As front-end margins continue their slow and steady decline, more dealers are looking to their service departments to fuel dealership growth. If your goal is to increase fixed ops revenue, you have two options: (1) increase service yield from current customers, or (2) increase service market share. To maximize profits, do both.
In this article, I’ll focus on capturing more service work from current customers. When I worked at AutoNation, we calculated that most auto dealerships capture less than half of the work needed on vehicles that enter their service lanes. That leaves plenty of opportunity to grow service yield.
Growing service yield is also known as increasing dollars per VIN or revenue per units-in-operation ($/UIO). Every dealership should use this metric to track and measure their service potential. Service absorption and service effectiveness are outdated metrics and completely useless in this scenario, as a dealership can have 100% service absorption and still be losing market share.
To calculate your $/UIO, take the total number of vehicles your dealership has sold in the last six years. If you average 100 cars per month, that’s about 72,000 vehicles. Now, calculate the annual service revenue you’re currently generating from your VINs sold (not conquest customers). Divide that figure by 72,000 to arrive at your current $/UIO. Use this number as a benchmark to measure future growth by # of cars sold in 6 years/current annual service revenue from VINs sold = $/UIO.
A Change in Mindset
To increase $/UIO, you’ll have to move beyond an ‘oil change’ and ‘scheduled maintenance’ mindset, and commit to providing customers with complete vehicle care.
This requires the ability to identify and communicate all service needs to your customers. There’s no secret here. Your current processes are designed to do this, but most of the time we find that adherence to our processes are less than stellar.
Your service processes have been around forever and your service staff “know” how to do them, which is why it can be extremely challenging to make changes. The best way to enforce process adherence is with the use of technology and accountability.
The advent of technology in the service lane, combined with usage of data and predictive analytics, can go a long way to improving process adherence and execution.
Let’s review how technology can improve the effectiveness of your existing processes:
The importance of an effective write-up process cannot be underestimated. When the future success of your dealership hinges on its ability to analyze and use data, the data has got to be good. During the write up process, the more information that can be gathered, the better.
The use of mobile tablets in this process is critical. Many dealers complain tablets take too much time, but the reality is, a paper process is no longer acceptable. Instead of measuring the process as fast vs. slow, measure it as informed vs. uninformed.
Here’s a good guideline. If your process is poor, it will take more time to complete it using technology than it did with paper. If your process is good, it will take less time to complete it with technology than it did with paper.
Multi-Point Inspections (MPI)
In addition to completing a thorough MPI, advisors need to check the following, every time:
- Is there an open recall?
- Are there declined services from last time?
- What are recommended services/repairs on a vehicle like yours?
The answers to the first two questions can easily be found using a mobile tablet integrated with your DMS and OEM communications.
The answer to the third question requires a tool to identify “Vehicles Like Mine” service recommendations. The reason why these are effective is because many technicians rely on their learned knowledge base and memory to check for repairs commonly needed for your vehicle brand. However, memory can be faulty and knowledge base isn’t as helpful when servicing other brands.
With the right tool, techs and advisors receive “Vehicles Like Mine” notifications right on their tablets, regardless of the year, make or model of the vehicle. For example, when a 2011 Touareg enters the service lane, based on its mileage, a “Vehicles Like Mine” tool will immediately list three potential issues; such as cabin air filters, fuel system and door.
This helps technicians pinpoint where to look for potential problems in a short amount of time, greatly increasing the likelihood of upsells. If the customer declines these services, follow up with a personalized offer that bundles the recommendations with another service.
A complete MPI process also identifies potential service opportunities for the next visit. The reality is, dealers can no longer expect to see customers every 3,000 miles. Today the average length between service visits is closer to 10,000 miles. Before a customer leaves, give them a list of service recommendations for the next 10,000 miles.
Declined Services Follow Up
A manual MPI process means that dealerships are relying on service advisors to report all declined services. This method is proven to be ineffective, no matter how well intentioned the advisors are. Look at these declined service capture rates:
- Advisor reported: 4-6%
- Standard text analytics: 8-10%
- Electronic MPIs: 10-15%
- Machine learning: 22-25%
As you can see, the more technology you can incorporate into the process, the higher your declined service capture rates will be.
Machine learning, which is a form of artificial intelligence, is especially helpful. A machine learning tool can identify and analyze valuable phrases trapped in ROs, such as “recommended all 4 tires” or “2 rear tires worn” or “brakes at 30% life.” This data is then used to generate automated and personalized content drips for each customer based on individual needs.
Every time you interact with a customer, whether in-store or offline, the data you collect needs to be integrated into a marketing strategy designed to drive the customer to the next stage.
From needs notification, you should have the ability to track how many customers scheduled an appointment. From there, gather your customers’ responses and preferences through the write-up and in-service notification processes.
All this data can be used in the post service follow-up process to lay the groundwork for the next needs notification. The use of predictive analytics to create highly targeted and relevant offers, at the right time, increases customer retention.
Finally, dealers need to create more marketing campaigns that drive awareness of all their service profit centers, instead of focusing only on maintenance and repair. Many customers aren’t aware of all the options that a dealership offers, including:
- Tires, brakes and batteries
- Quick Service
- Service Contracts
- Vehicle Accessories/Enhancements
The secret to generating more dollars per VIN isn’t really a secret. Your dealership already has the people and processes in place. Improving results requires the addition of technology, data analysis, predictive analytics and accountability.
To view this article in Fixed Ops Magazine, click here.
Articles | DATE 06, 2019