Key secrets to customer pay success for auto dealer service departments


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“Key Secrets to Customer Pay Success,” highlights how auto dealers are using technology and improved processes to help:

o Ensure thorough inspections of at least 90 percent of the vehicles entering the service department
o Generate an average $130 or more incremental customer pay work per vehicle and RO
o Boost “Declined Services” come-backs by 25 to 35 percent
o Improve fixed coverage, retain customer loyalty, and create more effective and satisfied advisors and technicians
o Protect the dealership’s good name and mitigate risk by documenting every completed and declined service/safety recommendations

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Key secrets to customer pay success for auto dealer service departments

  1. 1. key secrets to customer pay success presented by
  2. 2. KEY SECRETS TO CUSTOMER PAY SUCCESS : INTRO dear fi xed operations directors/managers: A Growing number of dealerships are embracing the challenge of improving their customer pay business in a down economy—and they’re doing it in spades. The following eBook, “Key Secrets to Customer Pay Success.,” highlights how these dealers are using technology and improved processes to help you: • Ensure thorough inspections of at least 90 percent of the vehicles entering your service department • Generate an average $130 or more incremental customer pay work per vehicle and RO • Boost “Declined Services” come-backs by 25 to 35 percent • Improve fixed coverage, retain customer loyalty, and create more effective and satisfied advisors and technicians • Protect your good name and mitigate risk by documenting every completed and declined service/safety recommendations Baseball great Yogi Berra once said, “The future ain’t what it used to be.” I couldn’t agree more. Today’s economy puts greater pressure on fixed operations departments to perform at “world class” levels. This eBook offers a wealth of insights and how-to best practices to help you get there. Enjoy the read. Sincerely, David Boyle MPi President/COO April 2010
  3. 3. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 1 secret 1: take advantage of new technologies and processes. Carrie Meo, vice president of fixed operations at the Darling’s Family of Dealerships in Maine, wasn’t sure why her cell phone was ringing with queries from service customers—but she was glad to get the calls. “Customers were calling my cell phone about their vehicle inspection reports,” Meo says. The calls were unusual: Customers rarely called following a service visit to inquire about technician recommendations and “declined work”—and those inquiries went straight to her service departments. With a little investigation, Meo figured out why her phone kept ringing. First, the Darling service department had recently installed a “The reports are powerful,” Meo new vehicle inspection report process that included take-home says. “They’re one of the reasons reports detailing service recommendations that the advisors and we’re staying busy all the time.” technicians had “cautioned” as to-do items for a next visit or rec- ommended work customers declined during their service visit. Further, Meo wasn’t supposed to be getting the calls—the service department phone number should have been printed on the reports rather than hers. But Meo recognized the positive. The calls were positive affirmation that the group’s decision to revamp its approach to handling service customers’ business was paying off. “The reports are powerful,” Meo says. “They’re one of the reasons we’re staying busy all the time.” Since Meo implemented the new vehicle inspection/report process, Darling’s has seen consistent growth in its customer pay business. She credits the growth to a group-wide effort to ensure technicians inspect every vehicle and advisors prioritize and sell service recommendations (see chart). RESULTS FROM MANDATORY VEHICLE INSPECTIONS Vehicles in for service now inspected 90% Average additional recommendations per vehicle 2.5 Additional average customer pay per RO +$130
  4. 4. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 2 Meo’s success at increasing customer pay business at her stores comes at a time when many dealers are struggling to boost customer pay business in fixed operations. Dealers and fixed operation managers know these struggles well: Units in operation are down; warranty work and warranty reimbursements are both off; and, service/maintenance intervals are out of the ballpark. All of these factors create extreme pressure to boost service revenues. Thus, the key question of our current time: the “ideal” write-up How can customer pay sales and profits be increased without a steady stream of new Your service advisor greets the 1 customers? customer promptly on arrival. This question has led Meo and other fixed 2 Your advisor performs a walk-around vehicle inspection with the customer operations directors to drill further into their to show any body damage or visible current customer pay processes and their repair, wear, or fluid items that need potential shortcomings: attention. 3 Your advisor listens to the customer 1. What processes or technologies are and documents the reason(s) for available that we can use to ensure their visit. Next, the advisor discusses maximum customer pay opportunities items the customer can agree to have performed at the time of write-up with the customers the dealership and those that require a diagnosis, does have? recommendation and estimate. 2. What customer pay processes will yield 4 Your advisor adds the “agreed to” items from the walk-around sustainable, long-term results and not inspection and notes those the simply drive a short-term boost in service customer declines. and parts revenues? 5 Your advisor checks for unaddressed repair items from previous visits and For fixed operations professionals like Meo, offers to address them. Your advisor the solution came through technology-enabled, should note those that get an “OK” customer-friendly processes and procedures that and those the customer declines. position the dealership as a true partner with 6 Your advisor offers to take care of customers and maximize their mutual lifetime any current or past due scheduled- value with the dealership. maintenance items, noting the “OK’d” and declined items. Admittedly, this thinking isn’t new to Meo or 7 Your advisor informs the customer other fixed operations mangers. Nor is it news that the technician will perform a that instituting, reinforcing and monitoring vehicle inspection in the shop and advise him/her of any work process improvements like mandatory vehicle recommendations once the inspection is complete.
