FOJ FORUM II: Good advice, lively conversation

ORLANDO — Experts in fixed operations offered hands-on recommendations for improving parts and service repair procedures at this year's Fixed Ops Journal Forum. There also was a look at the future of a profession grappling with changes in vehicle technology and consumer behavior. The second annual event was held Nov. 13 at the Hyatt Regency Grand Cypress. Here are highlights.

Chitty's example

Richard Chitty, retired parts and service chief of Toyota Motor Sales U.S.A. Inc., described how he had to address the negative effects of the recalled flagship LS400 sedan soon after the U.S. launch of Lexus in 1989. He used that experience to help develop a philosophy that came to define Lexus as the standard of fixed ops excellence and customer satisfaction.

Chitty cited his six R's of service: reservation, reception, (w)rite-up, repair, redelivery and re-contact. He displayed flow charts he created that detailed job processes for all dealership fixed ops employees, from porter to technician to service manager. Individual dealerships can create similar productive processes for their shops even without the backing of a dealer group or automaker, Chitty added.

"The biggest thing you folks do is create the big word of trust," Chitty told forum attendees. "People are going to spend their money someplace they like, trust and respect. You've got a short time to do that trust factor. But you'll keep the independents at bay working on that trust."

Preparing effective estimates

Mark Hargreaves, service manager of Gator Chrysler-Jeep-Dodge in Melbourne, Fla., offered advice on training technicians to write repair estimates that are more likely to persuade customers to accept service recommendations.

Among his tips: First, pay attention to what service customers say they want done and how they prioritize these items. Then propose needed additional services, in order of urgency and importance. Provide essential information in ways customers can understand and visualize. Use keywords. Be specific and precise.

"An organized estimate will increase the adviser's close ratio," Hargreaves said. "It will decrease the time it takes to get authorization, and it will increase your hours per repair order. If we can do a better job when we write the descriptions up on the estimates, we'll make more money."

Service BDC to the rescue

Sarah Vantine, business development center director for Scott Clark Auto Group in Charlotte, N.C., said the BDC she created to field service calls at the group's three dealerships "rescued our shops."

Previously, Vantine said, the dealerships' service advisers were required to take customer phone calls. That annoyed customers with appointments who had to wait for advisers' attention and left many calls unanswered. With the dedicated service BDC, she said, advisers have more time to complete walkaround vehicle inspections on the service drive.

More than two-thirds of the dealerships' service customers now schedule appointments, Vantine added. A large percentage of the 40,000 calls the BDC handles each month are made to service customers, to inform them of promotional offers and solicit business, she noted.

"Our representatives are empowered to handle a price call, to check part availability, to see if [customers] have an open recall," Vantine said of the service BDC. "It's sped up shop times, it's sped up wait times. We've had better retention, better customer satisfaction and a much more controlled pace in our shop for our technicians."

Focusing on hours, not dollars

Tully Williams, parts and service director for Niello Co. dealership group in Sacramento, Calif., urged forum attendees to concentrate on generating service hours rather than focusing exclusively on fixed ops revenue.

Williams identified three key performance indicators: "First, how are my hours being tracked — by writer, by technician, by store? Next, how do we get more hours — are our techs doing the great-quality recommendations that we would sell to our family members? Last but not least, are we selling these recommendations to all of our customers? Selling today's hours is the most important thing we can do."

Williams emphasized the importance of making accurate daily forecasts of labor hours per technician, and using those numbers in setting goals for service advisers to persuade customers to approve repair work based on techs' recommendations. Every repair order should include a vehicle inspection by a tech, he said.

He cited the "big four" of service and parts sales: brakes, tires, batteries and maintenance. Pay plans for service and parts managers as well as employees should reward achievement of the performance indicators, Williams said. All employees and managers should know the dealership's goals for service and parts sales and whether those goals are achieved every day, he added.

Magic Kingdom's service lessons

Alan Starling, president of Starling Automotive Group in Orlando, said the opening of the Walt Disney World resort and theme park in his community in 1971 offered valuable lessons on customer service.

Starling described Disney World as not only "the happiest place on earth," but also the cleanest — an example for his dealerships' service departments. He said he learned from Disney to dream big, to innovate, to go the extra mile to serve customers, to build a respected brand name, to educate and invest in his company's future leaders and to help his young employees with such innovations as a program to help them repay student loans.

In other words, Dream, Innovate, Service, Name, Education, Youth — or "DISNEY" for short.

"It's hard to think of an American today whose name is as powerful as Walt Disney," Starling said. "We need to ask ourselves in our business, have we built our company name in a steady, positive and memorable way? This is about repeat business and building relationships."

"Expect excellence"

Cecil Sims, vice president of fixed operations at Mercedes-Benz of Birmingham, told the forum audience that University of Alabama head football coach Nick Saban — whose teams have won six national championships — is a majority owner of his dealership. Saban's motto is "Expect excellence" — a standard Sims said he has worked to instill in his operations along with Mercedes-Benz's slogan, "The best or nothing."

Sims said the dealership defines its success by how it is perceived as a luxury retailer, not just a car dealership. To that end, Sims added, he expects his service consultants to do such things as send handwritten notes thanking customers for their business.

"We want people with a cultural mindset who feel winning is like breathing — it's not optional," Sims said of his employees. "We expect personal and professional excellence. We set that excellence as a standard of operation, and we hold our people accountable."

Maximizing human capital

Surveys of job seekers suggest that barely 1 percent would consider working at a retail dealership, said Max Lowenbaum, vice president of sales for the online hiring platform Hireology. Dealership service departments that need to hire technicians amid an industrywide shortage must offer job candidates pay stability, meaningful earnings potential, a clear career path and work-life balance, he said.

