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Jim Leman

Jim Leman Writing about dealer operations

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Look There to Find Where Margin Hides

by Ryan Williams - Fidelis PPM

Margin compression attacks from within and without. Every business should scrutinize every process to stop profit leaks and spot margin opportunities.

Be sure to explore these processes:

Service Turnover: Sales’ failure to conduct a professional and well-structured sales-to-service turnover kills retention. Dean Estep, a former fixed-operations training director for the AutoNation dealership chain and current managing partner at Next-Level Automotive Group, has said this is the point where dealers “stumble in establishing a long-term relationship with the customer.” Cox Automotive notes that conducting this turnover results in customers 2.3 times more likely to use that dealership’s service department.

Advisor Engagement: Service consultant Lou Aronica of MSX International says advisors who sell in the lane at check-in may trade nickels for dollars. Don’t upsell customers in the service drive until techs have gone through their vehicles and report their findings. It’s by choosing not to grab for every penny that trust is built. Both revenue and retention opportunity suffer, Aronica says, where a service department pushes advisors to up-sell in the lane during the R.O. creation. “Customers are more interested in getting in and out quickly than about your advisors looking over their car. They come back because of how they’re treated and the perceived value of the service,” he says.

Retention Sales: Stop wasting opportunities. Every retained customer is future service and vehicle business.  Many dealers kick-start retention by engaging customers with discount-priced dealer-branded prepaid maintenance plans they offer or sell in F&I. Does it work? Our studies show the right plan can drive first-year retention by eighty-five percent and two- and third-year rates by sixty-five percent. They also can boost customer-pay repair order averages by $70 each. Those that return these benefits have the following in common:

  • Drive consumers to the dealership, especially the service department
  • Deliver a positive experience, which encourage customers continue to come back
  • Have baked-in accountability tools to measure the lift in customer-pay dollars for each visit, so program ROI is measurable.

F&I: Studies by digital F&I technology provider MaximTrak Technologies, show that use of e-menu technology lifts per-vehicle retail (PVR) lifts of $538 and product penetration  fifty-two percent. When more customers buy more products, especially ones like service agreements, prepaid maintenance plans, and tire and wheel services you build retention and service dollars.

Used Car Reconditioning: Keep an eye on at least two costs here: (1) Holding cost depreciation, which accumulates at an average of $50 a day per vehicle you own until you sell it, and (2) Over- reconditioning. Both accumulate to eat margin. Dennis McGinn, CEO for Rapid Recon, pushes dealers to get vehicles through recon in three to five days to reduce holding costs and get cars to the frontline quicker.  When done, cars sell faster for more gross.

Lost Opportunities: Never give up on Declined Service customers. Call them back the next day, the next week and a month from now – they may not yet have attended to those services. You may find them in a better frame of mind, with more time and even a little more cash.  Consider offering credit services for repairs. Tim Clay, Chief Revenue Officer for Confident Financial Solutions, notes that the service provides a desirable alternative to credit card financing. He notes that many dealerships report a 20 percent or greater increase in monthly service revenues because of signing up for the company’s service.

Ryan Williams is president of Fidelis PPM and DRIV Technologies. Reach him at Ryan@getfidelis.com or visit www.getfidelis.com

Ashley Stryker

These are some fantastic tips. Thank you for sharing these! I'll pass your article to some of our clients--I know a few of our account managers would be thrilled to read this.

This was an incredible read, and of course as a salesman my favorite tip here was on the Lost Opportunities! I didn't know that used cars accumulate holding cost depreciation at the rate of $50 a day, WOW! I'm sharing this one!!! 

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