How to Achieve & Maintain 100% Service Absorption

Transcription

1 How to Achieve & Maintain 100% Service Absorption How top-performing dealerships mobilize the entire dealership management team to achieve 100% Service Absorption - A Case Study Approach With Steve Nickelsen, CEO of Nickelsen Partners, LLC Moderated by Mike Bowers, Executive Editor of DealersEdge

2 Steve Nickelsen, Nickelsen Partners Steve Nickelsen, CEO of Nickelsen Partners LLC, has focused on improving dealership net profit for the past 25 years. In his personal consulting to dealers and as leader of other consultants, he has worked with more than 8,000 dealers, general managers, and sales managers to improve their businesses, and he has trained more than 20,000 automotive salespeople. His clients include some of the most profitable automotive organizations in North America, as well as some with among the highest customer satisfaction and retention. He is a frequent speaker for companies and conventions related to the automotive industry, and he has been the highest-rated speaker at NADA. In addition to working directly with car dealers, he has worked with OEMs and importers to help them improve the sales, profitability, effectiveness, and satisfaction of their dealer bodies. Examples of his work include: For a group of domestic-brand dealerships, helping them rise from average to outstanding sales performance (including making their largest store the #12 Chevrolet store in the U.S. in sales) by coaching the dealer and his management team. For a dealer with both import and domestic stores, enabling the dealer to achieve greater profitability -- and happiness -- by helping him define and implement consistent, effective processes for major dealership activities, particularly the vehicle selling process, thereby creating an earned confidence that the operations were stable and under control. For a Canadian importer, helping them achieve month-over-month sales growth in an otherwise declining market, by creating and conducting a series of targeted performance workshops. For a distributor of Toyota vehicles, helping them grow their market share by more than 15% over two years, through work with the distributor and directly with their dealers.

3 How to Achieve and Maintain 100% Service Absorption A Strategic Plan Drawn from Case Studies of Peer Dealerships focused on 100% Service Absorption A DealersEdge webinar with Steve Nickelsen CEO of Nickelsen Solutions, LLC

4 Your Presenter Today: Steve Nickelsen CEO of Nickelsen Solutions, LLC Nickelsen Solutions, LLC is in the business of increasing dealership profits. We do that through: Identifying, creating, and sharing best-practice ideas Working closely with our clients to implement those ideas through consistent processes, people development, appropriate technology, and supportive incentives Providing focused tools to support execution and enable the management of those processes In that course of that work, we have worked with more than 8,000 dealers, general managers, and sales managers and have trained more than 20,000 salespeople. Learn more at Page 4

5 Today s Agenda Measuring service absorption What are the right metrics? What the best have in common Overall case study: Preferred Automotive Collection Mini case studies Putting it all together: the plan Execution and maintaining momentum Page 5

6 Measuring Service Absorption Service absorption compares how much profit you generate in Service, Parts, and Body Shop with how much it costs to keep the dealership open. High absorption (90%+): Fixed Operations covers the costs for the business, and all profits from Sales go straight to the bottom line. Low absorption: You re very vulnerable to any downturn in sales, and too much of your profits from Sales are needed to cover the dealership s overhead costs. There is not only one correct formula. Different OEMs and experts break out costs differently and use different formulas. Instead of getting hung up on differences in calculating service absorption, focus on improving it. Page 6

7 What the Best Have in Common A mindset Everybody knows the objective 100% A marketing plan for service We do it for sales, but less for service A focus on retaining Know why they defect Expenses kept at the right levels Be SURE you re measuring the right things The most profitable dealers have changed the metrics, i.e. from hours per R.O. to just total R.O.s and total GP Velocity strategy with used cars to increase internal parts and service gross profit A focus on creating good processes and executing them consistently Page 7

8 Case Study Preferred Automotive Collection Joe Betten, Dealer Goal is to spend 180 days a year on vacation Lives in Grand Haven Michigan but enjoys Marco Island and Scottsdale Avid horseman Daughter Amy is the Executive Manager Page 8

