The Art & Science Behind Service Menu Design Using the Profit Structuring Technique

Transcription

1 The Art & Science Behind Service Menu Design Using the Profit Structuring Technique Presented by: Ray Branch - Founder & CEO The KEEPS Corporation INSTRUCTIONS: 1. Have a pen or pencil with you, along with a note pad and a calculator. 2. Print these handouts and keep them in order. Dealer s Edge Webinar June 18, 2015 Participant Handout 1

2 Most Often Asked Questions... How many menus should I have? How much should I discount my menus? Should I have only factory compliant service menus? Should I print menus or go with a web-based menu presentation program? How do I make sure my techs are OK? How do I get SCs to sell Major Menu services? How do I keep Menus current? How often do I need to update them? 2

3 3

4 4

5 5

6 6

7 TECHNICIAN AVERAGE COST-OF-SALE ANALYSIS Technician Name Current Pay per FRH Notes 1 $ 2 $ 3 $ 4 $ 5 $ 6 $ 7 $ 8 $ 9 $ 10 $ 11 $ 12 $ 13 $ 14 $ 15 $ 16 $ 17 $ 18 $ 19 $ 20 $ Total Pay per FRH > $ (Total Pay per FRH) (Number of Techs) = (Average Cost per FRH) + $2.50 = Cost per FRH $ $ $2.50 $ 7

8 BASIC 30,000 MILE MAINTENANCE VALUE PACKAGE FORMAT EXAMPLE Drain & Fill Engine Oil up to 5 quarts using Genuine Valvoline Oil Install New Genuine AC Delco Oil Filter Top Off Engine Compartment Fluid Levels Retail Price vs. Top Off and Report Condition of Driveline Fluids Lubricate Chassis as Required Package Price Rotate, Inspect and Report Condition of 4 Tires should reflect a 15% Set Tire Pressures to Factory Recommended to 20% savings! Specifications Replace Air Cleaner Element and Clean housing Replace Fuel Filter Clean & Lubricate inner/outer Rubber Door Seals Package Price * Retail Price * $xxx.xx $xxx.xx PREMIUM 30,000 MILE MAINTENANCE VALUE PACKAGE Same as Basic 30,000 - Plus... Perform 18-Point Premium Maintenance Inspection Service and Clean Battery Cables Replace PCV Valve Clean and Service All Four Brakes Service All Hinges, Latches, and Door Locks Service and Clean Fuel Injection System Transmission Flush at 45,000 and Additional $70.00 Package Price * Retail Price * $xxx.xx $xxx.xx 8

9 SERVICE MENU DESIGN CALCULATIONS Mileage Interval: 30,000 Vehicles: Tier Name: Final Retail Price: $ Final Pkg Price: $ Total Parts Cost: $63.67 Tech Cost / FRH: $20.93 Current M-Labor ELR: $78.61 Actual Clock Time Individual Item FRH Total LABOR DISCOVERY CALCULATIONS FOR MENU FRHs To Be Paid for Total Menu Time (Mins.) Tech Productivity Total Adjusted Labor Cost Labor Markup Factor Total Labor Pkg Price PARTS DISCOVERY CALCULATIONS FOR MENU ELR Labor GP Dollars LV % $ $ $69.69 $ % LV2 LV3 LV Labor GP% Parts Cost Parts Markup Factor Total Parts Package Price Parts GP Dollars Parts GP% Parts / Labor Ratio (X/$1) PV1 $ $ $ % 0.75/$1.00 PV2 PV3 PV Total Parts Pkg Price MENU DISCOVERY PACKAGE & RETAIL CALCULATIONS Total Labor Pkg Price Total Menu Package Price Total Pkg GP Dollars Total Pkg GP% % Markup to Retail Price Menu Retail Price MV1 $ $ $ $ % 15% $ MV2 MV3 MV

