I talk with service managers and dealer principles all day, and one common thread I hear this year is that business is slow in all departments and that the recovery seen in other industries is not happening yet in ours.
I pondered that thought the other day while I was out on my dirtbike and realized that we need to look at who our competition is. Some OEMs stay focused on each other as their main competitors, and while this is a valid thought process, I think the market has changed. After 2008, the amount of household disposable income plummeted. We need to reevaluate who our competition is, how they affect each one of our departments and how we can compete more creatively.
The reason why the powersports industry has not seen a recovery like many other industries is because, as a general rule of thumb, we are not a necessity.
In the first quarter of this year, in certain regions of the country, people were spending money on guns because they were scared of losing them. Now that we are in the summer months, it is house-buying season as the country’s mortgage rates are at an all-time low. Consumers are spending their money on other items, and those items are our main competition. We are competing for each consumer’s disposable income.
As the economy tries to sputter back to life, many Americans are trying to strike that balance in their budget between perceived necessities and “toys.” Many of their toys are getting older, and with age comes higher repair bills.
Higher repair bills mean more service sales, but more pain for your customer. As the price of new units keeps going up every year, the jump from old reliable to new and flashy keeps getting bigger. That leaves our industry in a little bit of a conundrum. How do we put up the good fight for their money, keep the customer happy, keep them riding and not lose profit by lowering our prices?
Many consumers come into the service department tight on cash, or they simply do not want to open their wallets to fix their units. I think many times our service departments take the easy way out and reduce the number of hours they bill the customer on a specific job. I think it’s because they just want to make the customer happy, and it’s easier to say, “I know this seems like a lot of money, Mr. Customer, so we can probably do it for this.”
I find this most troublesome in departments that are not commission-based. This, of course, ultimately leads to an unprofitable department and the dealer principle losing his shirt.
I do consulting work for a dealer whose clientele fall into the low-to middle income range. This particular dealer has found a nice solution for the “I can’t pay that much” conversation. Instead of just giving in and lowering their price, they call their F&I department.
F&I in the service department? Yup, they are working with Regional Finance Lending, a company that will do small, individual loans to help pay for needed repairs. Regional Finance specializes in personal loans and focuses on the automotive vertical.
Regional Finance can help the consumer with a serious auto repair bill like a transmission or engine overhaul that can amount to thousands of dollars in repairs. After having a few chats with the regional manager, the dealer in question struck a deal that allows their service department to stop giving in to the customer and do what’s best for the business while saying, “We can help you get back on the road this summer.”
There are several national companies that offer this kind of lending, such as Spring Leaf Financial and One Main Finance. These companies specialize in small, personal loans that are geared toward short-term financing. There might be other regional companies in your area doing this type of lending, so go ask your F&I department the next time your customer winces at a repair bill. You might be surprised how they can help.
This type of personal loan is not the cheapest option for your customer, but instead of rolling over and lowering your price, give this a shot. You never know what resources people can come up with given a choice. If we don’t find a way to help them fix their unit, they may get disenfranchised with our toys and spend their money on something else.
C.R. Gittere and the Service Manager Pro team specialize in service department efficiency, elevating customer service and increasing department profitability. His monthly column focuses on best practices and unique ways to get the most out of your service department. More information about Service Manager Pro can be found at www.servicemanagerpro.com.