Reinventing fixed ops

Here are three troubling statistics about service departments at franchised dealerships:

1.These dealerships typically retain only about half of the customers who buy a new or used vehicle from them or visit their service department with no prior experience with the dealership.

2. The dealerships handle only 30 percent of service work performed each year across the country.

3.Service and parts department revenue increased about 13 percent between 2014 and 2016, according to the National Automobile Dealers Association. That's in line with revenue increases in new (13 percent) and used (11 percent) vehicle department sales.

Why are these stats troubling? After all, they show a rise in service and parts sales commensurate with other dealership operations.

And NADA reports that, during the same period, dealers also saw their service and parts gross profits rise by roughly 2.5 percent.

But here's the problem: I view these statistics as a sign that "same same" is largely the norm in dealership fixed operations across the country.

Too many dealers view these results as OK. Too few are asking how we can make them even better, particularly when margins and sales volumes in variable operations are flat or waning.

Stats 1 and 2 signal a longstanding level of accepted inefficiency that will become more costly and harmful in the months and years ahead.

Similarly, you have to wonder whether Stat 3 will continue to improve if the natural flow of new- and used-vehicle customers' service departments — both customer-pay and internal — begins to diminish.

Some dealers get it. I've had more dealers ask me for guidance about ways to increase service customer retention and profitability in recent months than I've heard in the past few years combined.

These dealers recognize that if new- and used-vehicle sales and margins continue to decline, they had better step it up in fixed operations. My guidance essentially boils down to increased efficiencies in the processes they use to capture and serve their service customers.

I offer three areas of fixed ops that are especially ripe for efficiency reinvention:

• Scheduling: I always viewed the early morning lineup of cars outside my dealership service department as a positive sign. I'd think: "It's going to be a good day."

I have a different perception today. To me, the line of cars may be the ultimate sign of a service department's inefficiency.

Xtime research suggests that only 54 percent of customers would schedule service before 11 a.m. if they were given the choice. The long line of vehicles, and related customer frustrations, largely represent a dealer's choice that bears reconsideration — particularly if you'll see only half or fewer of those customers in line ever again.

• Productivity: At a recent Automotive News event, dealer Don Flow noted that dealers expect 40-hour workweeks of service technicians, just as they did in 1973. With all of the advanced diagnostic technologies and tools available today, you have to wonder why techs' effective labor rates don't reflect a higher level of productivity.

I suspect dealers who ask this question will realize that the root cause is inefficiency that results from outdated ways of managing customers and service business.

• Transparency:A dealership's customers want to know more than what they'll pay for a new or used vehicle. They'd also really like to know what's wrong with their vehicle, and how much it'll cost to fix it, sooner than many dealerships are prepared to tell them.

I hear from friends and relatives about recent dealership service visits that made them feel they were left in the dark about the status of maintenance or repair work until they called to find out.

There are other areas of inefficiency dealers would be wise to address in their fixed operations. These include reducing the customary seven to 10 days to recondition used vehicles, introducing new- and used-vehicle buyers to service department personnel more consistently, and aligning marketing efforts to the needs of individual customers and their vehicles.

Dealers who address these inefficiencies proactively will see the benefits of moving beyond the "same same" in fixed operations. They'll attract and retain more customers, provide a better service experience — for their customers and employees — and bring a larger share of their service revenue to their bottom lines.

I urge dealers to pursue these improvements in operating efficiency sooner rather than later, before the pain of a declining retail market for new and used vehicles makes it harder to do so.