Category Archives: Dealership Parts Department

Get the Most Out of Your Dealership Advertising

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You spend time creating ads, you spend money advertising and yet the sales don’t reflect those efforts.  Does this sound familiar? Let’s figure out why we don’t get the results we want before we spend any more time and money on advertising.

The following is a recent Service experience.  (Skip to the “Bottom Line” if you don’t need another story about a bad service experience)  I needed to replace a trim piece on a 10-year-old vehicle – easy enough, no diagnosis – just “do you have the part in stock?” before I spend an hour in drive time.  First, I called the Service Department and was able to get the voicemail of the concierge.  The voicemail, while pleasant, encouraged me to make an appointment online at my convenience; I guess that was so I wouldn’t have to bother her with annoying details or questions.  You can tell it is a highline dealership because they call their appointment setter/reservationist a concierge.  I left a message explaining the two items I wanted to have installed and waited 24 hours before calling the new Service Manager.  I knew he was new because he sent an email letting me know he was the new manager and he wanted my business with a “too good to be true” offer for service on older vehicles.

Me being me, I felt I should help him out (at no charge) and let him know how he could bring back old Customers…Answer the phone or return calls ASAP!  You don’t have to give everything away if you take care of the Customers!

 On day three, I decided I had to be smarter than their system and contacted the Parts Department directly to check on the availability of the part and after hearing “Parts, could you hold please?”  I knew I had hit gold; I didn’t have to leave a message and wait for it to not be returned.  I was prepared, I had the VIN and pictures of the trim part ready to email, unfortunately, the Parts Counter Person had been there two weeks and wasn’t familiar with the models of the vehicles or how to look up trim parts.  However, he was friendly and tried hard before he had to ask someone how to look up the part.  Good news, that part breaks so often that even though the vehicle is 10 years old; it is stocked in dove or ivory.  He promised to have a Service Advisor call me, which happened 2 hours later.

Thirty-six hours after contacting the Dealership, I had an appointment!  Yahoo!  Several hours after that, the Assistant to the new Service Manager called to see if there was anything he could to do to help me.  My first thought was, “Can you connect me to the Used Car Manager and see if he wants to buy a 10-year-old car with less than 70,000 miles?”  Maybe he had an in with the Service Department.  Side note:  The vehicles they sell new are on my short list for a new puppy transportation vehicle, but the Salesperson would have to put a gun to my head to buy a vehicle from them.  If I can’t get decent service, what will the sales experience be like?

A long story to get to the point – train your people on how to take care of your Customers, how to do their job and to take pride in doing the job well.  If you whittled out a percentage of your marketing budget and invested it in improving your process and people, you might receive benefits you are expecting.

Bottom Line: Train All of Your Employees:

  • If you’ve hired the right people, training will improve your employees’ skills,
  • Training will help employees feel appreciated and you are investing in their future,
  • Training reduces employee turnover, which is very costly.

The second and third points are a bi-product of what should be the most important reason – trained employees can take care of your Customers the way you want your customers to be treated.

Before you begin any training, answer the following questions:

  • Exactly what do I want to improve with training?
  • How will I measure the results of the training?
  • How will I measure the return on my training time and investment dollar?

If there is no way to measure the results, do you need to spend money on training?

Tips to make your training program a success:

  1. Get the buy-in from all who will be impacted: Management and Employees – what do they want to learn and need to learn?
  2. Get staff excited about the training by reinforcing the benefits. Think of it as learning…not training.
  3. Have a training agenda designed for your specific needs and one that focuses on the changes you want to make, leave out the “fluff and nougat.”

With a little training, your Advertising dollars will pay off!

