70% of Your Dealership’s Profitability!

According to some of the business models employed within this industry your dealership should realize as much as 79% of its profits from service. My question then is, how are you managing your service department to maximize this opportunity?

Where is Your Focus?

It seems to me that most dealer principals spend more time managing their sales professionals and sales department than the service department which actually produces the profits. Many invest in software tools for CRM and managing the sales funnel but how many utilize advanced tools to measure and manage their technicians and maximize service department profitability?

Now I am in no way suggesting sales management is not important, we all know it is but I am suggesting we can do better at managing the function of the dealership where profitability is actually realized.

What Does Good Look Like?

When I question dealer principals directly I usually get a response that they run reports on service metrics to measure service performance. While an excellent practice, if you are doing this what is the baseline you are using to measure your results? Simply put, what does good look like, and are you really good?

Let me illustrate in a couple of specific areas.

Technician Performance

I recently reviewed an assessment of the service department for a relatively small dealership with less than 10 service technicians. Based on their internal “rankings” they expressed concern about the performance of several of their service technicians.

This review compared their service performance against a large national database and part of it graded service technicians from ”A” to “F” based on a number of measurements. What caught everyone’s attention was that not a single one of their technicians scored an average above a “D”. Further analysis of these results showed that by simply managing all of their service technicians to a “C” level would provide tens of thousands of dollars additional profitability to this dealership.

I believe this illustrates the question of what does good look like: instead of being concerned with a couple of individuals this dealership should be taking steps to improve performance across the board.

Performance of the MIF

Similar to the previous discussion do you know if your MIF is performing as good as it can and what could be gained from improvements.

If we were to analyze your in place population by model and compare it against thousands of other devices of same model across the country how would your parts usage and call frequency stand up?

I can tell you from experience that the average dealership can improve profitability by tens or hundreds of thousands of dollars per year by identifying those units with above average service expense and managing them down to the national average. The potential within your own dealership would probably amaze you!

Additional benefits are improved client satisfaction and therefore retention, and the ability to identify additional or supplemental training for specific technicians.

Marketing Ramifications

So now to what I believe is a bit of novel thought: how do you leverage this type of detailed analysis within a marketing strategy to drive higher profits for your dealership?

Since most of us agree that the function of sales is to place units so that we can realize profits on the aftermarket would it make sense to incent sales professionals to sell those models that drive the greatest profitability within their target volumes?

For those of you attempting to move into MPS how about the ability to compensate your sales professionals on a combination of hardware placement, capturing page volumes and profitability within an account? Do you think this may cause them to place the correct hardware and manage the account to greater efficiencies?

Summary

If you are already doing all of these things I congratulate you; you are definitely ahead of the curve. If you are not then this effort may provide one of the best returns on investment of anything you could do within your dealership.

There are resources and support available for you today that enable you to compare your performance against national averages with minimum effort on your part. Now as with anything else if you do nothing with the information then you will gain the same – nothing. However, if you manage to these numbers you are going to be surprised how much more efficient and profitable you can become while increasing client satisfaction.

To reiterate here, the value is the ability compare against what good is based on a very large set of service statistics, not just within your own organization.

If this discussion caught your attention and you would like to pursue it further please contact me (ghawkins@buscomgroup.com / 602.989.5667) at your convenience.