In the midst of Covid-19 lockdown and the reversal of the economy many dealerships are fearful for their future. Having being so focused on sales they are oblivious to the fact that their Aftersales division is the mainstay of the dealership.
See my previous blogs for perspective:
Holding less stock and retrenching staff will not enhance dealership profitability and viability, but the larger the Aftersales absorption rate, the better able the dealer to generate a profit.
A robust Aftersales division enables the dealership to make a profit even when new car sales and units in service are on the decline.
The reason why vehicle sales are so important to a dealership is not because of the margin or manufacturers incentives earned by that sale, but because of the potential dealership earnings from that vehicle during its service life. Each vehicle sale is an investment in the profitability of the dealership through the Service and Parts departments.
Even though vehicle usage has declined during lockdown, vehicles will still need maintenance according to their service schedules and manufacturers warranty requirements and vehicles will still require repairs whether under warranty or for the customer’s cost.
It is time to stop viewing your dealership as the “Sales Department”, The Parts Department and the “Service Department.” Rather, it’s time to view your dealership as a business whose various operations are reliant on each other.
Typically, when the Sales Department starts selling fewer vehicles Dealer Principals will approach the Sales, Parts and Service Managers instructing them to start cutting costs. As a result the entire dealership focuses their efforts on cutting expenses as opposed to increasing revenues.
Question: Do you honestly believe it is possible to save yourself into a profit?
Sell your way into a profit by increasing your Aftersales revenue !
Whilst New Vehicle sales will be under pressure, vehicles currently in operation will still need servicing and maintenance according to their service schedules and manufacturers warranty requirements, and vehicles will still require repairs.
Much of this work will be covered by service plans and warranty and is therefore captive.
The fact is your workshops will still have work and the potential to maximise revenues through vigilant management and improved efficiency.
Consider a daily service sale review with your service advisors and technicians.
Discuss the following:
- Service is serious business.
- Communicate goals (Labour, parts & lubricants and upselling targets).
- Labour, parts & lubricants and upselling achievements to date.
- CSI performance.
- Areas requiring improvement.
- Deliver value to each and every customer.
- Monitor jobs per day by service advisor.
If they’re dealing with more than 15 customers per day, it is stifling potential. The more time they have to spend with each customer on booking in, the greater the sales potential and the higher the CSI.
- For service advisors to reach their sales potential they must have the support of technicians, the washbay, and administrative staff (Costing and warranty clerks)
Manage these 15 Controllable Areas of Service
- Gross Profit
- Clocked Hours Worked
- Productivity & Utilisation
- Idle time
- Comebacks & Rework
- Effective Labour Rate
- Average Labour sold per job card
- Parts Value to Labour Sales Ratio
- Number of Repair Orders Written
- Workshop jobs per head per day
- Workshop revenue per head per day
- Productive costs per hour
- Non-Productive costs per hour
Each morning check the following:
- How well are we doing against these 15 controllable areas of service?
- Are our actions achieving departmental and organisational objectives?
- What MUST we improve?
- What can we improve?
Constantly Measure and Monitor The Service Process:
- Arrival & Greeting
- Vehicle Health-Check
- Raising the Work Order
- Pricing and Authorisations
- Maintenance & Repair Operations
- Tracking & Communication
- Preparation for Delivery
- Vehicle Delivery
The value of each technician:
Each technician has the ability to generate more than R675,000.00 profit annually.
Whilst the actual number may vary somewhat from dealer to dealer, the gross generated is significant.
Dealerships typically gross:
- 5%+ on new cars,
- 13%+ on used cars
- 39%+ on parts.
- And 70%+ in the service department !.
The quickest way to increase your Dealership gross is to sell your way in to a profit by being more efficient and by selling more service.
Industry figures claim the closing rate in the New Vehicle Department is in the region of 30%.
In the Service Department however, the closing rate is usually 100 percent!
In service the sale is already done. Every customer driving into the Service Reception is likely to produce revenues for the dealership and therein lies the amazing potential of the Service Department.
Contact Amatz Automotive for a comprehensive plan to Optimising your Dealership Revenue.
Dealer Development, Dealership Assessments, Operational Process Development, Customer Satisfaction Interventions, and Training Solutions.