Yes, You Can Reduce Employee Turnover

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Employee turnover is a fact-of-life in any business. Employees retire, relocate, find a better job or are terminated for one of the several possible reasons. The costs of turnover are numerous. The direct costs of recruitment and training are the easiest to calculate; but the loss of Manager’s time, disruption of staff, reduced sales and losing Customers because of bad experiences could be where the biggest costs lie. There are different ways of calculating employee turnover, but the idea is to use the same method year over year and to work on reducing the turnover rate. After the W2s are printed is a good time to run the numbers to generate a baseline turnover rate for your Dealership.

To calculate your turnover rate: count the numbers of W2s of former employees and divide by the number of W2s of current employees. Multiply the answer by 100 to get a turnover rate that you can compare to other industries. The national average for private sector businesses is 42% according to NADA. In vehicle dealerships, one department is typically the biggest contributor to the turnover percentage: the sales department. While turnover is a big money waster and creates a customer retention problem, I have to give credit to Sales Managers for persevering in the efforts toward keeping a full staff and working on upgrading when possible.

After the financial collapse of 2009 and subsequent high unemployment rates, surprisingly an estimated 30 million people quit their jobs in 2014.
According to Forbes, some of the key reasons employees quit are, because:

You’re overloading your best people with more responsibilities.
After years of trimming staff; to get the same if not now more work done, your best people are asked to do the work of 2–3 people. Take a look at your top staff: do they have the opportunity to work on higher-level stuff, or are they expected to come in day-after-day and do the same old stuff just to keep up with the work?

You’re never around.  We say the most important time Managers can spend at their job is the face time with their employees and customers. If your employees can’t find you, how can you solve problems, and coach and motivate your staff?

You’re complacent with the caliber of your employees.
Good people want to work with good people, yet managers will let bozos keep their jobs; they’ll let tardy people keep their jobs, and they’ll let lazy people keep their jobs. It’s easier than taking the time to make better hiring choices, easier than confronting the inept, and easier than training people – that is, until the good people leave.

You’ve never given your people a sense of where they can go with their careers.
You may hold the job that you’ve always wanted, but what about your employees: have they reached their goals? Do you even know what their goals are? A career path is one way to show them how far they can go at your dealership, yet few managers have laid out a path for their staff. Take the time to understand your employees’ goals and what role you are playing in helping them reach those goals. They may not know what their ultimate goal is, but I’m sure they’d appreciate knowing you cared.

According to Indeed.com, the new normal for employment at one place is just under five years; and January is the month when most start looking for a new job. On-line job searches were up 40% from December to January. So now is a great time to work on employee retention before your employees have a “New Years Resolution” that includes finding a new job.

The best way to retain employees is to communicate with them. Conduct “Stay Interviews” and ask employees why they stay at your dealership, and then pay attention to what they like. Are they happy here? Are developmental needs being addressed? Are you recognizing and rewarding hard work?

Back to the turnover rate, just like any other measurable procedure, you can improve the numbers by setting goals, examining current processes, looking for ways to improve them, and implementing best practices. It will be worth your time to further break down the turnover analysis by examining how many employees either were terminated or quit within the first 90 days of employment. Understanding why this group of employees “didn’t make it” will aid in implementing processes to improve your retention numbers. If you conduct formal exit interviews, excellent! If not, get a list of folks who didn’t make the 90 days and call them to ask either why they quit or why they feel the job wasn’t a good fit (i.e., they got fired). This trove of information will help you on the right path for good employee retention.

Upsells – Your Secret Weapon for Higher Profits

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I have shopped at the same grocery store chain since I was able to use a microwave.  They have always had a good fresh seafood department.  Last week, for the first time, someone tried to upsell me at the seafood counter: I ordered my pound of shrimp, and after weighing and packaging the shrimp, Matt, the new seafood manager, asked me if I needed cocktail or scampi sauce.  The man ahead of me had been asked if he wanted to try one of their new butters for the salmon he was buying.  I upsell myself enough at the grocery store, but for the first time, this manager proactively upsold me.  I imagine the sales of sauces and butters have increased since Matt took over the seafood department.