9 Case Study Preferred Auto Collection Locations (Western Michigan) Page 9

10 Case Study Preferred Automotive Collection Actual Service Absorption Results One Year Ago Today Change Toyota of Grand Rapids (no body shop) 87% 98% +11% Preferred Chrysler-Jeep-Dodge 75% 86% +11% Preferred Ford (no body shop) 67% 85% +18% Preferred Buick-GMC 81% 98% +17% Page 10

11 Case Study Preferred Automotive Collection The Mindset: Everyone Knows the Goal One Year Ago Today Next Year Toyota of Grand Rapids (no body shop) 87% 98% 110% Preferred Chrysler-Jeep-Dodge 75% 86% 95% Preferred Ford (no body shop) 67% 85% 98% Preferred Buick-GMC 81% 98% 108% Page 11

12 Case Study Preferred Automotive Collection The Plan Created a plan on how to achieve the 100% service absorption objective Get more fixed gross Reduce costs throughout the dealership Met with managers and told them the objective We are going to reduce our dependency on vehicle sales. Everyone knows not just fixed operations Dissected the components What can we control? Where are we hurting ourselves? Are we hurting retention by being too aggressive on price? (This could be as true in F&I as in Service.) Page 12

13 Case Study Preferred Automotive Collection Staffing Make sure you have enough staff to accomplish the goal. What is the right number of techs? How many writers? You can t grow without the people to handle the increase. Preferred s Toyota of Grand Rapids store just added 2 Service Advisors and 5 Technicians to handle the needed sales for 100%+. Page 13

14 Case Study Preferred Automotive Collection Align Incentives with Promotions Create incentives for every promotion. $8-9k in domestic; $10k in import Target the incentives at Service Advisors or Technicians, whichever is more appropriate for that specific promotion. Reward the technicians for quality inspections. At Preferred, good inspection with an upsell earns the chance to win a $300 debit card. Page 14

15 Case Study Preferred Automotive Collection Toyota of Grand Rapids The newest thing they started is the quick service at Toyota for those buying new cars and are under the TAC program. Gold members during the 2 years of coverage Promoted to platinum level after the coverage expires Goal is to retain at least 90% of TAC after expires Go after the 5,800 former that drive Toyotas that don t service with us (25 year history) Page 15

16 Case Study Preferred Automotive Collection: Marketing Do at least quarterly service, parts, and body shop promotions Extending the 3rd quarter tires and battery promotion into the 4th quarter Have used direct mail for building business for 3 years Whole staff has to be ginned up and energized Today Larry gets free oil changes keep it fun The most effective promotions target our own. However, Preferred has also had some success reaching for of competitors. Page 16

17 Case Study Preferred Automotive Collection Marketing Decide who you are going to be $9.95 oil changes, tires at cost, batteries for $59.00 installed, pit passes etc. Discounted oil changes We LOVE this despite the minor irritations or the 30% that never buy anything else. We average over $50 per R.O. Offer items less than $20; RainX, wipers, etc. Page 17

18 Case Study Preferred Automotive Collection Marketing The Pit Pass Another reason to do business with us Washer fluid and air for their tires whenever they want it We spend $200 to $300 in advertising to attract a customer, but won t spend a dollar for a donut to keep them coming back. We have people in our service waiting areas that don t have a car in service. Page 18

19 Case Study Preferred Automotive Collection Retention and The Circle of Life Showroom Yes No Your Competitor Buy Or Lease Service Vehicles Last Service before repurchase 6 th Service 1 st Service 2 nd Service 4 th Service 5 th Service 3 rd Service Page 19

20 Case Study Preferred Automotive Collection Focus on Customer Retention Measure the retention of your current both new and used. When someone defects: Find out the reason why Try to get them back into the family Page 20

