In Charles Dickens’ novel, The Tale of Two Cities, London and Paris were going through tremendous social turmoil. Even though their challenges were similar, the ways in which they operated were not. That revolutionary story, set in Europe in 1775, is the most printed original English book, and among the most famous works of fiction.
Turning to recent times, how would the “The Tale of Two Departments” read from an automotive dealership point of view? Last year’s economically revolutionary story addresses Dickens’ novel’s famous line, “It was the best of times, it was the worst of times….” In an automotive dealership, the tale is not the same from the sales and service perspectives, as the service department accounted for almost all of the profit in 2009 at the average dealership, according to NADA’s end of the year analysis. To get both sides of the dealership out of economic difficulty, dealership leaders must have the vision and the ability to adjust to the market. Dealership vision is greatly influenced by the dealer principle and/or the general manager, so it becomes vital that they learn what it takes to successfully come out of the revolution.
Most dealer principles or GMs have little-to-no active management or planning experience in the service department. Being a successful new or used car sales leader does not necessarily qualify you to run the service department because the two business models are completely different. However, if you take the time to get to know the two business models, you can better understand how you can take advantage of the huge service and parts sales revenue opportunities for this upcoming year.
Key Differences Between Departments:
Sales
- Larger dollar transactions, averaging $20,000
- High dollar transaction – low gross
- Emotional purchase
- Sells a commodity
- Purchase frequency is every three to four years
- Competitors are limited by franchise agreement
- Marketing has a price-sensitive approach
Service
- Average repair bill is $212
- Low dollar sales with an average of 46% profit
- Necessary purchase
- Sells a service
- Purchase frequency is every 3-4 months
- The aftermarket takes 70% of the business
- Marketing has a quality, fix it right, mentality
Market Potential in Service
The market is still dominated by the aftermarket which means there is growth potential.
Only 30% of customers frequent the dealership more than once a year. This means there is a lot of potential from customers who already know you.
There is still a dramatic fall-off after the fourth year of ownership. You have great potential if you perform better with this customer segment.
If you can change a common consumer feeling that most dealerships are inconvenient and costly, you will be able to further take advantage of potential growth within the court of public opinion.
The Right Approach
Be consistent — Service is all about retaining customers over the lifetime of their vehicle ownership in order to capture a healthy profit potential. It is also about extending that relationship from the loyalty to the service department into a purchase in the sales department. Most sales approaches are short-term. However, customers are in the service center for repeat visits much more often than in the sales department, so you have more opportunities to impress them with your dealership.
Talk value — Show more value for the investment to compete with the aftermarket brand. Sell the experience of doing business in a nice facility with amenities that customers cannot get from the aftermarket.
Talk price — Are you competitive on the three or four common services that your customers understand, like an oil change? You don’t need to discount everything, just discount enough to cause your market to question the stereotypes.
Talk “you” — Service industries are all about reputation because the product really is you, unlike a commodity. So, take the time to talk about your people, your services and your brand. Most service departments sell the quality of their service experience with factory-trained technicians.
E-mail doesn’t replace everything – Service has been such a lifeline this year that many new companies are looking to introduce “magic pill” programs such as total e-mail management systems to anyone looking to cut costs. Use e-mail to complement your current marketing but not in order to achieve total communications coverage — because it won’t. If not implemented correctly and strategically, you will actually lose money.
Track your results — Use programs that allow you to measure the results of the program. It is much easier to do in service than in sales.
Know the rules of co-op — Co-op rules for service are a bit more complicated than in sales, but if you want money back, you need to know them. If the manufacturer’s program is performing poorly, it makes much more sense to waive the free money in order to work with a solution that brings in more customers.
Segmented marketing — Your loyal customers are different from your current customers, who are different from your lost customers or prospects. Technology allows you to separate these customers and market to them based on their behavior. This can ultimately bring in more customers and a better return-on-investment than had you implemented a less customer-targeted mass communication.
Rely on your service manager — Tap into the expertise of your service manager rather than attempting to implement a marketing strategy that, while effective in other areas, isn’t informed by a comprehensive understanding of service departments. Again, sales and service are different, and your marketing approach needs to reflect that. Your service manager can play a key role helping you develop a sound strategy.
If you commit to the general philosophy of avoiding running the service department like you would the sales department, you can learn how to create a successful service vision for 2010. Remember, there is a lot of potential for “the best of times” with service growth, but there is also a lot of risk of the worst of times if you don’t do it right. Get to know the difference, and your vision will be one that allows you to be a true leader in 2010.
