prices. The gross profit benchmark for labor sales is 65% to 70%. We are encouraging our parts department to give up 65% to 70% gross profit on labor for 17% to 20% wholesale gross profit on parts sold to someone else who will make 65% to 75% on their labor sales. The parts department will also deliver the parts to wholesale customers (competition) and in many cases cover the freight bill. From a pure business standpoint this is a difficult tradeoff to explain. Why not give your service department the same break? We must remember to lock our car owners into our dealership so they will purchase their next vehicle from our dealership-a sound business practice.
PREVENTIVE MAINTENANCE
We can match our competition in the market place and make a profit once we realize how they do it. Our competition is defined as anyone who maintains or repairs vehicles-dealers, mass merchandisers, quick lube shops, etc. When have we actually shopped them? Evaluated their business practice? They do not use class A or B technicians to do oil changes or transmission services. They also do not mark up their competitive parts 40% either.
WHY GIVE UP MARKET SHARE?
You have the first choice to retain the customer. Are you prepared to make this choice and make the associated profit? Do you have the procedures and tools in place?
1. Do your sales departments have a proper delivery process, effectively introducing the new and used owners to your service and body shops? Every franchised manufacturer has an excellent process which is normally severely shortened or circumvented completely.
2. Do you have a competitively pre-priced maintenance schedule that is given to every owner at the time of delivery?
3. Has your computer system in the service department been set up to recommend maintenance? Does it follow factory-recommended maintenance?
4. Your effective labor rate should be equal to your posted labor rate.
5. You should have maintenance refusals coded in your computer to indicate this refusal on the work request, invoice, and permanent computer history.
6. You should train your service advisors in one of the many formal selling systems and monitor their selling. Have one of your best vehicle salespersons monitor the selling techniques and words used on your service lane by your service advisors. If work is not sold here it will not make it to your financial statement. Technicians are secondary service salespeople at best!
7. Do not show flat rate hours or individual parts prices on the repair order unless required by your state or franchise. Only show totals.
GET MOTIVATED AND COMMITTED AND GO AFTER OUR MARKET SHARE WITH THE SAME ENTHUSIAM AS WE DO FOR VEHICLE SALES!
Gene White is president of Gene White Management, Inc. For the past 21 years, Gene White has participated in dealership evaluations and training (automotive and heavy duty trucks) and conducted workshops for NADA, ATD, FADA, NACE, WD&S, State Associations and 20-Groups.