Service Underpins Customer Loyalty, Profitability

LOS ANGELES  – A large group of dealership general managers, service managers and service reps are gathered in a room in a downtown hotel here, listening to a speaker extol the virtues of personalizing the service-lane experience.

“Do you listen or do you talk?” says Tim Kintz, a speaker at Top Dog, a fixed-operations training conference. “How do we give that rave experience?”

The service department always has been a key profit center for dealerships. Now, as cars need fewer actual repairs and alternatives to even owning a car are emerging, retailers are looking at every aspect of the service department to keep customers coming back.

“I eliminate all the excuses to leave me,” says Andrew Pringle, service manager at Reynolds Buick GMC Isuzu in West Covina, CA, on hand for the Top Dog conference.

Pringle’s general manager paid for him to attend the 3-day conference, put on by Chris Collins Inc., a Los Angeles-based fixed-operations training and consulting firm.

Kintz is president of The Kintz Group, a dealership-training consultancy. His remarks evoke those of a motivational speaker, as do other speakers such as Dave Anderson, a former dealership-operations director who now speaks and writes on leadership.

Pringle is fired up by the presentations, especially Anderson’s. “I got a lot from him about mindset,” says Pringle. “I am back in my swing.”

A fixed-ops guy for his entire automotive career, Pringle has seen profit margins on new cars fall from $4,000 in the ʼ90s to less than $1,000. The focus now is on retaining a customer for the life of his or her vehicle, Pringle says.

He does that by building relationships with entire families. For example, when a longtime client’s son’s car broke down and the car was towed to another repair shop, the son called Pringle for confirmation the repair quote was reasonable.

Pringle reassured the son the fee was fair and talked with the other repair shop, as well.

“I make myself available,” he says.

According to the National Automobile Dealers Assn., service, parts and body-shop work accounted for 59.4% of dealerships’ gross profit in 2015. That rose to 61.7% as of June this year.

“Fixed ops are definitely a big part of dealer profitability,” Patrick Manzi, NADA senior economist, tells WardsAuto.

That profit center will become even more important if, as expected, new-car sales growth slows or plateaus in coming months.

Retaining Customers as Sales Growth Slows

Chris Collins Inc. has seen a big increase in attendance at its annual Top Dog event, says general manager Gary Daniels. Attendance this year more than doubled to 142.

There is a feeling that the current sales boom is a “bit of a bubble,” he says.

Dealers now “are trying to hedge. The big hedge they missed in 2009 was when sales dipped (and) repairs were rising. They are looking to bolster their fixed ops in case sales slump.

Money is “loose right now,” Ricky Berghahn, express-service advisor at Friendly Honda in Poughkeepsie, NY, says on the bus en route to the Top Dog dinner, “but is it going to hit a stop? Customer retention is going to be really important.”

He believes details will matter the most, including exceptional service personnel, little perks such as free car washes and loaner cars, and free first-year inspections.

Brad Cobb, president of the 10-franchise Bowers Auto Group of Chattanooga, TN, has seen fixed operations grow organically for each of the past 12 months, a record for his group.

“I don’t see how (fixed ops) could be more important than it already is” to the group’s bottom line, he says.

Cobb has seen a shift in recent years from repairs to maintenance, which means hours per repair order have dropped. But the number of such orders has risen as Bowers has added services such as a fast-oil-change lane, to which the dealership assigns two men to achieve service in 20 minutes or less.

Bowers isn’t sure if that is the most economical use of two men’s time, but it’s necessary. “If we don’t provide a nice environment and a quick service, people are going to go somewhere else,” he tells WardsAuto.

Dealerships also are investing in new technology to streamline the service experience, such as iPad payment, says Adam Lawyer, a partner at DHG Dealerships, a branch of accounting firm Dixon Hughes Goodman.

But the biggest focus is on the customer-service experience, he says. “The service managers or (service) writers are far more trained in the customer experience now than they were 20 years ago.”

Those investments are worth it, though.

“A dollar increase in fixed ops is worth far more than a dollar increase in variable sales,” he says.