10 SERVICE MENU DESIGN CALCULATIONS Mileage Interval: Vehicles: Tier Name: Final Retail Price: $ Final Pkg Price: $ Total Parts Cost: Tech Cost / FRH: Current M-Labor ELR: LABOR DISCOVERY CALCULATIONS FOR MENU Actual Clock Time Individual Item FRH Total FRHs To Be Paid for Total Menu Time (Mins) Tech Productivity Total Adjusted Labor Cost Labor Markup Factor Total Labor Pkg Price ELR Labor GP Dollars Labor GP% LV1 LV2 LV3 LV PARTS DISCOVERY CALCULATIONS FOR MENU Parts Cost Parts Markup Factor Total Parts Package Price Parts GP Dollars Parts GP% Parts / Labor Ratio (X/$1) PV1 PV2 PV3 PV Total Parts Pkg Price MENU DISCOVERY PACKAGE & RETAIL CALCULATIONS Total Labor Pkg Price Total Menu Package Price Total Pkg GP Dollars Total Pkg GP% % Markup to Retail Price Menu Retail Price MV1 MV2 MV3 MV

11 GP% Factor GP% Factor GP% Factor GP% Factor 10% % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % %

12 SERVICE MENU DESIGN CALCULATIONS INSTRUCTIONS Box Number How it s Calculated 1 Box 1 = Σ (cost of each part used in the Service Menu) Use the Technician Average Cost-of-Sale Analysis form on page 7 of this handout to calculate this number. Box 3 equals the total labor sales dollars for maintenance work over a given period of time divided by the total number of FRHs paid to the technicians for those services. To get a good average you should do an RO analysis on at least Customer Pay Repair Orders. Box 4 equals the total measured clock time it takes the technician to perform all of the labor services for the menu. Box 5 is the current total Flat Rate Hours that are being paid to the technician for performing all of the labor services for the menu. Box 6 is the number of Flat Rate Hours you will be paying the technician for performing all of the labor services for the menu. In the Discovery process this number can go up or down based on your profit objectives. 7 Box 7 = (Box 6) X (60 minutes/hour) = Time in minutes. 8 Box 8 = (Box 6) (Box 4) 9 10 Box 9 = (Box 6) X (Box 2) This will be your total labor cost to perform the menu stated in Dollars, not FRHs. Using the Profit Margin Mark-up Table on page 12 of the handout, enter the appropriate mark-up factor to achieve the desired Gross Margin. 11 Box 11 = (Box 9) X (Box 10) This is the Total Labor Package Price. 12 Box 12 = (Box 11) (Box 6) This is the Effective Labor Rate 13 Box 13 = (Box 11) - (Box 9) This is the Labor Gross Profit dollars. 14 Box 14 = ((Box 13) (Box 11)) X 100 This is the Labor Gross Profit percentage. 12

13 SERVICE MENU DESIGN CALCULATIONS INSTRUCTIONS (Continued) Box Number How it s Calculated 15 Box 15 = Box 1 The Parts Cost for the menu. 16 Enter a markup factor from the chart on page 12 of this handout that represent the GP% you are shooting for. 17 Box 17 = (Box 15) X (Box 16) This is the Total Parts Package Price. 18 Box 18 = (Box 17) - (Box 15) This is the Parts Gross Profit dollars. 19 Box 19 = (((Box 17) - (Box 15)) (Box 17)) X 100. This is the Parts GP percentage. 20 Box 20 = (Box 17) (Box 11) Expressed as a ratio to $ Box 21 = Box Box 22 = Box Box 23 = (Box 12) + (Box 22) This is the Total Menu Package Price 24 Box 24 = (Box 23) - ((Box 15) + (Box 9)) This is Total Package GP Dollars for the menu. 25 Box 25 = ((Box 24) (Box 23)) X 100 This is Total GP Percentage 26 This is the percentage you will markup the package price to get the Retail price for the menu. 27 Box 27 = (Box 24) X (1 + (Box 26)) This is the Menu Retail Price. 13

