I’ve heard about an in-store promotion called "Pre-Paid Installation" or PPI. What can you tell me about this program?
The answer this month is provided by Best Operators Club member Curtis Sloan. Curtis is vice president of Sloan’s Motorcycle & ATV Supercenter in Murfreesboro, Tennessee.
Curtis, from what I understand, you actually created this PPI program. What is it, and how did you get the idea for this?
Quite simply, we offer selected accessories or parts priced in a package that includes installation. The idea actually came to me while I was waiting for my lunch at a McDonald’s drive-through. I had already paid for my food, and for some reason, there was a delay at the pick-up window. I was getting frustrated sitting there in line, but I wasn’t going to pull away because I had already paid for my food.
This started me thinking about the customers who come in to our store, buy parts or accessories, and just walk out the door. Some of them are going to attempt to install the parts themselves, while others will end up going to competitors or independents. If we included the installation with the price of the parts, we could keep them in our store.
So, one benefit is that you are capturing additional service labor sales for installs. You are also reducing the chance of your customers going to your competitors. Are there some additional benefits to developing this type of program?
Yes, another benefit was that we reduced the complaints and returns related to parts not fitting the units. Customers are not always accurate about the year and model they have when they purchase their parts or accessories. There is also a small percentage of customers who do not use the pre-paid installation. They wreck their bike or sell it, or some other circumstance comes up. This provides a bit of additional profit. However, this is certainly not the reason for implementing the program.
In many ways this is like pre-paid maintenance. It ties the customer to your service department. This is the biggest benefit.
Curtis Sloan, VP of Sloan’s Motorcycle & ATV Supercenter.
How hard is it to sell this to your customers?
Customers like the program because it simplifies the process. They don’t have to purchase something at the parts counter and then go back to the service department to set up an appointment for the install. They know the total cost up front, and they only have one payment to make. It is really just another form of menu selling.
What types of items do you incorporate into this program?
Tires are our biggest seller for pre-paid installation. This has helped us compete with some of the aftermarket stores. They can buy the tire from us including installation, and they know that we will do the job right and do it while they wait. Additional popular items include performance kits, pipes, touring luggage and windshields.
Do you have to implement any special procedures in the service department?
In order to make the program really work, you need to have your service department set up to install many of these items on short notice. Some customers will want it done while they wait. If you can’t meet their expectations, you will lose a significant portion of this business. Other customers will pay for the install to be done at a later date.
Okay, now for the hard part. I would think this would be an accounting nightmare. How do you handle the details in your computer system?
Actually, it is not that hard. Here is a list of the steps you will need to take.
How To Create Your Prepaid Installation Program:
- Create a Sales Category called "PPI" in your DMS. You’ll need this for ease-of-reporting purposes.
- Create an accounts receivable customer called "Pre-paid Maintenance" with a $25,000 open-account credit limit.
- Create your own range of part numbers, so parts agents can sell PPI on a parts invoice. We have 19 pre-set numbers and one general-purpose number.
- Create an account number suitable for your liabilities section of your balance sheet.
- Develop a menu of parts and accessories packages … and sell!
- When customer comes to your service department to have the work performed, open an R/O in the customer’s name so you’ll have a service history.
- When the work is completed, A/R-charge the appropriate amount to your PPI account.
- At end-of-month, run an A/R customer history report for your PPI A/R "customer" as well.
- Make a journal entry crediting the liability account for the total sold.
- Make another entry debiting the account for redemption activity.
Indeed! Curtis, this program is a real winner. You capture more service business while increasing both customer retention and customer satisfaction. Thanks for sharing this with us.