19th October, 2016 · AADA Convention

How to increase profit in your service
department

5 minutes to read

Well-run service and parts operations can add as much or more net profits as an additional Tier 2 new car franchise. That was the lesson AADA took away from Lloyd Schiller’s Super Tuesday presentation.

“In an uncertain global economy where new car sales can shift downward in an instant, having a strong service and parts operation can feed profits into the business,” Mr Schiller said.
“Just as the new and used car departments must work together to optimise volume and profits – almost as one department with two options – so too must the service and parts departments operate as one department to optimise both the customer experience and profitability.”

Mr Schiller provided attendees with a road map for improving efficiency in order to increase service and parts sales and gross profits, accommodate customers faster and better for higher customer retention and better CSI scores.

“So how does higher efficiency create those results? Because you can get the same work accomplished in shorter timeframes, or you can get more work accomplished in the same timeframes,” he said.

A process overhaul for better results

Mr Schiller recommended employing Service Reservationists on the service drive, or service only BDC agents with visual access to the service drive via network cameras or similar.

“Confirm (or reschedule) each customer’s appointment with them the prior day,” he said. “During the confirmation call ask, ‘Is there anything else you would like us to address on this visit?'”

Mr Schiller advised adding open recall campaigns to the appointment, and if appropriate, add to-be-installed special order parts to the appointment, ‘scripting’ the appointment for a productive visit, adding a ‘Recommend Line’ to the appointment, previously postponed work from the past two visits, and any needed maintenance.

“Print pre-work order packages so your advisors have ‘a complete game plan’ for every customer,” he said.

Mr Schiller stressed the importance of meet and greets, emphasising eye contact, smiling and a welcoming attitude. Advisors should identify, verify and clarify ‘prime items’, asking permission to conduct a walk-around to check lights, pre-existing damage, and under the hood.

Language is important. Maintenance presentations should be along the lines of “I’ve had an opportunity to ______, I recommend the following service…” or, “Your car indicates _______ service. With your authorisation, we can _____?”

If they say “Yes”, sign them up. If they say nothing or hesitate,
“Do you know how long ______?
Knowing this will enable me __________
based on how long you may be _______”

Following up on unsold work

“We ask our guest, ‘On the work we are NOT going to do on this visit,_______?’ We confirm, ‘So it will be okay if _________?'”

When the follow-up date arrives, call the customer, introduce yourself and follow this script:
“Good morning, ____________, this is ________ from (your dealership). Is now a convenient time to talk? How’s everything been on your car/truck?
“Great…Last time in there were several things that _________. Would next Tuesday be a good day for you, or ________?”

Permission-based communications

“Would you prefer me to call you, email you, or text you?”
Resolve confusion or unhappiness immediately, solicit other family/friends/co-workers/employers’ vehicles’, as well as a CSI response, and thank your guest for their business.

Dealing with questions

How much is that going to cost?
Isn’t that covered by my warranty?
Isn’t that covered by my service contract?
How long will that take?
Do I really need this?

“When the guest asks you a question, this is known as a ‘buying signal’,” Mr Schiller said.
“This applies to any service transaction. Asking you a question really says, ‘I’m not saying No, and I’m not saying Yes. Make me feel smart or make me feel good about saying yes, and I will. Otherwise, my answer is No.'”
“When a guest says ‘that’s too expensive,’ or ‘that sounds expensive’, you ask, ‘What do _______?’ Then you will find out exactly what the issue is. Now you can address that item and again explain the features and benefits, as well as the need for the services, repairs and/or options, or you can set an appointment for when your guest can afford this work.”

Mr Schiller said Dealers should add more commissioned technicians, arguing each tech is worth $200,000 in gross profit per year. Having techs who are not rushed, with fewer vehicles to service, means they will look vehicles over better and advisors won’t “be afraid to sell because they can’t get it out”.

Similarly, each advisor is worth up to $1 million per year in labour and parts gross profit.
“The advisors will spend more time with their customers if they have fewer customers to serve. If your advisors average over 300 total repair orders per month per advisor, you are understaffed; 250-300 ROs per month (or 10-14 per average day) per advisor is the target.”

Express service technicians can complete oil change/rotates in 30 minutes, pleasing customers who want ‘fast in and out’, and allowing your main shop techs to work without interruptions.

Set objectives and post-performance

Mr Schiller quoted Thomas Monson’s Performance Theorem: “When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates.”

He suggested meeting daily, face-to-face, with each technician and each service advisor in his/her stall/desk area to review week-to-date performance on production, CSI, etc.
“This time can be brief, congratulating good performance, or it may be taken up with straightening out communications issues with co-workers, parts, the factory, extended warranty companies, etc,” he said.

Mr Schiller said incentives should tie into objective targets for both technicians and service advisors, based on hours produced, customer satisfaction index/fix it right, labour and parts gross profit generated.

Dealers should also tie advisor incentive/bonus pay ‘cadence’ into technician incentive/bonus pay ‘cadence’.

“If the techs are paid weekly for what they have completed, change your advisors’ pay period to match. If your techs are paid bi-weekly or bi-monthly, change your advisors’ pay period to match. This creates a much greater ‘sense of urgency’ when both the techs and the advisors are focused on closing out the same pay period strongly. It also completely eliminates the need for ‘Draws against Commission’ cheques; you settle and have several ‘closes’ per month. ‘Work in Process’ and ‘Open Repair Orders’ go down and service and parts sales will go up.”

Lloyd Schiller’s simple efficiency ideas that can have a huge impact on service efficiency

  1. Establish a used vehicle classification system to expedite your used car process:

    CPO – $X pre-authorised spending limit, target 48-72 hours lot ready

    A.    Current – 4 model years old or newer/under 100,000km retail with $Y pre-authorised spending limit, target 48-72 hours lot ready

    B.    5+ model years old and older/100,000-160,000km retail with $Z pre-authorised spending limit, target 72-96 hours lot ready

    C.    Check over and obtain authorisation BEFORE proceeding; inspection cost only!

    W – Wholesale unit, does NOT enter service (except maybe for detail?)

  2. Put service carry-overs with repair orders into techs’ stalls before going home; now the techs are ready to begin work when they come in.
  3. Schedule one service advisor/ASM to come in early each week to complete all night drops so these vehicles can be moved and dispatched upon opening in the morning.
  4. Number service parking locations. When vehicle is parked, write location number on the key tag. The next person parking vehicle will cross out previous location and write the new location. This reduces lost time ‘searching’ to find vehicles. Better and faster than using key remote as a locating device.
  5. Set-up dispatch racks by technicians grouped together by similar skills with each tech having his/her name on one slot. When reviewing ROs, pre-assign RO into most ‘likely tech’ based on skills and availability. Place ROs in tech’s slot.
    Pre-assigning jobs reduce time by:
    a)    not having to review ROs again
    b)    reducing the technician’s time spent waiting for the dispatcher or group leader to assign the next job, and
    c)    when techs see work in their slot, they work faster.

Schiller reiterates that quality control of “easily understood repair orders and descriptions prior to dispatching” are key to efficiency and attitude!