Don Tipton - DealersEdge

A Business Plan For Your Service Department
Opportunities For 2013
Don Tipton

Don’s Hometown Motors
Service & Sales
We Service Everything…
and Sell New & Used Cars
DTC Retail Consulting, Inc. 803-917-9991 2

Don Tipton
Don is a Speaker, Trainer & Consultant with over 35 years of automotive experience. He began as a
pre-teen working for his Dad at the local Chevrolet dealership. His Dad and Grandfather were both
involved in the Fixed Operations and Don was actually third generation in the same facility. Don
held many support and management positions in retail along the way before setting his sights and
ambitions on assisting other managers in becoming a success.
Don has conducted training workshops for many state and local dealer associations, addressing
topics in both the Service and Parts operations. He often is an invited speaker for Dealer 20-groups
and has presented at seven International Parts & Service Summits, several Tele-Conferences and
Webinars sponsored by DealersEdge. He has performed factory sponsored training seminars as well
as on-site implementation. Don has authored numerous articles for industry & trade publications.
As a Consultant, Don has worked with hundreds of Dealerships from large multi-store groups to
small single point stores and because of his approach and style enjoys long-term relationships with
many of his clients.
Word of mouth endorsements from Dealers and Managers keeps Don in demand.
DTC Retail Consulting, Inc. 803-917-9991
Copyright 2012. All Rights Reserved. Reproduction For Any Reason Is Prohibited.

How we got here..
Shop full of broken automobiles
Extreme shortage of Technicians
No enough stall space
“Just bring it in” - no real appointment system
1-rate pricing system & we posted it!
New vehicle sales were good
Very little service competition
No CSI surveys
Attitude
don@dtcretailconsulting.com
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Priorities were
Minimize the damage
Just get it done and get it out of the shop
No time to up-sell, just get through the day
Don’t let too many complaints get to the Dealer
Forget oil changes, not enough money in it
Tires? Not worth the hassle
Batteries? Can’t compete with price
Dispatch priorities:
◦ Dealer’s relatives, Dealer’s neighbors, Dealer’s friends, sold
vehicles, the screamers and then EVERYBODY ELSE!!!
Then CSI came along. Did we give better service or
just shift priorities?
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Longer maintenance cycles
Quality of the vehicle is better
Longer warranty coverage
Increase in leasing
Slower new vehicle sales the last several years
A lot of focus on factory CSI scores
Customer has “hand me down” perception of the
past
The consumer today has MANY service alternatives
Strong Used Vehicle Super Stores
Low dealer loyalty with Used buyers
May have a high percentage of repeat new vehicle
buyers
2 (or less) maintenance visits a year
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The competition was paying attention
Watching & listening to your customers
The competition was scheming, looking for a
weakness
Preparing to roll out a marketing plan to go after
the work the dealer either didn’t want or couldn’t
get to.
More importantly they developed a marketing
theme that would build a perception in the
customer’s mind that the dealership was not only
“inconvenient” but also “high-priced”.
Unfortunately…They were right!!!
and the customer paid attention!!!
“The future ain’t what it used to be”
Yogi Berra
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First, do the research. What does your customer
traffic look like?
Customer repair order count up? #1 Indicator!!!
$$$ per repair order up?
◦ Perform a repair order analysis
200 consecutive customer repair orders
Determine # vehicles serviced by model year
Determine effective labor rate by model year
Determine effective rate by work type
Competitive, Maintenance, Repair
How’s that grid working for you?
Determine hours sold per repair order by model year
Total repair order value by model year
Where is the model year traffic “fall-off” by RO count?
◦ Two years before the model year fall-off is the marketing
“sweet-spot”
“When you want to win a game you have to teach. When you lose a game you have to learn”
Tom Landry
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Structure
◦ What it takes to get it done (hit objective)
◦ Control the environment; staff, pay plans
Process
◦ How to get it done
◦ Consistent approach to customer handling
◦ Create a “memorable” experience not just a
“functional” experience for the customer
Marketing
◦ Change the customer’s perception
◦ Challenge is to… “get them on-site”
“Failing to plan is planning to fail”
Alan Lakein
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Take a look at how your department is
currently structured
◦ Number of front line personnel versus behind the
scenes personnel
◦ Ratio of 2-productive for every 1-support
◦ 1-Service Advisor for every 4-Technicians
◦ Total Service Advisor income budget < 15% of
department gross profit
◦ Total personnel expense < 45% of department
gross profit
◦ Plan to grow “laterally” with more front-line
personnel that the customer can see & interact with
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Set a net profit objective
◦ Breakeven or 20% net to sales as an example
◦ Formula & Example:
Average month expense – divided by total labor gross
profit margin (%) less desired net to sales
$125,000 / 65.9% - 20.0 (net to sales)
$125,000 divided by 45.9% = $272,331 labor goal
Production required to hit that objective
Formula & Example:
Labor sales required divided by overall effective rate
$272,331 divided by $82.69 = 3,293.4 flat rate hours
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Do you have enough Technicians?
Formula & Example:
◦ Production required divided by average Technician
monthly production
◦ 3293.4 divided by 156.2 = 21 Technicians
Do you have enough Service Advisors?
◦ 21 Technicians divided by 4 per Service Advisor
◦ 5.2 Service Advisor’s required
◦ *MUST keep in mind current pay plans before
adding any Service Advisors
◦ What would happen to your expense if you add an
Advisor now?
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Do you need more customers or can you just
improve the value per repair order to hit your
objective? Or, do you need to improve both?
◦ Example:
3293.4 required 2800.0 current average
493.4 additional production required
493.4 divided by 1200 customer repair order = .4
improvement with current customer traffic
493.4 divided by 2.1 (current average) = 235
additional customer repair orders
Some of both: .2 improvement X 1200 CP-RO = 240.0
plus 110 additional CP-RO X 2.3 = 253.0
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Determine how many customer transactions
your Service Advisor’s handle daily
◦ 15 – 17 per day – everything except cashiering
◦ 13 – 15 per day – including cashiering
Efficiency of your current dispatch structure
◦ Direct flow of communication (status) from Lane to
Shop & Shop to Lane, no bottlenecks
◦ Service Advisor’s can set priorities without
“stepping” all over each other
Pay Plans
◦ Goal oriented (3293.4 flat rate hours)
◦ Review annually (adjust if needed)
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Quick Service
◦ To be competitive you MUST offer Quick Service
◦ Not just a marketing gimmick
◦ Must be able to actually pull it off
◦ Battle perception: “high priced” & “inconvenient”
◦ Must watch expense (personnel) and Technician
cost of sale
◦ So why bother?
◦ To build traffic & create up-sell opportunity
◦ Opportunity to sell what?
◦ Filters, blades, brakes & tires
◦ These are; Low to No profit operations
◦ Great for retention (important!), how about profit?
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Looking at it from a customer’s perspective:
How should the customer be handled from the start
of the transaction to the end of the transaction every
time by every Service Advisor
Most Service Department’s start every day
without a plan. Don’t leave it chance!
Design a procedure that clearly defines every
step of the customer handling process
This becomes the (your) way of doing business
at Hometown Motors
Train…Train…Train
Coach…Coach…Coach
Review Performance at least quarterly
“The magic formula that successful businesses have discovered is to treat customers
like guest and employees like people”
Tom Peters
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Set a “drop-down” rate to kick in just before the
model year sweet spot
Standard diagnostic charge (check engine light)
MUST create a positive perception.
GET THEM ON-SITE!!!
Alternative parts pricing. Give options not
ultimatums.
◦ New & Aftermarket
◦ 2-price quote policy after three model years
Established, written pricing policy to ensure
consistency
Good, Better & Best options
◦ Tires
◦ Maintenance package
On Demand Gift Certificate
Train the Staff
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Review all factory programs. Are you taking
advantage of all they have to offer?
◦ Tires, brakes, filters, wipers
◦ Price match guarantees, rebates
◦ Marketing or declined service follow-up
Set an advertising budget
◦ 4% of customer labor sales or 20-group benchmark
Starting point: Budget- 50% within your data base,
50% outside your data base. Adjust depending on
your situation.
don@dtcretailconsulting.com 18