So what does that story have to do with you?  Well if Matt can upsell cocktail sauce and a $7.50 an hour cashier at McDonalds can upsell French fries, then why can’t we do a better job of upselling at our Dealerships?  I’m not talking about selling Customers unnecessary work; I’m talking about items that go hand-in-hand with each other, just like the shrimp and cocktail sauce!
In the Service Department, for example:

Request: New Tires:  Add-On Repair: nitrogen, wheel alignment, and road hazard insurance.

Request: Engine Misses  Add-On Repair: Besides the Correction, Replace spark plugs, change fuel contaminated oil & filter, possible air filter, PCV valve

Request: A/C Hose   Add-On Repair: Other A/C Hose if they are same age, Evacuate & Recharge

Request: Honda timing belt   Add-On Repair: Replace the water pump, radiator & heater hoses, coolant.

Lloyd Schiller of Lloyd Schiller.com says, “I see this all the time, a Customer comes in for a needed repair and we do that repair.  These are more than upsell opportunities; this is taking proper care of the Customer’s vehicles.  For example, if an original hose breaks, then the other hose or hoses will fail soon. Why put your Customer at an inconvenience PLUS charge them again for lost coolant or lost refrigerant because “we were afraid we’ll chase them off.”  If you’re inside my heart doing an angioplasty, PLEASE check ALL my arteries and vessels and give me ALL the stents I need (also a real-life lesson)! By training which repairs should be paired with corresponding work or what work will save the Customer money as long as the other work is being done, not only do you increase your sales, you provide a better level of service.  We train these repair combinations during our Service Advisor training classes and see the Total Sales per Repair Order increase.” 

Take a few minutes and ask your Service Advisors what they should do when a Customer requests any of the above services.  I hope the answer is, “I’d recommend….”

Upselling is not limited to the Service Department.  When the Parts Department’s phone rings it is opportunity calling.  The call is not an annoyance that must be dealt with, it’s a prospective Customer.  Answer the phone promptly and with a smile.  This simple courtesy will make it easier to close the sale and to upsell the caller.  The following is an excerpt on phone upselling from The Ultimate Marketing Plan by Dan Kennedy.

Dan’s example is from a Parts store where the Owner is spending a lot of money on advertising, but the sales are not increasing:

Well, Customers were calling, but after the caller stated his business, the answer went like this: “Lemme look it up–hold on . . .still there?  It’s $62.50.” Click.  Does this sound familiar?  The Parts Store owner had spent a lot of money advertising, but he had failed to train his people to handle the calls.  What they did to fix this was the following:

  • Devised a phone script to capture the caller’s name, address, and phone number.
    (This information was used to market to the callers)
  • They taught the script to all Employees.
  • They instituted a reward pool of fifty cents per captured name, address and phone number, divided at day’s end by everybody working that day.
  • They added a “telephone upsell” to the script as follows.

After taking the Customer’s phone order or answering the Customer’s questions, the Employees finish with:

 “Oh, just one more thing – we have an extra special offer just for today’s callers – would you like to hear about it?”

More than 70 percent of the callers said, “Yes.”

“Good.  Any caller who comes in today or by noon tomorrow will receive a 10% discount coupon for any purchase in the store and a free copy of our 400-page catalog.  Also, there’s a sale right now on (insert product).  I can set your coupon and catalog aside with your name if you are coming in.  Should I do that?”

More than 50% said yes.  More than 25 percent actually showed up.  More than 15% not only came in but also bought the item they originally called to ask about and bought the sale item described on the phone.

Spend a little time fine-tuning a script for your Parts Department to gather the caller’s contact information and to close the sale upon the initial phone call.  Don’t let those opportunities go unanswered.

