Effective labor rate and Hours per RO

Denim Simkins
I just watched an interview involving a Honda store and an automotive consultant and the discussion was about the improved performance in service due to the training program. This all sounds great and good job sticking to a program and making improvement. Here is where I really became concerned. They indicated that they were close to 3.0 hours per RO and their ELR was well over the $250 mark. The ELR statement really seems unlikely but when it was said there was not a correction made as maybe a misquote. ELR and Hr/RO are essential metrics but do they really tell you the whole story and when they are this high is it beneficial to the customer. Will focusing on these metrics create long term loyalty and repeat business? Please let me know your thoughts
Clint Jones
No, these metrics have nothing to do with Long Term loyalty and Repeat business. I do not believe the $250 ELR to be correct. Someone got their wires crossed on that. Now, if they are running about 3 Hrs/RO, I could see them at $250 TOTAL Labor Dollars/RO. Hours per RO typically becomes a lesson in how to count. One store doesn't count Warranty or LOF, the next guy counts everything, and on and on. None of it really matters in terms of building loyalty and repeat business. ELR is a good metric for monitoring overpaying techs via discounting. It doesn't get you customer loyalty though. The metric that I liked to watch was Tech Productivity AND Tech ELR. In my opinion, the only way to build Long Term Loyalty and Repeat Business is by #1-fixing the vehicle right the first time it is in, and #2-communicating to the point of overkill with the customer, and #3-don't sell a customer something they do not need.
Mark Miller
$250 ELR WOW! I spent time in some very high end european car lines and NEVER got ne that, it has to be wrong. As Clint said regarding ELR, some stores skew the count to their favor, some stores count it all, and some are in the middle. What none of this does is tell a story of loyalty or repeat business. If someone has a high ELR and hours per RO, that may be an indication that they are milking every customer for as much as possible, this will drive customer away. Hours per RO can tell you i you have an under performing writer or a tech that isn't looking over cars well. It will alert you that you need to look into a situation. ELR can tell you if you have a writer that is not billing or over billing.
Denim Simkins
@Clint to your point #3 - If the dealer focuses on HR p/RO so much this could come into play for an advisor that does not have a steady process of All products to every customer, every time. Therefore this could create a trust issue with the customer and the dealer in which will affect your repeat business. In regards to ELR I know why we track it and your right its the best way to monitor overpaying techs and excessive discounting. Over the years I have seen where this number is also a practice in manipulation, a little extra here and a little discounted here. This also could create an issue of not helping the oil change customer due to affecting both metrics. I need to regress and say that over the last 20 years these 2 metrics either made or broke the month so the importance of those metrics along with increasing traffic are very important for creating profit. To put it lightly we are at an extreme disadvantage compared to the after market in regards to the dealership structure and makes the measures necessary to produce profit. My biggest worry is when I find a process poor store demanding results in these areas and seasoned vets manipulating the numbers to make it happen. When this happens it can and will drive the customer away therefore affecting retention. You ask the next person you run into that is not in the car business about their perception of the dealership service department and a majority will indicate "their prices are to high". I am convinced that a typical scenario such as this has happened to them in the past. Technician rounds to the nearest .5 or .0 so a job that if you look up in the FR manual pays 1.6 the job after diagnosis (only paid in the dealership world) could be at a labor time of close to 2.5 or even 3.0. The advisor wanting to make up for the last customer that wanted a discount now bumps his $'s by $10 to $15 per hour now making it $125 per hour and the labor the customer pays now is $315 - $375 instead of $176.
Joe Tareen
They definitely misspoke about the ELR being @250 dollars. More like overall Labor dollars per RO. Divide $250 by 3.0 you get more of a true picture of an ELR which is around $83.33. $83.33 is not uncommon with Honda stores. I know of one who has a higher ELR than that. Cheers Joe

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