14 SERVICE MENU DESIGN LABOR SERVICES LIBRARY Drain & Fill Engine Oil Up to 6 Qts. Install New Genuine Motorcraft Oil Filter Top Off Engine Compartment Fluid Levels Rotate & Set Pressures & Inspect 4 Tires Labor Services Perform 18 Point QualityCare Inspection Lubricate Chassis as Required Top Off and Report Condition of Driveline Fluids Inspect Air Cleaner Element and Clean Canister Replace Air Cleaner Element and Clean Canister Inspect Cabin Air Filter (If equipped) Replace Wiper Blades Service and Clean Battery Cables Install Battery Terminal Anti-Corrosion Kit Replace Fuel Filter Replace PCV Valve Clean and Inspect All Four Brakes Service All Hinges, Latches and Door Locks Clean & Lubricate Inner/Outer Rubber Door Seals Clean, Inspect and Lubricate CV Boots Service Brake Caliper Slides Starting and Charging System Analysis Power Steering Flush Perform 4-Wheel Alignment Automatic Transmission Flush. Computer Balance 4 Tires Fuel Induction System Service (44 K) Fuel Injection Cleaner (mi3000) Fuel Induction/Throttle Body Service Cooling System Flush Road Test HVAC Tune Up Service 14

15 SERVICE MENU DESIGN PARTS LIBRARY Part # Part Name COST Each Oil Oil Diesel Oil Synthetic (Castrol) Oil Filter Oil Filter Diesel Air Filter Fuel Filter Fuel Filter Diesel Wiper Blades Misc. Fluids PCV Batt Pads BG MI 3000 BG 44k Major Fuel Kit Major Fuel Kit Diesel Diesel Additive Spark Plugs Spark Plugs Platinum Trans Fluid BG Trans Kit BG Coolant Kit BG Coolant Kit Diesel A-Freeze 100K Freeze Fridge Fresh Kit Pwr Str Kit Cabin Air Brake Flush kit Brake Fluid Fuel Injection Cleaner Man Trans Lube Transfer Lube (ATF) Gear Lube (Synth) 15

16 16

17 17

18 DISCLAIMERS/EXCEPTIONS FOR: Menu Interval Client Date Tax & Shop Supplies Fee Additional Tax & Waste Recycle Fee Additional Tax & Hazardous Waste Fee Additional Tax & Environmental Fees Additional Synthetic Fluids Additional No Additional Discounts Can Be Applied Some Models Slightly Higher Vans & 4WD Slightly Higher Spark Plugs Not Included Longlife Engine Coolant Additional Diesel Engines Higher Applies ONLY to Vehicles 3/4 Ton & Up Higher Some Rear Drive Vehicles Require Bearing Repack Dual Rear Wheels Higher Transmission Cross Member Removal Extra 18

19 Multi-Point Premium Maintenance Inspection Client Car Line/Make Date Inspect Fuel Lines & Connections Inspect Wiper Blade Condition Inspect Windshield Washer Angle & Flow Inspect Operation of Exterior Lamps & Horn Inspect Steering & Suspension Inspect Driveshaft Joints & Boots Inspect Exhaust System for Leaks/Damage Inspect Engine Drive Belts Inspect Engine Cooling System Hoses & Caps Inspect Spark Plug Wires Inspect Evaporative Fuel System Hoses & Caps $ Inspect Gas Tank Filler & Cap Gasket Inspect Power Steering System When Purchased As A Stand-Alone Service Inspect Front Wheel Bearings (Hand Pressure) Inspect Rear Wheel Cylinders & Master Cylinder for Leaks 19

20 As an attendee to this Dealer s Edge Webinar, you are eligible to receive the Service Menu Reverse Engineering and Profits Structuring Tool for FREE. You have until June 26nd to contact The KEEPS Corporation and receive your tool at no charge. Contact: Don Helmey - Don.Helmey@KEEPSCorp.com or Call Include: Name, Title, Phone #, Dealership Name, and Location 20

21 21

22 (Example is the output of KEEPS KPI Behavior Based Pay Plan Tool) 22

23 (Example is the output of KEEPS KPI Behavior Based Pay Plan Tool) 23

24 24

25 25

26 26

27 27

28 The Service Consultant s New Title: The Educator AKA Consultative Selling Selling the way you like to BUY rather than Selling the way you like to Sell! 28

