Here's how car dealerships can inflate service-dept. profits
I received an overwhelming response to a recent column on selling tires at car dealerships.
We've developed a collection of ideas to help you sell more tires. From our company's wealth of experience, here are tips that may help you.
Establish Sales Objectives
We have objectives for car sales, labor sales and parts sales, why not tire sales?
About one service customer in five needs, or will need, tires in the very near future. These are customers in your service department.
Let's agree for projection purposes this number is correct. The projection chart below is available to you, just drop me an email. Once you have an accurate number, you can establish individual service-advisor numbers or do it for the entire department.
Spiffs can be offered for the achievement of established goals. I would post the numbers by advisor, on a daily basis, in a high traffic area, out of sight of the customer.
Look at the gross profit amounts if you hit just 80% of the objective. Add to this number, you are retaining more customers by not giving them a reason to look anywhere else other than your dealership.
The first chart shows the opportunity your dealership has in tires. The numbers used are examples. Fill in yours and compare to your current performance and see if your dealership has an opportunity to improve.
The “SWAG” (sophisticated wild @#@ guess) percentage understates the projects by 20%. I prefer to be conservative in my numbers.
Now let's assume that, since the car is on the lift, your technical staff looks it over and finds additional work. Let's use two operations as opportunities. Front brake pad replacement and wheel alignment. We will say that we can close 10% of the customers who need tires will also purchase front brakes. Since we are installing tires, we will assume we can sell 25% of the customers a wheel alignment.
To summarize the opportunity in total gross profit refer to the second chart.
My numbers are conservative. Let's say I'm just half right. The upside is still huge. Plus, you are providing a service that keeps your customers returning to your dealership.
I was in a store a few weeks ago and the sales manager was telling me about a service customer who was waiting for her car that was being serviced.
She was walking the showroom, pointed to a car and told the sales person she wanted to buy that car one. She was not interested in driving it; she was just interested in buying it. Now isn't this the objective we all have. The gross was great, he told me.
Give Service Advisors Selling Points
Loading their lips with these key points:
- Mileage ratings — Not all tires have a manufacturer mileage rating, but most do. Your advisors need to have this information available to them.
- Out-the-Door Pricing — Your advisory staff needs to have the ability to present an out-the-door price. They should be trained to see the value in this concept of pricing that management establishes.
- Lifetime Services — Lifetime tire rotation and wheel balance are a great retention tool to give your dealership a competitive edge in your market place. Enlist the help of your technicians and advisors to work out a plan to offer this service to customers who purchase tires from your dealership. If it's their idea, it will work.
Advertise on Your Website
We did a presentation for a regional group of dealers. Of more than 40 dealers, one featured tires on the store website.
It's a great way to promote the service to your customers. A number of websites have a person on the homepage welcoming the viewer. It's a great idea to have a tire roll across the screen with a voiceover announcing that your dealership offers tires for all makes and models. It makes a statement: “We are in the tire business!”
Offer Three Grades of Tires
This is a must. Call them what you like, such as “good,” “best,” “better.” It works! It drives an image of your store as not being pushy and allows the customer to make a decision on which brand to purchase.
Guaranteed Price Match
Why not? This screams volumes about your belief in your prices. It's a sales tool that will allow you to leverage your competitors advertising for your benefit.
Consider this, you offer a price guarantee and you have a customer who would drive to the other side of town to save $10, but your dealership is more convenient, you got the sale! Remember your staff has a responsibility to complete a courtesy inspection on the vehicle.
Advertise for All Makes and Models
The majority of your customers have more than one car in the family. Is your store positioned to be considered for other makes in the family?
Attach Flyers to Invoices
Developing a flyer is easy. You have the ability to develop a one sheet flyer that promotes your tire inventory.
Provide a Daily Inventory
You have two types of tire inventory in your dealerships. You have the actual, which is the physical inventory in the racks, and you have the perceived inventory. This inventory is the most important for growing your business in tire sales. Printing an inventory summary each morning goes a long way in managing the perceived inventory.
Develop On-Hold Message
This is just another inexpensive way to ensure your customer knows you are in the tire business. Be sure to include a sentence or two that you stock tires for all makes and models.
Joe Sassin is a very knowledgeable and talented fixed operations director for Automotive Management Services Inc. He once shared with me this line: “If you can't smell them, you can't sell them.”
Another talented fixed operations director is Charles Sigmon from the Anderson Automotive Group in Raleigh, NC. He pulled a new truck out of inventory, loaded the bed with tires and parked it in the service lane. A banner on the side of the truck proclaimed, “Truckload Tire Sale.” It's about awareness, let them know you have tires.
Follow-up Customers Who Didn't Buy
If the one out of five customers' needs tires is accurate, you have lots of opportunities. But you can't close 100% of them at the time of their visit, so have a follow-up system for those who didn't buy tires?
It's easy to create a kick-out system to remind your advisors or manager to call the customer and ask for consideration.
Remember selling tires is not all about the tires. It's about customer retention. Your staff has an obligation to help the business grow and prosper.
As things are getting better, we need to seize the opportunities quickly. Forcing the customer to buy made-up services is not the future of your business. Tires are.
Lee Harkins is president and CEO of M5™ Management Services Inc. You can contact him at 205-747-8305 and firstname.lastname@example.org.
Tire and Sales Projection
|Projected Needs Percentage||20%|
|No. customer repair orders||654||7848|
|Customer ROs needing tires||131||1570|
|No. ROs needing tires||105||1260|
|No. of tires per RO||4||4|
|Objective tire sales||420||5040|
|Average tire sales value||$120||$120|
|Tire sales revenue||$50,400||$604,800|
|Gross profit per tire||$15||$15|
|Tire gross profit||$6,300||$75,600|
|Labor/tire (.2/tire M&B at||$60)||$16|
|Labor gross profit %||60%||60%|
|Labor gross profit||$4,032||$48,384|
|Total fixed gross profit||$10,332||$123,984|
Total Gross Profit
|Tire installation labor||$4,032||$48,384|
|Brake pad gross parts/labor||$987||$11,844|
|Alignment gross profit||$1,351||$16,212|
|Total gross profit||$12,670||$152,040|
Questions or comments about this column?
Send us an e-mail at Dealers@wardsauto.com.