21 Case Study Preferred Automotive Collection Focus on Customer Retention What Preferred Heard from Defecting Service Customers I m pretty honked off that you raised my oil change to $ It should have been $9.95. It just takes too long. You charge too much for everything. What Preferred Did with What They Heard Preferred had raised its price for oil changes from $9.95 to $ They dropped the price back to $9.95. Preferred changed its processes so that a team of 3-4 technicians gets vehicles done more quickly. For Toyota with complimentary 2-year maintenance, Preferred added one free oil change after that program expires. Page 21

22 Case Study Preferred Automotive Collection Retention and The Circle of Life : Results Customer Retention for Service New and Used 100% 80% 60% 75% 75% High 90s 60% 40% 20% 0% GM Off-Site Lot (Used) GM (Main Lot) Ford Toyota Auto Care Page 22

23 Case Study Preferred Automotive Collection One-on-Ones with Service Advisors: The Problem Not sure that they were offering all needed and scheduled maintenance to every customer Also not sure they were presenting them in a way that made the most sense or was the most persuasive Too many single-line repair orders Too much declined service Not discussing the next appointment with every customer Not tracking customer pay statistics for each advisor well enough Page 23

24 Case Study Preferred Automotive Collection One-on-Ones with Service Advisors: The Solution Every morning, the Service Director sits with each Advisor to review every repair order from the previous day. Very similar to the Save-A-Deal meeting in Sales General Manager attends 2-3 times/week minutes starting at 10 a.m. Use Repair Order Analysis from ADP Was all needed or scheduled maintenance was performed or offered? Review Declined Services Track with a labor op entered when service is declined Measure each Service Advisor against a goal and the shop average Added a line to the R.O. that tells when their next appointment is scheduled Page 24

25 Case Study Preferred Automotive Collection One-on-Ones with Service Advisors: Results Much better documentation Eliminated excuses for not performing at the highest levels Reduced single-line repair orders by 9% in the first month Generated $8,000 additional gross profit in the first month Working on another 10-12% reduction in single-line repair orders or denied work Worth an additional $8,000- $12,000 gross profit Page 25

26 Case Study Preferred Automotive Collection One-on-Ones with Service Advisors: A Tool This is an example of a spreadsheet that can be used for these oneon-one R.O. reviews. Each row is an R.O. It is just a checklist for verifying what is being done Customer Name Advisor RO Number Rec'd Maint Customer Signature Inspection Address Tires Measured Tires Under 4/32nds Tires Sold Page 26

27 Case Study Preferred Automotive Collection Process Measurement and Management Measure the results and make adjustment if you are not on track. Preferred uses ACAR to generate detailed reports with benchmarks Monthly ACAR meetings in person at each store Discussions about the current state and improvement opportunities Daily reports KPIs (Key Performance Indicators) Page 27

28 Case Study Preferred Automotive Collection Process Measurement and Management Preferred also uses the N- DOTS (Nickelsen Dealership Operations Toolkit) to track performance by Service Advisor. This shows real data from a portion of one report not all lines, total for all Service Advisors. Note that Preferred generates high Service Absorption through lots of R.O.s, NOT through high hours per R.O. Page 28

29 Case Study Preferred Automotive Collection Process Measurement and Management This expanded view shows the detail for three of Service Advisors as well as the total. A B C Page 29

30 MINI CASE STUDIES Page 30

31 Mini Case Study #1 Jon Lancaster Toyota Tire Sales and Quick Lube Focus on tire sales Selling over 80/day Website is set up for ease of purchase Built a quick lube across the street Does 100 CP quick lubes/day Page 31

32 Mini Case Study #2 Romain Automotive Group Adding Evening Service Added evening service (until 11:00) and Saturday service (8:00 4:00) Page 32

