Dealers Should Know Their Service Departments Better

Ask any dealer for their retail new- and used-car volume for the previous month, and without hesitation they can provide the numbers. Most can also tell you what their showroom-traffic count was.

But ask about the number of service-department repair orders written during the previous month, and many dealers and general managers can’t give an answer. Why? 

For the many of us who came up through the variable operations, fixed operations are not our area of expertise. But it doesn’t have to be a strong suit in order to monitor and manage the department effectively as a dealer or general manager. 

Service measurements to monitor monthly include total gross; the total number of repair orders by the categories of customer pay, warranty and internal; the labor rate for customer pay and internal; dollar sales per customer-pay repair order; and service-advisor and technician productivity. 

Service-advisor and technician reports are available in all dealership computer systems. This information allows dealers to monitor and manage individual productivity and review effective labor rates.

When monitoring your customer-pay repair orders, separate express/quick service from more traditional service operations. Often, the volume of express service operations, which typically have lower revenues per repair order, has increased and now represents a larger share of total customer-pay business. 

Dealers obviously want to continue expanding their express-service business, but they also must focus on the traditional business and take action to grow it. 

Just as is done in the new-vehicle business, it is important to take the steps necessary to get a larger share of the total pie.

It begins with customer retention which seems like a common buzzword, but it’s vital. We have to ensure we are taking care of and retaining our current customers while attracting customers who didn’t buy previously from our dealership.

The dealerships I see increasing their customer-pay repair orders have monthly specials. Direct mail and the Internet seem to be the most-effective channels to tout these.

The retention part comes through working the dealership database, and the conquest part comes from direct mail using purchased lists.     

Once you see your traffic increase, it is important to perform an inspection on each vehicle serviced. That often identifies items that require immediate attention and the service advisors contact customers to gain their approval for the needed work. But how should you respond if the customer declines the needed repair?

The process should include follow-up contacts with customers who initially declined a service recommendation. The service manager should hold daily “save-a-deal” meetings with the service advisors. The manager should monitor and measure each advisors closing percentage on follow-ups.

Also effective is setting customer maintenance and future repair expectations. This focuses on service work that may eventually be needed but isn’t urgent yet. 

For example, when the advisors meet with customers after a repair is completed, they can tell customers the inspection showed the vehicle essentially is in good operating condition (assuming it is), but offer suggestions on what they might want to address during a later visit.

Not only does this signal to the customer that you have their best interest at heart, it also helps build loyalty and retention.

We all know the value of service as it relates to sales.

Start monitoring the reports and review the information in them monthly with the service manager.

Dealers who get to know their service operations better will quickly increase their comfort level and the department’s sales and profits.

Tony Noland of Tony Noland & Associates is a veteran dealership consultant.