29 The 5 Step Menu Selling Process When Car is Under a Customer Pay Program (Word Tracks & Process Structure) Step 1: Menu Introduction Mr./Ms. Customer, at miles the (Brand) engineers who designed your car recommend several important procedures and adjustments that you may want to consider. Step 2: Introduce Menu Main Benefits Segue: Let me show you what I mean. (Hand Menu to Customer / Pull up screen) We have recently revised our Maintenance Value Packages. (look at customer) They were designed to do two very important things for you First of All, save you a lot of money and Second, Help protect you from major failures in the future. 29

30 Step 3: Introduce 2 Maintenance level Options Segue: We have this broken down into two levels of Maintenance Protection. Your first maintenance protection option is exactly what you will find in your owner s manual, which is designed to meet the MINIMUM factory requirements. Your second maintenance protection option includes all of the MINIMUM Factory Requirements, plus some specially selected items designed to address the weather and driving conditions in our area. Many of our customers choose this option, especially if they are considering keeping their car beyond the basic warranty period. Step 4: Close the Sale Mr./Ms. Customer which one of these maintenance protection options would be best for protecting YOU and your car today? Step 5: Shut Up! STOP buying back stuff by Talking the customer out of the sale!!! 30

31 MAINTENANCE COST COMPARISON WORKSHEET Comparison of Maintenance Costs Versus Insurance and Fuel Costs (based on 60,000 miles of driving) Average Maintenance Cost Calculate As Follows: Major Service Months Price 7,500 6 $ , $ , $ , $ , $ , $ , $ , $ Total Maintenance Price $1, / 60,000 = 3 cents / mile *Mileage intervals vary among manufacturers. Refer to your manufacturer s recommended maintenance schedule. Average Insurance Cost: **Insurance cost estimated for a single individual over the age of 25. Check your local insurance rates. Average Gasoline Cost: 4 years at $ ** / year = $ / 60,000 = cents / mile 4 years at 15,000 miles / year = 60,000 miles at 20 mpg 60,000 / 20 = 3,000 gallons of fuel 3,000 gallons X $ /gallon = $ $ / 60,000 = cents / mile 31

32 Average Gas Prices at Average Insurance Cost at 32

33 RELATIONSHIP MARKETING: The 6 Over 2 Model 1 The Twin Bridges Friendly meeting and greeting Fixing The The 2nd Bridge Customer 6 Active delivery and prep for the next sale Your Winning Formula HSE = ROI Identify the prime item(s) 2 Happy Service Experiences = Return On Investment It Happens Through Professional Selling and Communication Skills Mileage Qualifier 5 Close the sale - get the OK The 1st Confirm your understanding of the prime item(s) 3 Bridge 1. Review Service History File Fixing The 2. Take away 3 questions: Car Present a Service What are you going to do to my car? How much is it going to cost? Menu When do I get it back? 3. Administration break 4 A Professional Customer Sensitive Today s Competitive Market Selling System for 33

34 RELATIONSHIP MARKETING Much has been written about satisfying customers. In fact, we hear so much about Customer Satisfaction that the term has become a cliché. In many dealerships the concept evolves from satisfying people so much that they ll want to continue doing business, to simplify a game in which a good grade is the primary goal. If one loses sight of the real goal customer retention - the game is lost. Defined and developed in the 1990 s, in today s business environment and with the tools available, Relationship Marketing is more important than ever. If a Service Consultant embraces this concept, he/she can t help but succeed in satisfying customers. Relationship Marketing has been described by Auto Age Magazine as involving turning a consumer who happens to buy a car at your store into a customer who wouldn t do business with anyone else. Pretty powerful stuff!! Almost everyone working with retail customers uses this concept. There are many people who frequent a particular place of business because of a relationship they have with someone who works at the business. Their relationship exists due to several issues: family, friends, neighbors, and through repeated positive experiences during service visits. The problem with Relationship Marketing is that most people don t seem to be aware that they are using it or, more importantly, that they are not using it. Customers leave dealership service departments in one of three frames of mind: 1. They are so happy and satisfied that they are compelled to write to the dealer and praise his service people. 2. They are so unhappy they are compelled to write and complain, or 3. There is no emotion either way because nothing went terribly wrong nor was the service exceptional. The third group is by far the largest, and both the second and third groups are the customers you are most likely to lose. Only the first group will be virtually immune to the marketing efforts of the competition. 34

