Although your parts and service departments are fixed operations, there are ways to increase traffic and, ultimately, your net profit. The first and most obvious one is keeping expenses down. That could be worth a separate article, but assuming you’ve already done that, the next step is to increase net profit by focusing on creating new business.
There are several ways to accomplish this. You could focus on the profit margins for labor and parts sales, increase the number of sales per repair order or increase your repair order count. This article is about the last option, a fancy way of saying you should increase foot traffic.
Examine Capacity Challenges
We would all like to think that the pandemic is behind us; however, pandemic-related consequences continue. The shutdown prevented many people from maintaining their vehicles on time, and many owners are still playing catch up. The auto parts supply chain is still dealing with shortages, thanks partly to a brittle and arguably too-long path between the factory and the service department and partly to shutdowns and employee shortages. Currently, there aren’t enough loaner cars because many businesses sold off their fleets to generate needed income and haven’t been able to replace them. Thanks to labor shortages, some auto dealership service departments are understaffed.
These are problems you can’t always solve at the dealership level, although many experts are working to remedy them.
The J.D. Power 2022 U.S. Customer Service Index Study was released March 9, 2023. It contained some interesting information. For example, wait times for service appointments have increased. It now takes approximately 5.6 days for premium cars one-to-three years old and 4.8 days for mass-market vehicles one-to-three years old. That’s an increase of almost two full days. According to the report, delays are due to the increasing volume of EVs being serviced resulting in the first customer satisfaction decline in nearly 30 years. Why not take that hard truth and make it work for you? Now is the time to stand out from the crowd.
Most dealerships work hard for a positive relationship with their customers. People who view the dealership warmly and know from first-hand experience how much it does for its customers and the community will react well when you need patience from them. Friends are good to friends.
As the market continues to shift toward EVs, be aware that there’s an opportunity for better service. According to the J.D. Power study, people who own gas- or diesel-powered vehicles marked their overall service satisfaction at 852. For EV owners, it was only 784. Remember, many of those EVs are Teslas coming out of gigafactories in California, Nevada and New York. A lower satisfaction rating might indicate that Tesla’s customers are missing the service they used to get from dealership service departments.
Never underestimate the power of keeping customers happy.
Communicate
Surprisingly, the survey found that communicating with customers keeps them happy. Customer satisfaction improves if service departments are proactive about communication and send texts or emails about unresolved problems. If a dealership problem affects customers, consider being preemptive about it and reassure them that you are working hard to resolve the issues.
Increase Productivity
Finding technicians without enough to go around can take some creativity. Focus on the following: treat techs well, consider hiring more diversely, and take an interest in programs at local schools. Do what you can to create a pipeline, hire more women and minorities, mentor young techs and help create satisfying career paths for them.
Master techs are great, but you don’t need a master tech for every job. Instead, hire “B” and “C” level techs to handle repairs and maintenance. You can increase the work capacity that your service shop has by hiring just one tech. In turn, having one more tech reduces the customer wait time and can generally increase gross profit by about $10,000 per month.
Even if you focus on hiring less-experienced techs, they will, in most cases, improve their skills over time.
Schedule Appointments
Get customers into the shop as soon as possible by scheduling an appointment for them when they call. For the dealership to be as competitive as possible, the appointment must be that day or the next. Until a tech looks at the problem, you can’t expect to provide them with an accurate diagnosis. And, if customers can’t get their vehicle into the shop immediately, they may call the aftermarket competition. Therefore, whoever handles calls — a service adviser, an appointment coordinator or someone else — should have only one primary assignment: scheduling appointments.
Make Communicating Easier
Many technology channels have made it much easier to communicate with customers than ever before. Set things up so people can make appointments online or through an app. Ease payments by putting that online, too. Send text messages and videos about repair work. People like getting a video or photo that shows them repair work to be done, and when you send some photographic evidence to them, they are three times more likely to agree to the work.
Use Valets or Send Technicians
People have always liked personalized service. Be willing to send a valet to collect a vehicle. Alternatively, send a technician to the vehicle’s location. Owners who use valet or mobile service rated their overall higher in customer satisfaction.
Call No-Shows
No-shows are a fact of life. People get busy, and they forget what they’ve scheduled. However, there’s a lot you can do to reduce the number of no-shows. Send a confirmation text when someone makes an appointment and a final one on or before the appointment day. If a customer doesn’t show up despite the text messages, have someone call them to reschedule.
Follow Up on Special Order Parts
Sometimes repairs can’t be made until an ordered part arrives. You may send the customer a postcard to let them know the part came in, but don’t stop there. Someone from the dealership should also call the customer to make an appointment.
Too many dealerships don’t follow up with customers about parts orders. As a result, they sometimes have a large inventory of never-installed obsolete parts. Try to get the parts installed on the vehicles that prompted the order as much as possible.
Make Routine Service Appointments
When customers come in for an appointment, you ideally want them to return later for routine maintenance. Talk with customers about the next required maintenance and give them the option of making their next service appointment before they leave. The appointment can be time- or mileage-based.
If you implement these strategies, the repair order count may increase by at least 10%. If the service department normally performs 400 repairs a month, after hiring a new tech and increasing the dealership’s focus on following up, the number could increase to 440. In a year, the extra 40 repairs per month could add up to 480 repairs. And the extra money will head straight to your bottom line.