33 Mini Case Study #2 Romain Automotive Group Tire Displays and Good-Better-Best Offerings Page 33

34 Mini Case Study #2 Romain Automotive Group Signs to Attract Service Customers Page 34

35 Mini Case Study #3 Mike Patton Auto Family Increasing Customer Count Lowered quick lubes to $16.88 Gross profits went from $170k to $290k Recently invested in waiting areas in all dealerships If they take extra snacks or sodas they offer to help them Chris Patton does a blog Christianity at Work Page 35

36 Mini Case Study #4 Tom Gill Chevrolet Building a Café Café supports both service and sales Some dealers outsource café management to achieve break-even Page 36

37 Mini Case Study #4 Sisley Honda Building a Café Café supports both service and sales Some dealers outsource café management to achieve breakeven Page 37

38 Mini Case Study #5 Greenwood Chevrolet Outsourcing Service Retention Greenwood Chevrolet uses Performance Administration to provide prepaid maintenance services to its new-vehicle buyers. Creates customer habit of coming to dealership for service Triple number of ROs/customer in first year of ownership Page 38

39 Mini Case Study #6 Tom Kelley Auto Group Service Walk-Around with the Customer In 2009, Kelley started having its Service Advisors do a comprehensive walk-around with the customer. Within one week, hours per R.O. increased by 0.45! Page 39

40 Mini Case Study #7 Rerouting Incoming Calls to Service Advisors: Process All incoming calls go to the receptionist, who routes the calls. Sales calls go to Sales Office calls go to Office But Service calls get asked another question! For Service calls: Appointment calls go to appointment setter during peak periods Status calls or other information requests go to the Service Advisor Page 40

41 Mini Case Study #7 Rerouting Incoming Calls to Service Advisors: Process The receptionist logs every call. At first, the GM, Service Manager, and Service Advisors reviewed the log weekly. Each Service Advisor learns how many calls were taken for him. If there are too many incoming status calls, the Service Advisor is coached to keep better informed. Appointment calls were analyzed to do a better job of planning dispatching. Now that the process is stable, the call log reviews are done every six months. Page 41

42 Mini Case Study #7 Rerouting Incoming Calls to Service Advisors: Results Incoming calls to Service Advisors dropped by more than half. 63% of incoming calls were for appointments, which were rerouted. Most of the remaining calls were status calls that are no longer happening because the Service Advisors are calling the proactively. Several customer have remarked on how much better it is talking to a Service Advisor without constantly being interrupted by incoming calls. Productivity Before: 3 Service Advisors each taking calls/day. Average time with each service-drive customer was 8 minutes. After: Service Advisors each take calls/day. Average time with each service-drive customer is 13 minutes. Page 42

43 Putting It All Together The Plan Create great service menus Get the first service visit Bring back repeat Attract conquest Do a great write-up Provide a great experience for waiting Communicate during the day Do a good job in the shop Do a great service delivery Follow up as needed Monitor and manage Page 43

44 Putting It All Together The Plan Before Drop-Off During Delivery After Create great service menus Get the first service visit Bring back repeat Attract conquest Do a great write-up Provide a great experience for waiting Communicate during the day Do a good job in the shop Do a great service delivery Follow up as needed Monitor and manage Page 44

45 Putting It All Together The Plan Create great service menus Get the first service visit Bring back repeat What services can you offer your? How can you package those to emphasize value? How well do they line up with what are going to see recommended in their service manuals and on-line? Are they priced competitively? Is that obvious to the customer? Attract conquest Page 45

46 Putting It All Together The Plan Service Menu from H&H Chevrolet Create great service menus Get the first service visit Bring back repeat Attract conquest Page 46

47 Putting It All Together The Plan An On-Line Service Menu from Lakeland Create great service menus Get the first service visit Bring back repeat Attract conquest Page 47

48 Putting It All Together The Plan Another Service Menu Create great service menus Get the first service visit Bring back repeat Attract conquest Page 48

49 Putting It All Together The Plan A Service Menu That Explains What Create great service menus Get the first service visit Bring back repeat Attract conquest Page 49

