Upsells – Your Secret Weapon for Higher Profits

Posted on October 5, 2017 by Brooke Samples

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.

It Is All In The Details

Posted on July 31, 2017 by Brooke Samples

As Customers keep raising the bar with what makes them happy, it becomes more and more important to pay attention to the details in your Dealership. I am surprised by how much Customers continue to demand from Dealerships in a world where the number of businesses that “Wow” their Customers continues to decline. Here’s a story about a small detail that we may not think about, but a Service Advisor did.

While Lloyd Schiller was conducting Service Advisor training in Iowa, Robby, a Service Advisor, commented on how much the Customers liked the new menus and the multi-point inspection forms. However, now it’s a problem because all the extra paper work, combined with the invoice, was filling the glove box. Robby’s thought was “wouldn’t it be nice if the Customers had a folder to hold all of the Service paperwork, just like they get when they buy a vehicle?” Well two months later, they had imprinted folders and “the Customers LOVE them!” The good news is these inexpensive folders are a continual promotional reminder of the services you provide.

Another way to keep your Dealership’s name in front of the Customer is to do what Inskeep Ford in Greenfield, Indiana, does: a simple, but useful, air freshener with the Dealership’s logo and website imprinted on it. It can be hung in the new and used vehicles once they’ve been prepped. You can use it when delivering a new vehicle or it can be given to a Customer whose vehicle is in for service or is in the Body Shop. Let the Customers know they don’t have to wait for a service appointment for a new air freshener; the Customers can visit your Dealership anytime and get a new one when the scent evaporates.

Small details can make a big impact on your Customer’s perception of your Dealership. What can you do that keeps your name in front of your Customer – and keeps them coming back?

What Should The Internal Labor Rate Be For a Dealership?

Posted on September 20, 2016 by Brooke Samples

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.

Service, Body Shop and Parts Departments Cash Flow

Posted on September 8, 2016 by Brooke Samples

Every business faces unexpected events which can strain its bank balance; the trick is to be prepared for them. You finally got (and paid for) all of those recall parts, now you have to find the time to install them and wait for the factory to pay you. A tornado or a hailstorm overwhelmed your Body Shop; you worked overtime to get the vehicles repaired, while you wait on insurance checks. You were offered a fantastic buy on tires, but you can’t sell them all in one week. These are just a few of the potential times when all of a sudden, “Where did all our cash go?” The financial statement’s balance sheet shows the two main areas to look for that money – Receivables and Inventories.

When it comes to the financial statement, most managers see their role to make the profit and control the expenses. Cash flow is low on the list of priorities, after all, isn’t that accounting’s responsibility? Actually, cash flow should be everyone’s responsibility. For subscribers to the Profit Blueprints© system we analyze key accounts to save you time in monitoring your asset accounts. Not only do we track the monthly balance; we put it into perspective by comparing the balances to the appropriate sales accounts and show you how much cash, if any, is tied up in frozen assets.

To keep frozen assets in check, be familiar with the schedules and the accounts to understand where cash could potentially be hiding.

SERVICE DEPARTMENT

OPEN REPAIR ORDER REPORT. This report could easily hide thousands of dollars of potential cash or potential write-offs. Keep this report clean by closing Repair Orders promptly. If not paid in full, close the Repair Order to a receivables account when the vehicle leaves the lot. This will make it a “thorn in your side” when it starts to age and is better than the labor and parts sitting on a report that few people review. Open Repair Orders should have a vehicle on your lot; verify this at the end of every month.

SCHEDULES

Receivables

Confirm that you will be paid, before you extend credit. This includes Extended Service Contract companies.
Warranty Claims Schedule. Clearly defined processes and continuous training of staff will help collect and keep the warranty money. The last page of your Profit Blueprints report tracks your Warranty Receivables in relation to your warranty sales. If you are above the day’s supply target, the excess will show in green.

Sublet Schedule – Service and Body Shop

There is nothing worse then when you have to write off a balance on the sublet schedule because when the work was done – you thought you were going to be paid for it…then something slipped through the cracks and now you have to write off a balance. Compare the Sublet Schedule to the Open Repair Order report every few weeks to make sure the two are in sync. Shore up your sublet processes when you see a problem.

BODY SHOP

OPEN REPAIR ORDER REPORT To free up cash and avoid potential write-offs, close Repair Orders when the vehicle is delivered to the Customer, don’t wait until the end of the month. Open Repair Orders should have a vehicle on your lot; verify this at the end of the month by touching every one.

RECEIVABLES The Body Shop should have a receivables schedule separate from the other departments. The only balances on this schedule should be for Insurance companies you have a Direct Repair Agreement with; all other repairs need to be paid-in-full before the vehicle leaves the Body Shop. Deposit Customers’ checks in accordance with your dealership’s policy. Do all of this and you will have a picture perfect schedule.

PAINT AND MATERIALS Because most paint suppliers deliver requested materials within hours of a request, there is little reason to stock more than a month’s supply. If your financial statement’s balance sheet doesn’t breakout Paint and Material (P & M), we don’t analyze it on your report unless the inventory balance is supplied by your Controller. Calculate your P & M supply of inventory by comparing your General Ledger Balance to your P & M Cost of Sales for the Month. (Sales – Gross Profit = Cost of Sale) Ideally, the inventory value will be around the average Cost of Sale. Reconcile the General Ledger balance to the physical Paint and Material balance every month. Do not let your paint vendor count this inventory! And don’t let them place an order for you.

PARTS DEPARTMENT

INVENTORY

The Parts Department is special because even though the parts inventory can range from hundreds of thousands of dollars to several millions of dollars, there is no Accounting schedule to confirm that the General Ledger balance is accurate.

We recommend a monthly reconciliation of the General Ledger to the Parts Management Report to watch for growing gaps, but this does not assure that all the parts are on the shelves. Perpetual inventories, done 3 – 4 times a year, plus a physical inventory done by an outside company should confirm all parts are present and accounted for, 99% of the time.
Watch the days of supply as calculated on your Profit Blueprints^© Report. 30 days is too skinny, while over 60 days may raise a red flag. Parts managers will confirm when they got off the 30-day supply and stocked more parts – their sales went up! Work towards the optimal range of around 45 – 55 days of supply.
Keep your eye on your stocking status and aging analysis from your Parts’ DMS Management Report. You could show the ideal days of supply, only to find out 30% of the inventory is over 12 months old. Stocking Status (Normal or Active) is another indicator of the quality of your inventory with a target of 70%+ for most franchises.
Do everything you can to minimize Special Order Parts. If the part(s) could be here tomorrow – hold the vehicle. If it is a Customer Pay Part, the part(s) needs to be pre-paid. If it is a warranty part(s), the Customer has to confirm an appointment before the part is ordered. If we saw those Special Order Parts sitting on shelves as hundred dollar bills, we’d do what we could to get them to the bank.

RECEIVABLES

The Parts Department should have a receivables schedule separate from the other departments. The only balances on this schedule should be for approved Wholesale Customers. Approved mean you also have on file a complete credit application and, if appropriate, a sales tax exemption number. Only extend credit to companies who have good references, continuously pay on time and have a low percentage of returns. Being weary of a Customer suddenly buying more than usual, this may indicate they have been cut off from other vendors—or it could mean you are doing a great job! The Parts Department should be vigilant for Customers who drag their feet on paying. By the third week of the month, most wholesale accounts should reflect only current purchases.

Each department manager has the responsibility to keep the cash flowing. Review your responsibilities for your department’s cash flow. With good processes and continuous monitoring, the bank account will be flush and you can focus on selling more and controlling expenses.