Can you increase sales in the service department without chasing away your customers?

The goal of the service department at any dealership is the same as every other department: generate an income for the owner. Moreover, there’s an expectation that the profits will increase year-over-year. The responsibility for that growth falls squarely on the shoulders of the service manager and their team, namely service advisors and technicians. But is sales growth possible without chasing away faithful customers?

Labor Rate increases versus inflation rate

According to the Bureau of Labor Statistics, the US inflation rate has slowed from three percent on 2011 to just one percent in 2016. That indicates nearly stagnant financial growth for the vast majority of Americans.

In 2011, the average dealership labor rate was in the vicinity of $104 per hour. That number also varies significantly based on geographical location in the United States, but is an average across the nation. In 2016, the average labor rate charged by car dealerships nationwide has increased to $129 per hour.

What that indicates is the labor rate for auto repairs is nearing a ceiling. While economic growth has slowed to a crawl, dealership labor increases have forged ahead at nearly five percent per year. Additional labor rate increases have the potential to push customers to alternate vehicle service and repair choices that charge lower rates.

How, then, can an automotive dealership increase their sales without increasing their hourly labor rate? What challenges does it pose to customers and to service employees?

Ways to increase sales dollars

A critical component to increasing sales through the service department is to maintain the focus on added value to the customer. Should the concentration shift away from the client, it may be quickly noticed that efforts go unrewarded, and may even be detrimental to business.

Here are a few methods to increasing sales in the service department without bumping up the labor rate:

• Monitor the service process closely. From the vehicle walkaround in the service drive to checking in with a service advisor, right through to the technician’s inspection and repairs and subsequent estimate, the processes that are set out for employees to follow should be adhered to. Regularly follow a work order through the whole process to ensure every person is performing their role fully. Otherwise, sales dollars are being left on the table.
• Offer mobile services. A growing industry trend is mobile vehicle servicing or vehicle pickup and delivery. Lincoln has claimed that every 2017 model year vehicle will be offered vehicle pickup and delivery for maintenance and repairs during the warranty period. While Lincoln is providing this service free of charge, customers don’t expect convenience to be free. Offer mobile services or vehicle pickup and delivery for a premium charge.
• Provide services that save customers time. Consider items where customers are required to make an additional appointment elsewhere. Services such as glass repair can be performed at the dealership with little training and almost no cost for materials. These services can be performed by a junior technician at a low labor cost, meaning even at a competitive price the gross profit is still quite acceptable. Dent repairs or upholstery repairs can be subleted and marked up and, though marginal, the profit will improve sales figures.
• Emphasize accessory sales. Parts and service departments both profit well on accessory sales and installation. A prominent accessory display at the service desk can trigger an impulse purchase from customers who see it. Accessories show pride in vehicle ownership and are perceived as good value by those who purchase them.
• Offer full-service vehicle detailing. Again, the labor costs of detailing staff are on the low end, meaning competitive pricing can be offered to customers without sacrificing gross profit. Provide upholstery cleaning, exterior scratch removal, and complete vehicle polishing for high-ticket detail services that customers will be happy to pay for.

Among each of these services, it is imperative that pricing is competitive. That doesn’t mean offering the lowest price but it does mean being in the same ballpark. If the services offered are exceptional – truly better than the competition offers – it’s quite possible to charge a premium and still be good value.

Get the whole team on board

Successful increases in sales are a team effort. It requires a concerted push from vehicle write-up through to the completion. For that, every team member involved needs to buy into the process.

Regardless of the method of increasing sales dollars, the process is the same.

• Make the objective clear. Determine a specific target to achieve through the chosen method. If the goal is to increase sales $10,000 per month, ensure that every involved team member knows the goal. The targets should be realistic and measurable and should be well-researched and metered before implementing the process.
• Make the benefits clear to staff members. Requesting more productivity from any particular role with a reasonable expectation of success hinges on answering one question – “What’s in it for me?” Knowing how the team will benefit and how each individual will benefit from the increased sales is a great way to motivate the team towards the new common goal. Be prepared with this information as the process is rolled out to prevent opposition.
• Track the sales increase. As with developing any habit, it takes 21 days of repetition and consistency to cement a new sales process into daily routines. Follow up daily with each team member involved in the chosen method, reviewing their performance toward the goal and encouraging them on.

Set a timeline to review the implementation and assess if the goals have been achieved, exceeded, or missed. It may be necessary to revise the sales target or select a different process to implement, but do so only after a concerted effort.

Once again, the emphasis must be placed on the benefit to the customer in order to achieve increased sales without hurting the customer base. If clients don’t perceive value, few will buy into the process without straining the future service relationship.