Last week, I was working on a project for Experian Automotive. They provided me with a list of vehicles in operation based on registration data from the states. This file allowed me to look at all the individual, state-registered powersports vehicles in the U.S. and what counties they are registered in. Most of the vehicles currently registered are model years between 2002 and 2008, with a huge drop-off in 2008. Other indicators that these model year vehicles are still on the road can be found by looking at sales from the aftermarket parts suppliers, and cylinder repair and re-plating companies.
If you have ever noticed a factory service schedule, many of them require significant amounts of work once the vehicle reaches two to four years old. Repairs like brake line flushes, brake line replacement, and bearing repacking are needed to keep a vehicle operating safely. As these vehicles age beyond this timeframe, it creates more and more of an opportunity to upsell these services and repairs.
According to the March 2013 MPN Industry Profile, 29 percent of a dealer’s sales are derived from service, and 32 percent of profit comes from service work. Most dealers noticed an uptick in service sales in 2012 versus 2011 and very few noticed a small drop. I would guess that the increase in service is related to the operating age of the units.
The largest category for number of repair orders written per month is more than 70. When I talk with dealers, the average number I find is around 100 per month during the riding season. If you review the service intervals with your customer and find one or two things to upsell, you can generate cubic dollars at the end of the season.
If your dealership writes 100 repair orders per month and you get an upsell of one hours on 40 percent of them, you will generate an extra 40 hours a month in billed labor. The national average labor rate, according to MPN’s research, is $74.60 per hour, which works out to an extra $2,984 per month in sales or $35,808 per year. The best part about these numbers is that 75 percent of the work is already done. The service writer has already checked in the unit, and the mechanic has already put the bike on a lift. These significant incremental dollars do not require huge efforts on the dealership’s end.
Most of the dealerships I work with strive to get a dollar of labor to a dollar of parts sold on every repair order. This one-to-one ratio can be important when you look at the possibility of generating an extra $35,808 per year in labor. This means that there is a real possibility to generate an extra $71,616 in sales just on the units that are already coming in your door.
Once upon a time, most dealers were selling pre-paid maintenance, and since 2008, it seems like many of them have abandoned this profit center. During the free fall of late 2008 and into 2009, dealers were barely scraping by just to keep the doors open and the lights on. If you think about it, those maintenance contracts are now expired, but you sold them on the importance of keeping their toy in prime condition. The best way you can capture this is to look at what you sold over the last 10 years to see what your top selling units were. Make sure you are stocking some of the wear and tear parts such as brakes, driveline parts, air cleaners and spark plugs. It’s important to stock some of these common service items, so when the customer comes in and you identify an upsell opportunity, you have the inventory to accommodate the sale.
If your service writer attempts to get the upsell on recommended services and the customer does not say yes, have your service writer makes notations inside your DMS. These notes should be used to send the customer an email, follow-up letter or for review when they come in for the next visit.
There are no hidden tips or tricks to generating this type of incremental business. Your sales and service team needs to be planting the seed with buyers at every visit to the dealership. Always keep in mind that having a great service department can really make the customer want to come back to your store. When customers come into your store for service, and they have to wait around, they’ll see other things like new units and accessories. Service and repair will always be the one thing that will never be an online commodity, and if you strive to make it as profitable as possible, it can be the strongest pillar in your dealership.
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.