Within Your Data Base – determine how much of
your budget to spend in each area
1. Maintenance reminders (keep in mind current
maintenance cycles)
2. Last Service Date – Missing Customers
6 to 12 months by model year & zip code
12 to 18 months by model year & zip code
18 months & over by model year & zip code
3. Used Vehicle Buyers
Ask them to return
Given them a reason to return
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Outside Your Data Base
Commercial-fleets-leasing companies
Vehicle registration by make, year & zip code
Free circulars, magazine, publications
Val-Pac
Office buildings – corporate centers
Colleges & universities
Grocery store receipt
Small business preferred customer card
Billboards
Cable TV, radio
Newspaper
Networking with existing customers
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◦ Market that you service most makes & models
◦ Birthday for your car
3% off every model year
10% off 10 year old+ vehicles
◦ Repair order attachment
◦ Point of sale display
◦ Tires
Buy 3 get the 4 th free
Price match guarantee
Free lifetime rotation
◦ Wipers
Buy 1 get 1 free with free installation
◦ Free battery check & installation
◦ No-Risk alignment
No charge to customer if within specs
Pre-approval to align if necessary
◦ 35 minutes or Free, LOF
◦ Spiff for Service Advisor’s
# new customer’s added with repair order value $30.00+
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◦ You don’t always have to offer a discount
◦ Why discount a discount?
◦ Survey your market to make sure you’re
competitive
◦ Shuttle service – both ways
◦ Loaner vehicles
◦ Discounted rentals
◦ Starbucks coffee
◦ Free Wi-Fi
◦ Vehicle pickup & delivery, home or office
◦ Comfortable customer lounge with HD-TV
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“If your customer repair order counts are up and
your gross profit $$$ are down, be concerned”
“If your gross profit $$$ have increased or are the
same as last year but the customer repair order
counts have dropped, be very concerned”
A few key indicators to add to your performance list:
Customer repair order count by model year
Customer repair order count YTD versus the last three years, YTD
$$$ per customer repair order by model year
# hits & repair order value on advertising versus the budget for that
category
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“If you don’t know where you’re going, you might wind up someplace else”
Yogi Berra
Plan to determine the production required
Plan to build a monthly forecast & share it
Plan to stay in control of the customer
experience
Plan the structure
Plan the process
Plan the marketing
Plan to coach
Plan to train
Plan to grow
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“Wishing you a safe and successful 2013”
Don
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P.O.B. 49277
Jacksonville Beach, FL 32240
803-917-9991
www.dtcretailconsulting.com
don@dtcretailconsulting.com
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