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Opportunities Lost…but then Found!
Finding Service Revenue Opportunities at Your Dealership
Each day, during the service write-up and diagnostic process, service advisors and technicians frequently discover potential service revenue opportunities; otherwise known as “problems” to the car owner. In most cases, they present their findings to the vehicle owner with the hope of “up-selling” additional service lines. Most of the time the vehicle owner declines the proposed services for one of two reasons or both: time and/or money. The customer then leaves the building and the potential revenue is technically lost. How much is lost? Let’s play with some numbers.
Most service directors will say that up to 40% of all repair orders have at least one declined service opportunity listed. If your shop handles 75 repairs order per day then you will have up to 30 declined service opportunities each day or 780 per month (26 days). Basically, your Service Department has missed out on 780 potential revenue opportunities in just one month
Now…let’s look at the financial implications of lost service revenue opportunities. Suppose that the customer pay and parts revenue attached to each declined service opportunity equals $150. Using the numbers from above, 780 declined service opportunities missed per month equates to a potential loss of $117,000 of additional revenue ($150 x 780) or $67,860 in Gross Profit ($117,000 x 58% GP)
So we assume that 780 declined service opportunities leave because they do not have the time and/or money to have the services performed. Does this mean that they will not have the needed service completed at some other time? No…it could mean that the decision has just been delayed.
Theoretically, the money is not lost, but in a holding pattern. The key to “finding the money” is to proactively contact the declined service customers to remind them of the importance of having these services performed and to offer an incentive (i.e. 10% off, etc.) to return to the dealership.
Studies show that with an effective and automatic follow-up declined services process using multiple channels of communication; the average dealer will have a 13.5% response rate with an average RO value of $331. Again, using the numbers above, 780 declined service opportunities per month at 13.5% response rate equated to 105 RO’s at $331. By utilizing an automatic follow-up process and being proactive with the service opportunities you originally perceived to be lost you just found $34,854 in revenue each month.
Not only have you found the lost money, but also proactively re-engaged that customer into your service department. A “Win-Win” for everyone!
~ Gary Mitchell
Director, Telephony & Virtual BDC Products, DMEautomotive
Gary has 25 years of experience in providing franchised auto dealers with marketing and technology solutions designed to increase revenue and overall profitability. Gary has held national positions with ADP Dealer Services, LML Technologies, and DMEautomotive. He is currently responsible for researching and designing new products and marketing campaigns based on industry trends and specific dealership needs. He directly interfaces with Development and Product Management to monitor market needs and requirements, taking into account emerging technologies, competitor products / services, industry trends, and regulatory / compliance changes for both OEM and regulatory bodies. LinkedIn Profile: http://www.linkedin.com/in/garymitchellauto
Original post is located at http://www.automotivedirectmarketing.blogspot.com