As I type and sip on my jumbo-size sweet tea — yes, we do have that here in the Carolinas, and no, it's not the cognac that other industry columnists like to relax with as they write — I had no trouble figuring out what I wanted to cover this month.
The column idea came several weeks ago when I was purchasing — correction, my wife was purchasing — a new Chevrolet Uplander minivan at Rick Hendrick Chevrolet in Durham, NC.
I was so impressed with the salesperson Aubrey Foster and F&I manager Troy Raines. I knew then that my experience was worth sharing.
Aubrey did a fine job, all the way from locating the vehicle of our choice to the delivery of the unit.
In the F&I office, I paid attention to every step of the transaction. It was all handled smoothly, with full disclosures.
I purchased an extended-service contract because I wanted protection against potential costly repairs. I purchased the fabric and paint protection package because my wife was worried about spills on the cloth seats (mainly from my coffee).
I wanted mud flaps and a roof rack, which were not sold in the F&I office. But Aubrey stepped up and worked with the parts department to get the parts ordered. He also scheduled a service-department appointment to install the accessories.
A Win-Win Situation
My experience raised many questions.
Does a dealership want to increase service-department customer pay revenues? Does the dealership want to build on the customer excitement of a vehicle delivery by extending it to the service department?
How much money does the dealership spend to attract new customers and keep existing ones? Can system providers help?
Most dealers would be only too happy to drive more traffic to their service departments.
And it usually costs less to keep a customer than attract a new one. Consumers become repeat customers if they are happy with their overall experience.
As far as the computer system vendors helping towards that, customer relationship management (CRM) will play a larger role in the service and parts department.
So, how can we move the activity in this direction? Let's start with pay plans for sales people who help drive business to the service department.
I saw so many synergies in our own vehicle-buying experience. I thought, “Why is this not part of the normal process? Why not add an additional revenue stream to the salesperson and also enhance the dealership's bottom line?”
By making this part of the pay plan, sales people will want to tie their customer to the service department. Jeff Sacks, a friend and mentor, taught me two things about pay plans:
- They dictate behavior.
- Design them to satisfy a need.
What would it take to build a pay plan that compensates a salesperson for customer-pay labor that he or she helped initiate? Could you assign the salesperson to the customer? Yes. Would it be beneficial to have the salesperson make the follow-up contacts to customers who recently had their vehicles serviced? Yes. What a way to build customer trust and loyalty. CRM systems can easily assist with this.
Design a Pay Plan
In designing a service-incentive plan for sales people, keep these points in mind:
- Convey a consistent message.
- Be as specific as you can as to what is meant by “commissionable gross.”
- Reserve the right to change it.
- Have no more than three-four drivers (such as F&I gross, selling gross, customer pay labor gross or CSI indicators).
- Keep it easy to calculate and understand.
- Make sure its goals allow the dealership to stay within industry guides/benchmarks for sales personnel's compensation.
Rick Hendrick Chevrolet General Manager Doug Harbison says, “Our pay plans for sales people are heavily weighted on CSI scores. We feel that in order to obtain the necessary CSI scores the salesperson must do all that they can to meet the needs of each and every customer.”
It is easy to generate a report to identify all the customer-pay service department labor generated for customers who were sold a vehicle by a certain salesperson.
What if we only wanted to pay a commission on that customer-pay labor that the salesperson or F&I manger sold? We would need to track the referral of the service work and be able to pull that customer-pay labor by employee.
I asked dealership-management system providers about the best way to track this with their systems. Here's what they say:
Reynolds & Reynolds
From Reynolds' Contact Management, a salesperson can pull a report by date range that tells him or her all customers who had customer pay service work during that time frame, how much the total repair order was for, and who (if anyone) their assigned sales person is.
The data can be exported to Excel from Contact Management and sorted by salesperson. This report could then be used to calculate salesperson pay plans or bonus-based compensation. Contact Management can provide this type of data due to the integration with the ERA system and its service information.
Using w.e.b.CRM, dealers can assign each salesperson to specific customers, and can include sales transactions in desking and F&I along with all of the service activity.
The system can create certain customer communication tasks, such as follow-up calls, letters or e-mails to bring customers back for their first service visit.
A second solution allows dealers to pay sales people only for the incremental service business they create using an aggregate baseline measure. The response rates are measured month-over-month against the established baseline and the salesperson is compensated only for the incremental business above that level.
Its system can capture the salesperson's name and employee number as additional fields on the repair order upon request from the customer.
A commission pay rate could then be established or linked to the salesperson in the payroll area to calculate commissions based on customer pay labor and parts gross generated from an accessory installation.
Use a new accessories feature to compensate sales people for customer-pay service work. The function lets dealers pre-define any number of commonly sold accessories that can be itemized and totaled on the buyer's order and then added to the deal by the desk manager or the F&I manager.
Set the retail price and cost for each individual accessory and specify whether it should be added to the MSRP and included in the residual value of the vehicle. The cost of the accessories reduces the salespersons' commissionable gross, but their gross is recaptured because the agreed-upon value of the vehicle increases.
Track customer pay labor generated by the salesperson or F&I manager through we-owe and aftermarket programs. Access the we-owe screen in FIN, go to the Subscreens menu and choose either Options or Dealer Equipment Added. After the service department has completed a we-owe, the repair order and date are recorded in the F&I software.
Using the aftermarket application, additional deals can be tied to original deals. An F&I summary report details deals for a specific time period, sorted by salesperson.
Well, my tea is almost gone. I enjoyed writing this article, crediting dealership personnel for a job well done and sharing thoughts on dealership operations.
Consultant Wayne Fortier of Dixon Hughes PLLC is a CPA and former dealership group CFO. He is at firstname.lastname@example.org or 877.DLR.CPAS.