  5. 5. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 3 inspections is critical to customer pay success—and that this is often difficult, if not elusive, to accomplish. “We always did inspections but we didn’t know if the inspection reports were being regularly given to customers and when they were the reports lacked the kind of detail that might prompt the customer to reschedule for that work,” Meo says. The difference now is that technology makes it easier to manage and monitor a dealership’s customer pay business, without reams of ROs and other paperwork. Today’s technology allows managers like Meo to drill into metrics that reveal the individual performance of technicians and advisors to see where they shine and where they fall short. In Meo’s case, she uses MPi’s EDGE system to give her the data she needs to manage technicians and advisors and ensure they climb all steps of the customer pay ladder—from the initial inspection to follow-ups with customers who recently completed work. The system gives her real, money-making insight into customer pay processes: “Do I have one guy selling the same thing over and over again? Do I have another not selling enough?” Meo asks. “We never measured these things before.” Other insights: • Technicians take responsibility for customer vehicles. The vehicle recommendation reports become their way to communicate with customers. “Some customers ask for technicians by name,” Meo says. “We never had that before.” Tip: Print technician photos on vehicle reports to further cement the customer-to-technician relationship, a move Meo plans to make in the near future. • Advisors become better sellers. Metrics allow Meo to spot and address sales deficiencies. For example, she found some advisors not selling flushes as con-sistently as they could. The fix: Get more sales training from the flush vendor. In the end, the advisors become true “advisors” and less like “order-takers.”
  6. 6. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 4 secret 2: understand “new school” management Through its work with dealers, MPi has researched and studied why it’s historically what about ‘no-shows’? been difficult for service departments to achieve ongoing, self-sustaining gains in customer Some service departments are pro- pay work. actively following up with ‘no-show’ customers to re-schedule the missed The findings, which flow from reviewing data visit –an effort that typically boosts at client stores before and after they adopted monthly customer pay sales. a technology-based system to manage and measure customer pay performance, suggest That’s because most dealerships two broad problems: wait for ‘no-show’ customers to re-schedule. problem 1: “We didn’t even think about making The inspection of customer vehicles— the effort in the past,” says a fixed the critical first rung of the customer pay ladder operations director for a public dealer —is completed less often than managers think. group. “It’s worth the effort to retain MPi’s data show that inspections occur about these customers.” 50 percent of the time at stores where manag- ers believe they do well on customer pay work. Upshot: For every 100 vehicles in a service department, 50 will never undergo a full evaluation to determine potential opportunities to up-sell customer pay work. Why would this happen? In most cases, it’s due to the traditionally time-consum- ing nature of manually assessing the inspection process. Flatly stated, advisors and technicians understand that their managers are often hard-pressed for time to do the paper-based comparisons and calculations that would assess how well they’ve followed a store’s customer pay processes. 50% Missed Profit For every 100 vehicles that come into the service department, clearly half never receive full evaluation by a technician. What is this Opportunity costing you in your dealership?