50 Putting It All Together The Plan A Service Menu That Explains What and Why Create great service menus Get the first service visit Bring back repeat Attract conquest Page 50

51 Putting It All Together The Plan Create great service menus Get the first service visit Bring back repeat Attract conquest Do a service tour during the sales process Schedule the first service appointment during vehicle delivery Remind them of the first appointment ahead of time: call, text, , or mail Monitor and manage first-visit retention overall, by salesperson, and by whoever does delivery Offer free oil changes to recent vehicle buyers? Offer a prepaid maintenance program? Page 51

52 Putting It All Together The Plan Create great service menus Get the first service visit Bring back repeat Attract conquest Schedule the next maintenance appointment during service delivery Follow up on missed appointments identify dissatisfaction issues so you can work on them Use marketing programs (e.g., direct mail) that have worked well for you or other dealers Offer simple incentives to return unlimited free washer fluid refills, unlimited free nitrogen tire refills, etc. Page 52

53 Putting It All Together The Plan Create great service menus Get the first service visit Bring back repeat Attract conquest Use marketing programs (e.g., direct mail) that have worked well for you or other dealers Talk with about servicing their other-make vehicles Monitor your on-line reputation Page 53

54 Putting It All Together The Plan On-Line Reputations Affect Conquests Create great service menus Get the first service visit Bring back repeat Attract conquest This review is for Preferred Automotive Collection s Toyota of Grand Rapids store, on dealerrater.com. Reviews like this may attract conquest. Poor reviews definitely drive prospective away. Page 54

55 Putting It All Together The Plan Improving On-Line Reputations Create great service menus Get the first service visit Bring back repeat Are you happy with your experience here today? [If yes] Here is a list of several websites that sometimes look at to decide whether they want to visit a dealership. Would you mind writing a little review about your experience here on one or two of them? Attract conquest Page 55

56 Putting It All Together The Plan Do a great write-up Schedule appointments to allow enough time to do this well Service ADVISORS, not just Service Writers Do full walk-around with the customer to build value and earn trust Review any declined work from prior visits Recommend needed work, and provide alerts about work that will be needed in the foreseeable future If the vehicle does not need anything beyond a basic service, tell the customer that and commend them for having a vehicle in great shape Page 56

57 Putting It All Together The Plan Provide a great experience for waiting Communicate during the day Have a pleasant, comfortable waiting area where people can relax or work must have decent WIFI Complimentary beverages and snacks Ideally have both TV and a quiet working area Consider adding a café Do a good job in the shop Page 57

58 Putting It All Together The Plan Service Customer Waiting Areas at Ken Ganley Nissan Provide a great experience for waiting Communicate during the day Do a good job in the shop Page 58

59 Putting It All Together The Plan Provide a great experience for waiting Communicate during the day Do a good job in the shop Call/text/ the customer when the vehicle is ready and thoroughly review what was done (particularly if a cashier will be doing service delivery) Call on additional work as soon as the need is identified Don t make the customer call you Never set up the customer to be surprised when they come to pick up the car Try to have the Service Advisor cashier the R.O., not someone who does not understand the R.O. How does the customer prefer to be communicated with? Page 59

60 Putting It All Together The Plan Provide a great experience for waiting Communicate during the day Do a good job in the shop Complete inspection on every vehicle Clearly document complaint/ cause/correction for each R.O. line item so customer can understand it at service delivery Page 60

61 Putting It All Together The Plan Review the R.O. in detail, so customer understands that all his concerns were dealt with effectively, what he paid for, and what he received at no charge Review the inspection sheet, so customer has peace of mind Discuss any future work needed Schedule the next appointment Do a great service delivery Page 61

62 Putting It All Together The Plan Track customer satisfaction through surveys and manager calls to goal is understanding how to provide consistently great service, not just getting good CSI numbers Call all missed appointments to identify causes and reschedule Call to set appointments for declined work or anticipated service needs at the appropriate time Follow up as needed Monitor and manage Page 62

