The Service Goldmine

I don’t know about you, but I am sick and tired of all the negative, doom and gloom “end of the world” economy talk. Of course car sales suck right now and times are tough for all of us, but what we need to do, in my opinion, is to focus on survival rather than failure. We need to look at other ways of doing business, we need to be open minded and creative and we need to all pull together to whip this bump in the road and get back on track – and I truly believe we can do it. Car dealers have always been the most creative, motivated people in the world when it comes to vehicle sales and advertising – so my challenge is to look outside that box right now while car sales are down – and try the same creative action on the un-tapped goldmine you have in your service department.

This is a fact and everyone knows it: Dealers with strong, profitable fixed operations are in much better shape than dealers that depend only on car sales to survive. I mean, think about how simple this is…if people aren’t buying new cars then they have to fix up and maintain their old ones, right? So stay with me here for a minute, ok. Doesn’t it make sense to advertise and market your service department aggressively since car sales are just not setting the world on fire right now? Doesn’t it make sense to get more customers in your service department, now more than ever? And doesn’t it make sense to redirect some of your advertising budget towards getting customers in for service? Answer – Of course it does!

And if you ever wonder where most of your new and used car buyers go for service -take a ride around town and look at all of the independent repair shops…they are covered up with work because people have to have their cars fixed and they think the independents are cheaper. I didn’t say they were cheaper, I said that consumers think they are cheaper. The independents depend entirely on service so they advertise more, are open more, are more convenient and work harder to keep customers coming back over and over – they have to! 

All of that makes sense, right? Well here is the funny part - no matter how many people agree with this theory of making money in service - some dealers still just don’t get it. There are hundreds of dealers that still think you can’t make that much money in the “ol back end” – so they stay up front and keep trying to pay the bills by selling cars – and that just isn’t working. They keep spending thousands of dollars on advertising car sales when they know it won’t work right now – but that is all a lot of them know – it is all they can think of to do. Now, I do admit that the service department isn’t as sexy or pretty as the showroom with it’s marble floors and flat screen TV’s – but, let me make this clear…your service department can be a goldmine and a lifeline -  that can truly save your entire dealership in today’s market.

Think about this: A well run dealership service department should keep at least 75% of every customer pay labor dollar sold as gross. Wow…what other department other than F&I returns that kind of gross? Add to that 40-45% gross on customer pay parts sales – not so bad either, right? Think it can’t be done – it can and I have done it. Start by raising your labor rate for high tech repair work…you can literally charge what you want…as long as you job price (don’t say parts and labor and labor rate…just say the price of the entire job) and offer low priced competitive maintenance services. 

What? I am crazy you say…well hear this. The grosses I mentioned above are very achievable – if anyone tells you they aren’t – call me…I did it consistently with a $12.95 oil change included in the mix that tripled our service traffic and the result was that our customers loved us and we made a ton of gross and net profit…in fact, we held a 128% service absorption factor, no kidding.

So get competitive and advertise – that is the simple solution to this whole mess for now. Sure you need to focus on selling every customer that even remotely looks at a new or used car – but for goodness sake, don’t overlook your service department. It’s true that car sales suck right now and it looks like they will suck for a while longer no matter what you do, so why not get focused on your service department. It really is a goldmine that will not only save your store right now…but imagine how much better your bottom line will look when you have a strong service department and strong car sales. Just go back there and get as aggressive as you have always been in the sales department. Run your service department like a sales department. Hold service sales meetings at least once each week. Be open late through the week and be open all day on Saturdays. Get competitive and do whatever it takes to negotiate and close every single deal on the drive. Get aggressive with your competitive service prices to attract more customers to your store and here’s a novel idea - focus on being nice! Make sure your service salespeople present menus to each customer and make sure they do a vehicle inspection on each car. Get them to answer their phone quicker, and be more courteous and make sure they talk about features, benefits and advantages when they are on the phone. Show them how important it is to invite every customer into your store…with a simple “Let’s see when I can get you in for service, would today or tomorrow be better for you?” You will be amazed how many more customers will show up if you just simply ask for the business.

And when they arrive, make sure you greet each customer quickly, with a smile and a firm handshake. Make eye contact and show them that you care. Offer some kind of a customer loyalty club to keep customers coming back over and over – and give customers real reasons to do business with you! Improving customer retention and service profits is not rocket science…in fact it is simple. Just treat each customer like you would want to be treated and remember – the independents are constantly advertising to your customers – and if you aren’t careful – they will win the battle. You can do this – I know you can.