The Body Shop has opportunities, too.  It can get discouraging trying to upsell Customers who want you to cover their deductibles, but there are Customers who are “not guilty” of the accident and have no deductible.  My mother recently visited a body shop due to a minor accident.  After the repair was done, she told me about the accident and how nice they were at the Body Shop.  When I inquired if she also had the missing passenger mirror replaced, she said: “I didn’t think of it and no one mentioned it.”  Missed opportunity!  She still is driving around with a warped plastic mirror instead of a glass one — a plastic mirror was her fix so she wouldn’t have to go to a Body Shop (for those with friends or family in Bonita Springs, Florida, you might want to warn them about a burgundy Mercury Sable).  To maximize your Body Shop opportunities, while writing an estimate, do a vehicle walk around.  Increase sales by offering to write an estimate for work not associated with the insurance claim, it is bound to be cheaper if it is done while the vehicle is already at your Dealership.  When I had my vehicle at a Body Shop for a repair I wasn’t responsible for, the Estimator never even went to my car; he just took the insurance company’s estimate — he could have found a few “defects” to upsell me on had he bothered.  For Customers who have their vehicles serviced at your Dealership, check the service history; you could save the Customer time by having their needed maintenance done while the vehicle is in your shop.  Don’t miss the opportunity to help the Customer and the Service Department.

For the Sales Department, accessories are your big opportunity to upsell to the Customer, but that is a whole other article.  Make this month the time when you look at Service, Parts and Body Shop and see how legitimate upsells are your secret weapon to Happier Customers and to higher Net Profits.

Parts Goals = Higher Profits

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Lord William Kelvin (1824 –1907) stated: “If you can not measure it, you can not improve it.”  That theory is the basis of the Profit Blueprints® System.  We start by measuring the numbers critical to your success and then work with you to reach your targets.  We have the pleasure of working with Parts Managers who seize the opportunity to measure and improve the performance of their Departments.  Here is how Sébastien Vanier does it:

One French-Canadian Manager’s recipe for success:

Big Hairy Audacious Goals

+ Real-Time Posting of Daily/MTD Results

+ Delicious Treat Rewards for Achievements

= Record-breaking Achievements Every Month

Parts Manager Sébastien Vanier sets the standard for motivating the productivity of his staff, and that is just one of his many talents.  For over 4 years, Sébastien has been motivating his staff with posting the Department’s goals and the progress towards those goals.  He admits, at first the employees were skeptical about the ambitious goals and daily posting of the numbers; “but once they saw the improvements in their efforts and in their paychecks, they appreciated it!”

Besides Sales and Gross Profit goals, there is a lot of emphasis on answering the phones.  To give all Parts Counter People a chance to earn more, he allows Tech Counter People to answer phones when the Tech Counter is slow, and the Wholesale Counter People are allowed to help out at the Tech Counter when Wholesale calls are slow.

BIG HAIRY AUDACIOUS GOALS

Sébastien clearly embraces the philosophy of BIG Hairy Audacious Goals (BHAG), a term first proposed by James Collins and Jerry Porras in their 1994 book Built to Last: Successful Habits of Visionary Companies. BHAG encourages visionary goals that are strategic and emotionally compelling.  The folks who work for Sébastien know all about the goals because reaching individual goals is built into their pay plans.  Each year, Sébastien reworks and fine-tunes the goals, as the employees continue to exceed them.

REAL-TIME POSTING OF DAILY & MONTHLY RESULTS

Every employee knows where they stand on an hourly, daily, weekly, and monthly basis — thanks to the big-screen monitor in the Parts Department installed last year.  Super Bowl worthy screens keep the numbers in front of the team’s eyes.  It’s not just the Sales and Gross Profits that are monitored, the Incoming and Outgoing calls are tracked and shown in real-time. This measurement really took hold when the screens went up.  Before he started tracking and rewarding the telephone efforts, the number of abandoned calls ran between 15% —18%, afterward that number dropped to 8%.

