The Paradox of Aftersales

When asked what area of the dealership was the most important for the overall success of their business, many Dealer Principals respond with New and Used vehicle sales.

However, that’s the wrong answer and is symptomatic of the industry where dealerships invest their time, energy, training and marketing in their New Vehicle Department, ignoring the potential earnings of their Aftersales Division (Fixed Operations).

Far too many Dealer Principals disregard their Service and Parts Departments.      Why?

Most Dealer Principals gained their experience in vehicle sales and have little or no understanding of their Service and Parts Departments.

Although the Service Department is the most complex department within the dealership, when it is well managed it has the capacity to be the most profitable.  

The reason why vehicle sales are so important is not because of the margin and incentive earned by that sale, but because of the potential dealership earnings from that vehicle during its service life.

Dealer Principals should never ever underestimate the earning potential that one vehicle sale holds.

The average vehicle could return to the dealership approximately 6 times or more depending on its recommended service intervals and warranty duration. The potential earnings to your dealership for a mid-size SUV just on routine maintenance during its warranty period exceeds R100,000.00 (Labour, Lubricants, Parts & Consumables). And this does not include tyres, paint chip and windscreen chip repairs, wheel alignment, air-conditioner services and other upsell opportunities.

Certainly, in most cases, the salesperson concluding the sale is unaware of the potential earnings they have created for the dealership.

The vehicle sale is an investment in the future profitability of the dealership through the Service and Parts departments.

It is surprising that many Dealer Principals do not understand this. Those who do take firm control of their Fixed Operations.

A vigorous Service Department is the foundation for customer retention, customer satisfaction, and most importantly for the dealership: Dealership Profitability.

When I was in charge of the Aftersales Division for a major OE I was surprised at how many Dealer Principals were disappointed in their Service and Parts Departments.

However, in virtually every case the Dealer Principal was disconnected from his Service and Parts Departments. Dealer Principals generally are never in their service receptions during the peak morning and late afternoon periods, do not mingle with their customers, walk through their workshop and parking area, check the state of their parts warehouse, and are detached from the Service and Parts Department financial KPI’s.

The analogy is being a passenger in a plane as it taxis down the runway and seeing the pilot leave the cockpit and walk down the aisle towards you.

So while Dealer Principals have an abundance of information on the Aftersales Department’s financial KPI’s, including the Service Department’s Customer Satisfaction Index, they pay relatively little attention to the financial powerhouse of the dealership and its achievement against it’s potential earnings.  

What should Dealer Principals be concentrating on:

• The financial well being of their Parts and Service Departments utilising a few well-chosen KPI metrics.
• The synergy between their Sales and Aftersales Departments.
• Customer Satisfaction.
• Customer Retention (if a customer is a repeat customer that R100,000.00 annuity can grow multiple times).
• A pleasant and inviting facility.
• Passionate employees.
• Employee Satisfaction.
• Recruiting the best, not the least expensive.
• Regular financial KPI reviews with their Parts and Service Managers

When analysing their financial KPI’s, Dealer Principals are not accountants, they simply want to know what they should do at an operational level.