Sales tactics migrate to the service bays
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Monica Peck of Hare Chevrolet in Noblesville, Ind., has worked to develop the store's service business. "Waiting for them to come into a dealership is an old-school philosophy," she said. |
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Published in Automotive News Nov. 11, 2012
Eighteen months ago, dealer Monica Peck hired several full-time employees to keep in touch with her service customers. Retention rates, gross profit and customer-pay repair orders at Peck's Hare Chevrolet in Noblesville, Ind., are up.
In March, Roger Pipher launched daily spiffs and games to motivate his service advisers to sell more products. Service department gross profits at Coleman Buick-GMC-Cadillac in Lawrenceville, N.J., are up $100,000 over last year.
Peck and Pipher are among a growing number of dealership managers who are borrowing tactics more commonly used on the auto sales side to pump up their parts and service results.
The transformation is occurring as dealers look for ways to replace declining warranty work and maximize revenues in the most profitable department in their stores. Many turned their focus to boosting parts and service results after the severe decline in vehicle sales during the recession.
Alan McLaren, who heads AutoNation Inc.'s parts-and-service operation, wonders why it took the industry so long.
"I don't know why for 100 years we've thought about it as being a very different business from sales," said McLaren, senior vice president of customer care, the term AutoNation uses for parts and service. "But it's just another sales channel, and we, as an industry, have treated it as purely technical for a very, very long time."
That is changing at AutoNation. In a pilot launched this summer, the nation's largest retailer is operating a business development center dedicated to parts and service. A development center provides call-center services to 25 stores in the Dallas and Fort Lauderdale, Fla., markets.
Early results are promising, with dramatic increases in appointments at pilot dealerships, McLaren said. It's too early to share revenue or profit findings, but AutoNation executives are studying whether to expand service development centers across the company.
A business development center for service was one answer for Peck. When it was launched 18 months ago, about eight staffers started by contacting customers on recall lists before turning to other tasks such as maintenance reminders.
Hare Chevrolet also started selling prepaid maintenance plans in the service drives last September. Peck rewarded service advisers with higher commissions and the chance to win an iPad. The department now averages sales of about 80 contracts a month.
"Waiting for them to come into a dealership is an old-school philosophy," said Peck, who owns the dealership with her sister, Courtney Cole. "And if that's a dealer's philosophy, I would think they're seeing a downturn in traffic."
That's not the case at Hare. Service retention of new-car owners jumped from 45 percent a year ago to nearly 55 percent. Repair order count is tracking to be up 11 percent for 2012. Gross profits are expected to rise 5 percent this year. The dealership is adding eight customer-pay and warranty bays.
On a recent day at Coleman Buick-GMC-Cadillac, service advisers played a connect-the-dots game. They connect two dots -- and earn $5 in cash -- for each alignment they sell. At the end of the day, whoever has sold the most and connected the most boxes, wins the daily jackpot, usually in the $50-$75 range, said Pipher, fixed-operations director.
With upbeat music playing, Pipher lays out the game and the product to be promoted in 15-minute morning meetings. "They hit the drive pumped up," he said.
Product sales are up, and the department's gross profits are tracking to rise by $100,000 this year vs. last year, Pipher said.
Hare and Coleman have institutionalized vehicle walkarounds on every visit to look for additional repairs or maintenance -- brakes or tires, for instance -- that might be needed.
But a lot of dealerships are missing out. A recent survey by DMEautomotive, which provides marketing services to dealerships, found that just 8 percent of consumers who needed tires, brakes or batteries were made aware of it by a service provider such as a dealer. While those products generally carry thinner margins, they help keep a customer coming back to a dealership for bigger repair jobs.
A lot of money is at stake: In 2011, the service and parts business represented 13 percent of overall sales for the typical dealership but contributed 72 percent of dealership operating profits, according to the National Automobile Dealers Association. c
You can reach Amy Wilson at awilson@crain.com.
