Everyone makes the comment that sales sells the first car and service sells the rest. But quite honestly, not a whole lot of people really believe that. Being able to show — through data — retailers and OE executive management that it isn't just the revenue that comes from the sale of labor and parts. The value of fixed operations has a lot to do with how many cars they are going to sell. Because if you retain people in fixed operations as loyal customers, happy customers, they buy more cars. I mean, it's a fact. I have data piled to the ceiling that can prove it again and again and again.
Can you give an example?
When I started [consulting] in the auto business in 1995, two-thirds of the retailers didn't sell tires. They just sent people down the street to get tires at whatever the tire shop was. That was certainly true for Hyundai. And so we started the tire business with Hyundai retailers. And now it's a huge driver of retention and revenue.
Not just because you sell tires, but because of all the other things that need to be taken care of at the time that tires are needing to be replaced.
Another [was] the implementation, and the buy-in from retailers, for express service. Back in the early 2000s, there might have been two OEMs that really started to do anything with express.
What was the challenge at the companies where you worked?
For companies like Subaru and Hyundai, growing so quickly, we were doing everything we [could] to improve shop proficiency and increase the amount of capacity the retailers have in total available labor hours. That is the key to success for retailers with a growing brand. You can't create total available labor hours any other way, or [grow] the business any faster, than you can by having a good express service operation.
You mention total available labor hours a lot. Why?
There's a scene [in the movie City Slickers] where Billy Crystal and Jack Palance are riding along, and [Palance] talks talk about the meaning of life. He says there's that "one thing" — and there's that dramatic moment. I used that clip as my introduction to Subaru retailers.
That "one thing" — the meaning of success in life in fixed operations, and really the life breath of their business — is total available labor hours. You can't retain customers if you don't have enough available labor hours for them to get in to get the car fixed.
It still works to this day. Most OEMs, non-premium in particular, might have a 50 percent fixed ops market share in their area of responsibility, and there's a lot more business out there. If we do the right things, we can help your business make more money and take better care of our customers.
Why do fixed ops departments struggle with retention?
It's different by retailer. There are some retailers in mature markets that are just out of space. And further investment becomes, in their minds, really not feasible, even though there's a lot more business to be had. I think there's a lot of retailers in the middle that just need help seeing the way.
Then you have some folks who just don't believe. You try to show them the way. They're afraid to do the investment that would bring them more business because they're not sure the business is there. [They'll say,] "If I get the business, then I'll go ahead and expand." Well, you can't do it that way. You have to build it and they will come.
How has customer behavior changed over the years?
If you go back to the 1970s and 1980s, the customer coming in to buy a car didn't know anything other than what the retailer told them. And same thing goes with parts and service. Information technology is what really brought everything to the forefront.
Now it's pretty transparent. It's a different car owner. If they want to know something, they can find it out. They don't have to rely just on the dealer to tell them, which I think is a very healthy thing for the business.
Why was that important?
Subaru has a fairly sophisticated customer. They expect a good experience, they expect to be treated fairly. They certainly don't want to be lied to, and they sure as heck can't have anybody waste their time.
People loyal to a brand are pretty forgiving. If you're doing your best to take care of them, they give you all the leeway, but they won't forgive you for lying to them and they won't forgive you for wasting their time.
It's a pretty simple formula, I think. If you can avoid those two things in dealing with customers, you're going to have a lot more loyal customer.
You mentioned data earlier. Were you a big user of data in your work?
Monster user of data. There's not anyone that sits within 100 yards of my office that isn't a data monster. Everything is data-driven, because you have to prove what you say is being done or what you think is going to be done.
The key data that we have for that is our own data extraction. We started data extraction at Hyundai back in 1998 or 1999. When I came to Subaru, they didn't have data extraction. That was the first thing I started to try to impact, to get the IT department to get that data because it's so valuable. We can do so much to help the retailers with that information and help them see their own stuff.
How concerned should fixed ops departments be about the impending wave of electric vehicles?
There's not much to do with those vehicles. And so the service department is going to have to have a model that's going to take care of customers and not worry about the revenue. Sell people what they need when they need it, and they're going to be loyal customers. It's going to be challenging.
It's going to be a while, because there are still 15 to 18 million cars a year that are being sold that are combustion engines. We're going to have to adapt to it and it's going to have a major impact on the industry, no question.