63 Putting It All Together The Plan Track R.O.s, total gross profit, and sales penetration by product for each Service Advisor Review R.O.s Completed inspection sheets attached? Evidence of appropriate upselling attempts (not too little, but also not too much)? Clear work descriptions so can understand value provided and have peace of mind? Service Managers do one-on-ones with Service Advisors to coach on increasing total gross profit and retention Manage by walking around Are effective walk-arounds happening? Are service deliveries done well? Do look happy, or do they look resigned? Follow up as needed Monitor and manage Page 63

64 Putting It All Together The Plan Notice How Much of This Is About Process Create great service menus Get the first service visit Bring back repeat Attract conquest Do a great write-up Provide a great experience for waiting Communicate during the day Do a good job in the shop Do a great service delivery Follow up as needed Monitor and manage Page 64

65 Execution and Maintaining Momentum The Biggest Problem Success depends on getting the processes right right process, done consistently. Seven out of the ten elements in the plan are processes. Most dealerships struggle to execute the same process the same way consistently. Page 65

66 Execution and Maintaining Momentum Two Things That Matter What you plan to do Your intentions Your plan How consistently you do it x = How many of your people actually follow the plan How often your people follow the plan What % of your experience the plan Your results Great if the plan and the execution are good Poor if either the plan or the consistency is inadequate Initially good but then declining unless management stays on top of execution Page 66

67 Execution and Maintaining Momentum Who Is Accountable for Execution? How are you going to measure execution and hold that person accountable? How are they going to measure execution and hold others accountable? Page 67

68 Execution and Maintaining Momentum Monitoring Key Performance Indicators (KPIs) Page 68

69 Execution and Maintaining Momentum Are You Setting Yourself Up to Succeed or to Fail? Do your people believe you are committed, or can they safely treat this like another flavor of the month? Do your people have the skills, time, and resources they need? If not, what are you going to do about that? Are you going to focus on the right metrics? (Retention and R.O. count, not $/R.O.) Are you putting in place processes that make these good things happen, or are you using processes that prevent them from occurring? Are you reviewing progress towards your Service Absorption goal at every manager meeting? Are you holding your people accountable for following up on those conversations? Page 69

70 Execution and Maintaining Momentum Is the Problem Your People? If you believe the problem is one person but that your other managers are fine You may be right. If you believe that all your managers are a problem Odds are that their replacements will be a problem, too. The fix for that is better processes plus coaching for those managers. Their manager(s) may need coaching, too. Page 70

71 Execution and Maintaining Momentum Make Time to Measure What s Important Regular review of KPIs it s the dealer s or GM s responsibility to determine what is on the dashboard. Knowing that the oil pressure is low is of no value if that data is not acted on. Air traffic control keeps airplanes on their flight plan. If they are off, it s turn left to 050. Page 71

72 Execution and Maintaining Momentum Urgent vs. Important Some of us need to rethink our time allocation if we re going to get the important things done. Page 72

73 Execution and Maintaining Momentum What We See at Dealerships It is possible to generate these improvements without outside help. But it is really hard, and success is rare. Dealers typically get the most benefit from relying on their own managers and supporting them with outside resources. Advertising and website maintenance for service promotions Targeted programs like prepaid maintenance Data benchmarks and trend analysis Assessing the truth about how well you are executing today Best practices and ideas that have worked at other dealerships (and knowledge about what has been tried less successfully) Coaching and skill-building for dealers, managers, and staff Page 73

74 Summary: Which of These Plan Elements Will Be Different in Your Store within a Month or Two? Create great service menus Get the first service visit Bring back repeat Attract conquest Do a great write-up Provide a great experience for waiting Communicate during the day Do a good job in the shop Do a great service delivery Follow up as needed Monitor and manage Page 74

75 Thanks for listening, and congratulations on your desire to learn! For any additional questions, please me at: or my cell is Steve Nickelsen, CEO Page 75