Service Lane Profitability

Missed Opportunities:

Leaving Money on the Table

When was your last service department sales meeting? I’m not talking about a typical shop meeting that you have never an issue arises. Rather, I’m talking about a weekly or bi-weekly meeting of all the personnel in the “fixed ops family.” The purpose of the meeting is very focused and intentional: to teach, to motivate, and to hold accountable everyone involved in the services sales process. I’m referring to management, advisors, techs, and parts personnel…everyone is responsible for service sales!

I’ve spent most of my 27-year fixed ops career conducting these meetings at the local dealership level. The format of the meeting is always the same: (1) Inform everyone of the facts and figures, celebrate the victories, and point out the missed opportunities, (2) Implement a process to turn opportunities into labor hours and labor dollars. (Note: As labor hours increase, parts revenue increases with it…therefore savvy parts managers should have a vested interest in attending the service sales meeting!)

Let me re-state the meeting format a different way. In the service sales meeting, you must discuss: Where you have been, where you are headed, and how you will get there. The best way for me to communicate this concept is by way of a real-world example. In August of this year, I was asked to lead a service sales meeting for a metro dealership fixed ops team. Since the meeting was conducted during the lunch hour, I only focused on two statistics: Shop efficiency and customer penetration rate.

To calculate shop efficiency, simply take the total flat rate hours and divide it by total clock hours. This shop had 2184 clock hours for the month: 13 techs x 8 hours per day (clock time) x 21 days in the month = 2184 clock hours. The entire shop had 1484 flat rate hours (including LOF’s, customer pay, warranty, and internal). Therefore, their shop efficiency was 68% (1484 divided by 2184 = 68%).

That means the technicians were at the dealership for 700 hours with no revenue being produced (2184 – 1484 = 700). I’m not saying they were idle, (with no work to do) for 700 hours…but that they didn’t produce revenue for themselves or the dealership during those 700 hours. Granted, there are some jobs that just drain the life out of a good tech. Sometimes they spend a half day diagnosing and fixing a problem that only pays 1.5 hours. It’s just the way it is sometimes.

I put this number in writing, on a flip chart, and asked the techs how they felt about being at the dealership for 700 hours with no money to show for it. They got fairly vocal and …well…let’s just say their boxer shorts got pretty wadded up! They blamed the service advisors, the economy, the Obama administration, the Chrysler/GM bankruptcies, and the price of tea in China.

Next, I focused on the customer penetration rate (CPR). To calculate CPR, take the number of Maintenance Services sold and divide it by the total number of customer pay RO’s. This shop had 602 customer pay RO’s for the month and had sold 104 maintenance services. Their CPR was 17% (104 divided by 602 = 17%).

CPR is a quick snapshot that shows the health of the service sales staff. The advisors and techs had 602 opportunities for which they only had 104 maintenance sales to show for it. Not too impressive! To recap, the service team was only filling up 68% of their “time bank” and the service sales staff was only closing the sale 17% of the time. These are not mutually exclusive statistics, but rather they are closely intertwined.

This information raises a question: Are the fixed ops personnel helpless victims of fate or are they missing a wealth of opportunity right under their noses?

To answer the question, I went to the back lot where they keep the vehicles that are completed; awaiting pick-up by the customers. I randomly chose three vehicles, raised the hood, and conducted a walk-a-round.

In the interest of time I’ll just go into detail about one; it was a 2006 crossover with 51,500 miles. The RO contained a single line item for a driveability concern with a check engine light…the diagnosis and repair was under $75. History showed the vehicle was purchased new at the dealership and had been in for three minor warranty issues and seven oil changes.

You know where I am heading, don’t you? The wipers were cracked and chalky ($30), the power steering fluid was dark and had no history of ever being changed ($90), the throttle plate and plenum were black inside ($130), the battery connections were starting to corrode ($35), and the factory-installed tires were totally shot ($400). Folks, that’s $685 of maintenance sales (opportunities) that they missed!

How did it happen? Their menu and the big banner on the service drive says they do a free 21-point inspection with each service visit…so I guess the technician wasn’t paying much attention. The service drive process requires the advisor to do a walk-a-round and raise the hood on each vehicle…so I guess the advisor wasn’t paying much attention either!

That $685 translated into about 2.5 missed labor hours. The money and the hours were lost for two reasons:

• They weren’t looking for opportunities

• They didn’t ask the customer to buy

Let’s go back to the 700 non-revenue hours that the shop lost…it was an unnecessary loss. The hours were there, the money was there; all they had to do was be observant and ask!

It’s time to get personal; if I had the same type of fixed ops meeting at your dealership, would I have found the same thing?

In conclusion, here are the action points for success:

? Have a service sales meeting twice a month

? Do the math on your shop efficiency and customer penetration rate

? Examine your missed opportunities

? Educate your customers and ask them to buy

I’ll leave you with the words of Jesus: “Now that you know these things, you will be blessed if you do them.”

CALL OUT:

“Consumers will purchase preventive maintenance if you educate them and ask them to buy!”

-Charlie Polston

Charlie Polston is a Fixed Operations Profitability and Customer Retention Consultant with BG Products, Inc. He has trained over 2,500 Fixed Operations personnel nationwide. He has been with BG Products, Inc. for over 27 years. Charlie can be reached at 800-580-0024 or cpolston@bglsi.com

Posted on: August 14, 2009

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