Service departments need to advertise jobs digitally to potential candidates, Lowenbaum said, noting that nearly one-third of job seekers drop off if an employer's application process or career website is not readily accessible on mobile devices. Dealerships have lost as many as 2 million applicants by failing to respond to candidates promptly, he noted.

By contrast, Lowenbaum added, two-thirds of newly hired employees are more likely to stay for three years or more if employers offer a positive experience during their first days on the job.

"There are people in the market," Lowenbaum said. "The issue is that those people are not considering retail automotive, or being a technician, as the place that they would consider working."

To sell service and parts, offer choices

Tom Kane, parts and service director of Universal Nissan-Hyundai-Genesis in Orlando, argued that it's better to offer fixed ops customers a choice of products, warranties and prices and ask which best meet their needs, than to give them a take-it-or-leave-it offer. That means service and parts departments should develop a competitive retail pricing strategy that takes into account customers' income levels and vehicle ages, he said.

A menu of "good-better-best" offerings can increase sales, profitability of repair orders and customer satisfaction and retention rates. Kane said. It reduces pressure on service advisers to give discounts and encourages customers to approve recommendations for additional work. He cited examples from his dealerships of choices of alignment and brake service, as well as factory or aftermarket parts.

"On our service drive, do we just say, 'We have one offering, one alternator, you want it or not?' " Kane said. "You are not going to sell too many of those. We have to realize who we are talking to, and it's not just one type of customer."

Sell on more than price

Dealerships need not — and should not — engage in excessive price discounting to compete with aftermarket service providers, said Don Reed, CEO of DealerPro Training. Playing "let's make a deal" with customers to try to persuade them to buy additional work is a losing game, Reed argued.

"There's no dealer in America who can't compete with the aftermarket and win," Reed said. "The aftermarket doesn't do major mechanical repairs. The aftermarket does C-level technician work. But we have some fixed ops managers who start discounting their prices down to ridiculous levels."

Reed cited the example of a dealer client who offered a $10.95 oil change, which he called "the dumbest marketing ploy I've ever seen." The dealership lost thousands of dollars each month providing 850 oil changes to "mooches" who did not buy additional service, Reed noted.

"You've got to fix the dealer first before you fix that process," he said.

Don't "pound" recall customers

A recall provides an appropriate opportunity to recommend other needed repairs and maintenance to customers, said Lee Harkins, CEO of M5 Management Services. But a hard sell in such situations is counterproductive, he warned.

"In a lot of stores, when that recall client comes in, everybody thinks it's a golden opportunity to pound the stuffing out of them," Harkins said. "It's the worse thing you can do. All you're doing is reconfirming that you're trying to put pressure on them. You're shooting yourself in the foot."

Software fixes aren't scary

The over-the-air software updates increasingly provided by automakers to perform repairs and maintenance on connected vehicles may reduce the need for some physical inspections by dealership service departments.

But Almog Veig, director of fixed operations for David Lewis and Associates, reassured dealers and fixed ops managers that such updates need not threaten their overall service business.

"Technology is coming, whether you like it or not," Veig said. "This is not going away. This is something that we have to learn to adapt to. We offer so many other services that over-the-air updates are not going to eliminate our business. They're actually going to drive us to be better at the store level."

EVs and service profits

Mark Colosimo, vice president of data and analytics at the automotive consulting firm Urban Science, acknowledged concerns that the arrival in large volumes of electric vehicles with fewer parts and maintenance needs could reduce dealership service visits and fixed ops profits. But he described "a pathway by which we can overcome any loss of service."

Colosimo cited projections that EVs will account for as much as 25 percent of U.S. new-vehicle sales by 2030. Dealership service departments will be better equipped to fix EVs than independent repairers, he said. That could attract owners of older vehicles who might otherwise go to independent garages or chain stores rather than dealerships for service, he added.

"We can increase customer retention through preparation and training — preparing our techs now" to work on EVs, Colosimo said. "Making sure dealerships are open when customers are available. And getting those old vehicles back to you [for service]. They are getting older and older, and that means more service business."

Warning about alternative-fuel vehicles

Nate Chenenko, leader of the mobility practice at the consulting firm Carlisle & Co., agreed with Colosimo that electric and hybrid vehicles offer dealerships ample opportunities to increase fixed ops revenue — with a caveat.

Given a hypothetical choice between a dealership selling 100 internal-combustion vehicles a month and the same number of alternative-fuel vehicles, he said, the store should aim to sell the latter, "because you will make 50 percent more in the service drive and at the parts counter."

Owners of alternative-fuel vehicles are more likely today to seek service at a dealership, Chenenko noted. But he added a caution: "I'm not so sure that you can" maintain that advantage, he told attendees.

"The independent repairer is dramatically better at satisfying the [alternative-fuel vehicle] customer than the dealer is," Chenenko said. To win back those customers from the aftermarket, he said, "you can easily fix the vehicles right the first time. You just have to actually execute that."

Car sharing redefines service

Anthony Rodio, CEO of the mobile maintenance, repair and diagnostic service YourMechanic, argued that the definition of service will change in an era of shared mobility, as fleet vehicle ownership grows and sales to individual buyers decrease.

Larger numbers of electric and autonomous vehicles will force traditional shops to provide mobile service and boost their automation of functions such as scheduling and catalogs, he said. He cautioned against "lumping together" hybrids and EVs to assess service needs, saying these vehicle types have "very different ownership models."

YourMechanic offers prepaid maintenance plans to dealers and automakers. Such packages, Rodio said, appeal to customers who don't live near the dealership's service department and enable dealers to target which customers might soon need a new car or truck. "Whether it's fixing consumers' cars, whether it's shared mobility, the future of how this is going to be done is you service the car at the point of need," Rodio said.