DELICIOUS TREAT REWARDS

The Parts Employees don’t have to wait for the end of the month to be rewarded.  Incoming phone calls are monitored with the goal that all calls are being answered quickly and no one hangs up before the call is answered.  He first rewarded them with Tim Horton donuts and coffee on the following day if no calls were lost.  The staff complained that they were doing so well, they were gaining weight on all those donuts.  So the higher goal was raised to have 5 days throughout the month with no hang-ups: Yahoo! It’s Pizza Time!

Sébastien’s efforts not only produce great numbers, they produce camaraderie among the staff.  One week, there was a day when only 1 call was abandoned (that didn’t count against Pizza), but all the staff got into good-natured ribbing, trying to figure which Counter Person should have gotten that call and what he might have been doing when he should have been answering that call.
Thank you Sébastien for all of your efforts.

What Should The Internal Labor Rate Be For a Dealership?

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The debate of what the Sales Department should pay for repairs and maintenance on vehicles they want to retail continues year after year.  We encourage Dealerships to charge most of the used vehicle internal work at a Retail Labor Rate, understanding that the cost of the work will be passed on to the vehicle Customer and the Dealership ultimately will make more profit, since the Sales Department typically sells from cost on Used Vehicles.

However, there are still Dealerships whose Internal Labor Rate is 50% – 60% of the Retail Labor Rate and deeply discount the parts.  To those Dealerships, I pose the following:

What if:  You’re the Used Vehicle Manager and every week you bring in a beautiful trade at a great price and you expect to make $2,000 on it, plus finance income.  Now you’re told to sell it to an employee for $500 over cost.  (Even if the employee has plans to retail the vehicle.)  If this happens every week, the $104,000 Gross Profit you would have made for the year is now $26,000. How happy will you be?

Although the numbers may be larger in this example (and maybe not), the effect is the same when the Sales Department “asks” the other departments to discount their efforts.

The Service Department, the Body Shop and the Parts Department could be selling their work at a higher rate to retail Customers than at a discounted internal rate.  For Service and Body, there is no replenishing the time sold – once it’s sold at a discounted rate, there’s no chance of selling it at a higher rate.  The time the Parts Counter People spend tracking down the parts the Parts Department doesn’t stock could be spent providing excellent service to the Departments and Customers who pay a higher mark-up percentage.

As any Service Manager or Body Shop Manager can tell you, finding Technicians is a challenge; just like finding beautiful used vehicles at bargain prices.  The effort to find, hire, train and coach Technicians is valuable, just like the time spent by Sales Managers finding, appraising, preparing a vehicle, then ultimately working a deal to get the best price.

If the Labor Rate for Service work was only worth 60% of the Retail Labor rate, you can be sure that the Factory would pay claims at that Labor Rate.  If a parts Markup of 20% made sense, then the Factory would pay no more.  I’ve run the analysis many times, for numerous Dealerships, and a 25% Markup on parts will allow the Parts Department to break-even.  There is little pride or sense in breaking even.

There will be times when the Service, Parts and the Body Shop will need to help the Sales Department with a discount, we call them “Mulligans,” but it shouldn’t be an everyday occurrence.  Maintenance work should be done at the same price as Customer Pay – not more than the Customer Pay work.  If there is a “special” or coupon price, then that is what the Sales Department should pay.  If you retail pre-owned vehicles over 7 years old, a discounted labor rate and reduced parts markup is worthy of discussion.  But in return the Sales Department should make the effort to introduce the Sales Customers to the Service Department, instead of worrying that the Customer might actually return to the Dealership.

The Sales Department should be part of the Team and not send work outside the Dealership because “they can get it done so much cheaper.”  This is a disservice to all involved, including the Customer if something on the vehicle fails because work was done by the cheapest guy in the block.

The Service Department should be part of the Team and earn the right to charge the retail labor rate, by providing excellent service and not putting the used vehicles at the end of the line.  If it takes a week to get a car through reconditioning, then I can’t fault the Sales Department for demanding a discount.

There are a lot of challenges and debates when running a Dealership and its departments; let’s not make the Internal markup be one of them.