  7. 7. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 5 problem 2: Service department managers often know where the deficiencies lie; it’s proving these performance problems that can cause hand-wringing. Steve Jellen, director of fixed operations for Flemington (N.J.) Car and Truck Country, notes he’s achieved near 100-percent consistency in getting inspections completed, thanks to MPi’s EDGE technology, which allows him to track technician and advisor performance. “I didn’t have any way of tracking with consistency what technicians were doing or weren’t doing, “ says Jellen, who affirms that his oversight of 13 service departments for the Flemington dealer group does not afford enough time for a manual review of thousands of ROs. “Now, I can break it down and see when technicians aren’t doing inspections and evaluate the types of recommendations they make.” Now he knows the answers to three, often-vexing customer pay process questions: 1. Are advisors asking technicians to do inspections? Sans technology-driven performance data, this question often triggers a “he said/she said” scenario between advisors and technicians. That’s all gone now, Jellen says, noting he now doesn’t have to sift through stacks of un-reviewed ROs and estimates to answer this key question. 2. Are technicians following through on the inspection request and/or completing inspections? At Jellen’s stores, technicians consistently complete more than 90 percent of vehicle inspections. 3. Are advisors selling the technician’s recommendations? At most stores, it’s virtually impossible to answer the question with certainty. Jellen, however, knows the exact close ratios for each advisor (more on that in a minute). Today’s technology serves up a variety of “new school” management metrics: • Percentage of vehicles with requested inspections. Managers who track this metric note a 95 percent completion rate. • Percentage of ROs with completed inspections. At Jellen’s store, he expects a minimum of a 90 percent completion rate. • Average number of recommendations per inspection. Managers should expect a degree of recommendation parity among technicians,
  8. 8. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 6 depending on the type/mileage of vehicles they see. (see box, this page) what’s your average mileage? • Average value of technician The accurate answer might be recommendations. Are technicians over- surprising. or under-loading recommendations? This metric provides the answer. “Ours is 50,000,” says Steve Jellen, fixed operations director, Flemington • Category of recommendations per techni- (N.J.) Car and Truck Country. “It cian. Does a particular tech favor one type of floored us. We thought it was a recommendation over others? A consistent lot higher.” spread of work across tires, suspension, fluids and other work categories is the ideal. With an accurate read on average mileage, Jellen could set fair expec- “Technicians are black and white,” Jellen says. tations for the average number of “When they see the data that compares what recommendations technicians should they recommend compared to everyone else, make during vehicle inspections. they get it.” A benchmark range: 2.5 to 3.5 recommendations per inspection.
  9. 9. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 7 secret 3: measure advisors and everyone wins Today’s technology also delivers drill-down metrics that assess advisors’ customer pay sales performance. For technicians, this is crucial. Often, one of their main complaints about advisors is that “they’re close ratios not selling my recommendations.” Here again, and customers manual reviews of ROs, estimates and closed When fixed operations director Steve tickets are often the only pathway for fixed Jellen of Flemington (N.J.) Car and operations managers to prove or disprove the Truck Country evaluated his advisor technician’s assertion—unless they’ve got the close ratio he noticed a trend: There data right in front of them. were more “declines” on recommend- ed up-sell work when customers had A critical new advisor-focused metric: Close big-ticket items. ratios on technician recommendations. His suspicion: Advisors might be asking In a well-managed store, managers should for too much, and not prioritizing see a degree of consistency of close rates recommendations based on the across advisors. The data reveals whether degree of “need” for a vehicle. advisors prefer to sell specific types of work, such as flushes or brake jobs. “If a guy comes in and needs four tires and four brakes for $1300, you can leave the flush for another time,” Jellen says. “In those cases, we’ll A critical new advisor-focused metric: Close ratios on technician recommendations. ‘caution’ the service. When offered the option, it’s surprising how many customers say ‘do the work while the Managers can drill into this metric further to see vehicle’s here.’” first-hand how often customers “decline” work and the type of work customers decline for each Jellen notes these kind of sales- advisor. This is the metric Meo used to discern a coaching insights were impossible to need for additional training to improve advisor determine without the technology to selling skills for flushes. capture sales information. For Jellen, this kind of data-driven oversight has “I could never measure that before,” he yielded positive gains across his stores. “In 2009, says. “If I can measure it, I can fix it.” we broke all kinds of records for our retail customer pay business,” he says, noting a $1.1 million increase in customer pay revenues for the year, a boost driven in part by ensuring advisors properly use “leave-behind” reports and other point-of-sale materials (more on that in a minute).
  10. 10. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 8 Here’s a look at other technology-powered metrics fixed operations managers like Jellen use on a daily basis to track advisor sales performance: • “CP Hours per RO:” This calculation divides total customer pay labor sales by the “Real RO Count*” to provide a “true” read of overall customer pay activity. • “CP to total sales”: This ratio uses the “Real RO Count” as a foundation to accurately compare the customer pay business’ contribution to a service department’s overall sales. • “Warranty to CP Conversion”: This ratio offers an overall indicator of how well a vehicle inspection process and advisor selling combine to up-sell customer pay work to warranty customers. • Average up-sell per advisor: The dollar value of this metric will vary from store to store, depending on the franchise. At highline stores, the average up-sell can run as high as $452; at volume stores, the figure averages near $150 to $200. The key is establishing a baseline and managing advisor sales performance to achieve consistent incremental increases and high customer satisfaction ratings. * The “Real RO Count” is an MPi term. At many stores, “Total RO Counts” are used to evaluate customer pay business, even though the tally often mixes warranty and customer pay customers. The “Real RO Count” segments these customers for a more accurate read on the overall customer pay business.