35 Relationship Marketing is the most powerful tool you have to help you prosper. Too realize this you need only to think about the friends and family who already do business with you and wouldn't go anywhere else. These customers bring their cars in, toss the keys on the service desk, and say do whatever it needs. There is no way that would happen without the customer knowing and trusting you or having a relationship. Unfortunately, most of the customers with whom the service consultants work do not have such a relationship. They are strangers and they are dealt with as strangers. One need only to stand on a service drive for a few minutes to see that consultants treat friends one way and strangers another. The strangers are generally processed or herded through the service drive like cattle. The friends are not processed they are treated like someone very important. The key to Relationship Marketing is making the customer feel important. Customers respond in a more positive manner when they feel good about themselves and when the person with whom they are dealing makes them feel important. There are really only two goals the consultant should have in mind when dealing with a customer 1. Satisfying your customer so that they will come back, and 2. Selling the needed services. If the consultant thinks about treating the customer like a friend and making the customer feel important, he/she positions himself/herself better to accomplish these two goals. 35

36 SOME IDEAS THAT MAY LEAD TO RELATIONSHIP MARKETING: 1. Your attitude must convey that you are pleased the customer chose to return to this dealership for service. The customer must be made to feel important and special. The attitude should be that of a friend who wants to help. 2. Try to see the situation from the customer s perspective. Ask questions. Se the problem first hand. This goes a long way toward avoiding a miscommunication. 3. Avoid negative responses. Say YES as much as possible. Try to avoid saying NO. But if you must say NO, do so with empathy and an explanation. Avoid common phrases such as the only thing I can do is and I have no idea. If you don t know the answer, tell the customer you ll find it and then follow through. 4. Avoid arguing with a customer. You can t win! Your customer should always be right! 5. Strive to fulfill commitments. Take them seriously the customer does. Call customer if you are going to miss promised time. 6. Don t treat the customer like a stranger deal with him/her the way you would a friend. Would you handle the situation differently if you knew that you were going to see the customer that evening at a social event? 7. Don t automatically default to the man or discount a lady who is the customer. If the car belongs to the lady, talk with the lady unless she defers to her husband or a gentleman who has accompanied her. Treat the women equal to the man. These are only a few basic ideas to help develop an awareness leading to greater customer satisfaction and retention. Although the next four sections deal with specific technical aspects of customer handling, the customer s perception and satisfaction should be the guiding factor when performing all of these functions. 36

37 TRAIN YOUR SERVICE ADVISORS In today s fiercely competitive service repair business, Service Advisors must exceed the customer s expectations. Dealers depend, now more than ever, on fixed operations to provide a generous profit to the bottom line. Is your service department s front line trained for success? The greatest threat to any company is the inadequate performance of its employees. Severe economic conditions, interest rates, and market competition, will have a less negative impact than that of a poorly trained Service Advisor! This individual sees more customers than any other employee in the dealership, ten times the amount of customers seen by the best sales person. Yet, typically, Service Advisors are the least trained individuals in the store. Why? Could it be they aren t perceived as sales professionals by management? Many years ago they were considered Order Takers. Mrs. Smith came in for an oil change, and that is all she got; no tire rotation, no walk around, no 27-Point Maintenance Inspection. If she was lucky, a service menu may have been offered. Of course, today we know better! But do we really? Are we training the Service Advisors to SELL? What is your store s average hours per RO? How many one-line ROs do you average? Customers are hungry for someone they can trust. Typically, people do not look forward to or anticipate a service appointment with their local dealership. Customers believe that for the amount of money they have already invested in their vehicles, it shouldn t break down. Many times the service department makes their experience even more unpleasant. There is no friendly greeting, no eye contact, smile or warm reception. Rather, a non-verbal communication, like shrugging the shoulders, rolling the eyes, or a tired expression is offered. All of these improper greetings create an atmosphere of dislike. Customers feel unwelcome. Communication is blocked and the customer distrusts the credibility of the dealership. The Service Advisors position involves selling, not only labor hours but more importantly, the dealership s image. It takes a special person to face and sell service to customers who may be in a negative frame of mind, as they often are when they are in the service drive. Typically the Service Advisors communicate with three types of customers Customers already in the drive for needed service. Customers in the drive have decided to try your service, now the advisors and department must perform. First, you must listen to the customer and handle the primary concern. Then you must complete the walk around on every car, offer menu sales, offer the maintenance inspection, and the ABC (Advantages, Benefits, and Consequences) selling method. 37

