If it hasn’t already, the recent regulation changes to governing Finance and Insurance products will soon be setting alarm bells off across most dealerships.
F&I has always been a major source of income in the automotive industry so any tightening of government regulations on operations will have far-reaching and hard-felt consequences – impacting heavily on a dealership’s bottom-line.
With F&I numbers set to dwindle or, at least, stagnate in growth, one of the following areas in the dealership will have to step up in its place:
- News Vehicles
- Used Vehicles
New Vehicles departments are already operating on tight margins as it is so there are no clear revenue streams available to support additional profit initiatives.
Used Vehicles is a similar story, again bound by limited opportunities for additional revenue in a tight market.
If both departments are well-managed, the required replacement income cannot be saved in either, at least in any meaningful capacity.
Expenses are also under pressure with utility costs continuing to rise, matched in growth by the ever-present focus on keeping and attracting important staff members to the dealership which is driving employment costs ever higher.
The traditional view among dealerships has been that having a strong and steady back-end cushions the dealership against the highs and lows of vehicle sales. Perhaps it is time to also include F&I in this focus by further galvanising the Aftersales department.
Outlined below are 5 simple and practical ways in which this can be done.
Embrace and accept the role of the Service Plan.
The Service department landscape has changed significantly over the past 10 years. Most manufacturers now have a Service Plan in place, in the form of Capped Price, Fixed Cost, Menu Price, or a unique manufacturer’s offer.
This, for the most part, has been of great benefit to the dealership and has drastically changed customer perspective on servicing costs. Considering this, service staff must be highly vigilant in ensuring existing or potential customers are not driven away in the process of generating additional service opportunities.
The 3 most effective ways to maintain this equilibrium but still expand are by:
- Selling exactly what the customer needs – Technicians and Service Advisors need to work to together to not only identify all service items that require attention but to also ensure they are not missing any items. Important or minor; every part counts.
- Completing all work in a single visit – This is only possible as a result of understanding all servicing needs and recommendations (as outlined during a customer’s last visit) at the time of the appointment booking. This prior knowledge ensures all required parts can be pre-picked, any additional work can be quoted and approved and, where necessary, alternative transport methods can be organised for the customer if the vehicle needs to be kept over.
- Following up service quotes given – Closely linked to the previous point, staff need to ensure that any quote for additional work not performed on the day of the service is followed up in a timely manner.
Maximise workshop efficiency.
A recent visit we made to a dealership workshop gave up the following scenario:
Technicians were vacuuming each vehicle at the end of each service.
This may seem like a prime display of customer service – which it undoubtedly is – but in terms of workshop efficiency, it is an unnecessary time-waster.
Let’s examine the time to dollar breakdown:
- It takes each Technician 10 minutes to vacuum the vehicle
- If there are 30 repair orders for the day, the total time Technicians spend vacuuming vehicles is 300 minutes (5 hours)
- The per hour labour rate for a Technician is $150.00
- 5 hours @ $150.00 = $750.00
$750 of labour is being lost each and every day, without even beginning to calculate the opportunity cost lost with Technicians performing tasks that could be best performed by others.
This is just one example of dozens. Imperative to efficiency is the need to review all facets of the workshop but, in particular, these additional areas are traditionally where most time is lost and would be a good place to start:
- Waiting for spare parts
- Moving vehicles in the car park
- Inefficient workshop layout
- Incorrect tools and equipment
Employ a high quality Workshop Controller
The workshop controller is essentially the Air Traffic Controller of the Service department, controlling vehicle movements with the same pre-planning and military-like precision seen in an airport control tower.
For this reason, a Workshop Controller requires a particular set of skills so it’s critically important that whoever is employed in this role is up to the task. After all, they are the fulcrum of the department.
Required skills include but are not limited to:
- Effective leadership – the ability to motivate, mentor and drive the team of technicians to perform at their best each and every day
- Excellent communication skills – being able to effectively interact and work with Advisors, parts staff and the Service Manager, as well as the other dealership departments.
- Outstanding organisation – an ability to manage time effectively whilst still paying great attention to detail.
When the Workshop Controller has the department running efficiently, advisers can book additional vehicles in each day, with confidence. Add one additional repair order per day (five repair orders for the week) and the additional revenue starts to add up very quickly – with minimal change to operating procedures.
Revisit parts selling opportunities
New and Used Car departments have embraced electronic media to display their inventory. It is time for many Parts departments to do the same.
The dealership website is a starting point for review. Ask yourself, how well is the Parts department story being told? Are customers being made aware of the full range of accessories and merchandise? How about delivery service, trading hours and even the experience and expertise of the parts team?
The New Car department are a key customer for the parts team that is too often underutilised. Look around the showroom and critically review the accessories and merchandising display. The parts team’s collective skillset does not always include the creative elements required to display accessories that will capture customer attention and therefore assistance or guidance in this area may be required; but then again, maybe not. It may be surprising who in the workshop has hidden creative talents that can be harnessed to improve promotion of the parts department.
Monitor budgets, targets and daily selling figures
In our experience training and consulting with Aftersales team members, it is surprising, frustrating, and scary how little understanding there is of financial data within dealership staff which, as a result, is paid little to no attention or is not available at all.
In every dealership, the sales team will be aware of the monthly sales targets and their progress from their daily sales meetings. Targets are displayed prominently on white boards in Sales Managers’ offices and in the board room.
Walk across the dealership to the parts and service departments and none of the sales targets or daily performance numbers will be seen. It may all be available in the DMS but that is where, in most cases, it stays. Displaying these targets is a simple step that can have a major effective or work ethic, motivation and accountability.
These 5 focal points of performance present the most accessible option for revenue growth and can be readily implemented across most dealerships with limited disruption or fundamental shifts in process. That being said, the task of generating additional income cannot be wholly the task of the Aftersales team, but a combined effort by all dealership staff.
In conjunction with the examples outlined above, it may be time to take a step back and look at operations from above to see if all the processes and procedures within the dealership are working at their fine-tuned best.
We, as automotive professionals, are getting good at adapting to the changing landscape of consumer behaviour but sometimes it takes a major curve ball, such as a government regulation change, to make us look a little deeper at our operations – something that we all should be doing before those alarm bells become deafening.