  11. 11. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 9 secret 4: make “take-away” materials count What’s one thing that virtually always leaves customers with a bad taste? It’s when advisors recommend and up-sell work without clearly explaining the nature of the work and why it may be important for the customer to address right away. It’s the “What’s in it for me?” question that lingers in the back of every customer’s mind when being presented with up-sell recommendations. As part of the customer pay processes at his stores, Jellen requires advisors to walk each customer through every recommended repair and prioritize its importance. The advisors use two custom-printed reports at the point of sale (POS): • The Recommended Action Plan™: This details all the technician recommenda- tions and prioritizes them by color to note the degree of urgency for the customer. • The Know Your Vehicle Report™: This is a take-home (grease- and fingerprint-free) piece for the customer that outlines the work they completed and declined during a visit. The idea: It provides a customer a full accounting of their vehicle’s repair work, as well as a run-down of items to address during their next visit. Fixed operations directors and managers evaluate how consistently and effectively advisors use these important point-of-sale materials—and the come-back effect they have on customers—through two key metrics: • Percentage of customers who receive a “Recommended Action Plan” and “Know Your Vehicle Report.” Jellen adds that the reports help advisors sell more effectively. They can “explain things in plain English and show customers the value in our recommendations and work,” he says. • Percentage of customers who “decline” work and return. Jellen and other fixed operations managers see a 25 percent to 35 percent capture of these customers—due to largely to the “Know Your Vehicle Report.” “Customers are taking it home and reading it,” Jellen says. “It’s very powerful.” (see box, this page)
  12. 12. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 10 secret 5: manage, motivate with transparency Every fixed operations director and manager understands the power of positive peer pressure. This dynamic becomes even more transformative as stores collect and share customer pay metrics with their advisors and technicians every day. Mangers often post the daily print-outs of advisor and technician metrics—as well as their prime the ongoing monthly totals and compliance with “come- back” pump department goals—to ensure everyone knows where they stand and to serve as motivational reminders of the importance of consistent Dealerships that send notices to customers with “declined” work two follow-through on their customer pay processes. weeks after their visit to suggest a follow-up appointment see bigger “Everyone’s rankings go up on the wall,” Jellen captures of these “come-back” says. “We don’t do it to criticize anybody. We customers than those who don’t. want them to see how they’re ranked against their peers.” Some stores also track the type of follow-up and its success rate to The pinpoint metrics on advisor performance determine whether phone calls or also help Jellen set targeted “spiffs” for the entire e-mail is most effective. department. Example: A $5 spiff program for technicians might offer the bonus to one technician for air filters, another for brake jobs and another for alignments. “I’m able to spiff areas that the data show as weaknesses,” he says. “I wasn’t able to do that before.” For broader “spiff” programs, Jellen uses the advisor metrics to establish handicaps (like those in golf) to motivate advisors who might already sell a particular product or service well. In those cases, percentage of improvement, rather than volume of sales, becomes the guideline for rewards. Other pointers for effectively using data-based performance metrics at your dealership: • Expect more work early-on. Typically, it takes 90 days for managers, advisors and technicians to become comfortable with the greater degree of data and accountability. But the adjustment gets easier as advisors and technicians see the benefits of additional work and pay.
  13. 13. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 11 • Stick to your guns. It’s the consistent, ongoing use of the metrics to manage advisors and technicians that ensure they stay focused on completing the tasks and processes that make customer pay improvement efforts more effective and long-lasting.
  14. 14. KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 12 secret 6: build the buy-in, savor the roll-out Like any new technology in a dealership, the introduction of a technology-based, customer pay system and process like MPi’s EDGE cannot be a top-decision. But buy-in comes more easily as advisors and technicians understand these systems are even-handed and fair—and they typically bring the reward of increased earnings and on-the-job satisfaction. Even so, Jellen and Meo recommend a “phase-in” approach for deploying new customer pay technology and processes. “We did it based on where we thought the managers would be most effective,” Jellen says. “The results we achieved there helped us with buy-in at other stores.” Customers will also likely help underscore the value of this new approach to customer pay work. In addition to raves from customers who called her, Meo found further proof of a satisfied customer in the pages of her local paper. The writer’s story helps sum up why all fixed operations managers should consider a technology-backed, transparency-focused approach to handling their customer pay business: “Building customer loyalty is critical to business success, especially in these times. You can do the same by selling your customer what they need, what they can afford and explaining things to them in terms they can understand so they can make informed decisions. Eventually I will have to replace Ms. Jetta, and you can be certain I will purchase my next vehicle from this dealership because of the service I have received.“ For more on these “Key Secrets to Customer Pay Success” or the EDGE system, visit www.mpifi or call 1-888.503.8040