38 TRAIN YOUR SERVICE ADVISORS - Continued Customers calling to inquire about pricing and services Customers who call to inquire about service and prices have not decided to do business with you yet. Actually, they are probably trying to eliminate your dealership from the list they plan to call. Only one out of four customers who call the service department actually comes in for repairs. When the customer wants a price, the advisor should explain to the potential customer the most simple and economical repair that may be needed. Customers call regularly to find out what is wrong with their vehicle and what it will cost for repairs. Most of the time the Service Advisor will tell the customer, Well, you ll need to bring your vehicle in and let a technician diagnose the problem. You will increase the number of service repairs from customers who call in if you offer the least expensive cost for their service repair. The key is to get the customer through the door! You have an 80% chance of providing the needed service if you get them through the door. You are trying to influence the customer to come into the dealership not diagnose the vehicle. Customers whose vehicle is in the shop, requiring additional service. When Advisors call the customer to sell additional needed service, the groundwork should have already been laid. The 27-Point Maintenance Inspection should be presented to the customer at the time of write-up after offering a solution to the customer s primary concern. The inspection is free and the customer is under no obligation to purchase anything. This inspection avoids unplanned vehicle breakdowns, towing expenses, and lost time. 95% of all customers will allow your service technician to complete the 27-Point Maintenance Inspection allowing the Service Advisor to determine if, in fact, the customer may be interested in additional work. It has been said Service Advisors must excel in at least three unique skills. They must be credible Service Consultants; they must be Sales People; and they must be Consumer Relations Experts. They should receive specialized training in communication skills, utilizing the seven key merchandising tools including the service menu selling system, and daily time management strategies. The saying, A salesman can sell the first vehicle to a customer, but a good service department will sell the second and third vehicle is true. Every point of contact within the dealership is an opportunity to build customer retention. In the eyes of the customer, the Service Advisor personifies the dealership, with technicians and other employees largely in the background. If the Service Advisor loses the trust of the customer, so does the fixed operations and the rest of the dealership. 38

39 KEEPS POSITION ON MAXIMIZING POTENTIAL The concept of Maximizing Potential is one of the most misused and misunderstood concepts in relation to Fixed Operations improvement. In the hundreds of customer retention studies we have conducted across the country we find that after the Maximizing is done, the customer leaves forever. Our position on this issue is much different than the norm. We highly recommend taking a long-term view of maximizing potential through planned and consistent development of long term customer retention. We support maximizing gross profit revenue over the new and used car ownership period rather than planning to maximize on the relationship shortterm. This business/marketing approach will decrease gross profit per customer transaction short-term, but that is OK because more Total Gross Profit will be generated over the long haul, not to mention the additional new and used cars you will sell because the customer comes to your dealership more often over time. All of our programs and Service Consultants sales training are geared toward striking a balance between selling each customer as much as is needed on each visit and being sensitive to the customer s perception of what s happening to him/her. We firmly believe customers should not leave your service department (on each visit) without knowing the condition and needs of their vehicles. However; the presentation and closing techniques used should be tempered with the thought of making sure the customer returns as often as their service needs arise. We know that if our clients embrace and support this concept, they will truly MAXIMIZE POTENTIAL. 39

40 40