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Tag Archive: Customer Retention

Tom Hopkins

6 Steps to Getting Referrals


The easiest lead to close is a referred lead. Unfortunately, not many automotive salespeople have mastered the art form. I’ve developed a simple, six-step process for obtaining referrals that will give you so much more success in developing your referral business that you will make it an automatic part of every selling situation.

Start with a goal of just one referral every time, and work your way up to where you know the steps so well and they flow so naturally that you’ll get at least three referrals from every client. Then, memorize these six steps to getting referrals. The better you know them, the better you’ll mine the rich lode of referrals that’s just waiting for you in your current client base.

Let’s review the steps in detail so you’ll see how to work with each one most effectively.

Step #1: Help your clients think of specific people they know

When you ask for referrals, you have to give your client a group of faces to focus on. Never say, “Who else do you know that’s looking for a car?” Instead, help them focus on a particular group of people they know.

Salesperson: Bill and Jane, you’re excited with your new vehicle, aren’t you?

Client: Oh, it’s wonderful. We can’t wait to get on the road with it!

Salesperson: So tell me, who will be the first people you tell about your new car?

Client: Well, our relatives, of course. Then, our neighbors because they’ll see it in the driveway.

Salesperson: That’s great. Are there any of your relatives or friends who might also be in the market for a new car?

By mentioning family and friends, the client focuses in on those people he is closest to and with whom he’ll be in contact that very week while his excitement over his car is still fresh.

Step #2: Write the referrals’ names down

When your clients come up with a few people who might be in the market for a vehicle, take out a small notepad and write down the names of those referrals. (Be sure to ask how to spell the names.) Keep your notes out so you can jot down the information they give you. Plus, you’ll need those notes to qualify the referrals when you contact them.

Step #3: Ask qualifying questions

Here’s some information you may want to know when you contact the referrals:

  • Where do they live?
  • Would they be adding a vehicle to the family or replacing one?
  • What did they say when you told them you were looking for a new car?

When you get in touch with the referrals, you’ll be able to begin conversations with them based on Bill and Jane’s answers to your questions.

Step #4: Ask for contact information

Asking for the addresses and phone numbers of the referrals is more difficult because your client may not know this information offhand. But don’t let that deter you. You can’t just settle for the name, because there may be several people with the same name in the area. And knowing how to contact the referral is critical.

Step #5: Ask your customer to call the referral and set up the appointment

This step is where most novice salespeople balk. They won’t even try it. But those clients who will make the call will help you comply with the Do Not Call Registry. If the referral’s name is on that list, you can’t call them without their permission. Your existing client can, at the very least, get that permission for you.

Also, keep in mind that this question is simply setting the stage for the final step in the referral-getting process. Those clients who are uncomfortable calling for you will be so relieved that you offer them Step #6 that they’ll jump on it. If you had gone directly from Step #4 to Step #6, you may not have gotten the same response.

There is a method to my madness here. Here’s how it works.

Salesperson: Thanks so much for the referrals, Bill and Jane. You know, since I won’t get to see your excitement when you show off your new car, would you mind calling Don and Mary now and sharing your good news with them? Then I can work on arranging a time to talk with them.

If your clients are fine with that, then great! Start dialing. But if they hesitate and act uncomfortable, take the pressure off immediately by moving on to the next step.

Step #6: Ask to use the client’s name when you make contact with the referral

Your clients may not know the referral all that well, or they may feel uncomfortable making the call. If this is the case, let them know you understand their hesitation, but ask if you could bother them for one more favor. Ask for permission to use their names when you contact the people they referred you to. They’ll be so relieved to be let off the hot-seat, they’ll be more than happy to give you permission to use their names.

It may take you a few tries to get this pattern down to where it flows naturally. However, you’ll make it a natural part of every contact once you see the phenomenal results it generates. Many of my students have gone from getting one or two referrals to getting five referrals from every client. Don’t you think it’s worth a try?


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Steve Hall

Customer Retention in the Service Department (Part Two)

This is the second installment in a two-part series by Steve Hall. To read Part One, click here

Service Advisor 2

This is the second installment in a two-part series by Steve Hall. To read Part One, click here

Now that you understand the importance of custom retention, the next logical question is how do you capitalize on these opportunities? The most common way has been express service. It is probably the single largest retention tool we have available.

Express service is a business we know we need to be in. If we don’t offer, and actively pursue this work, our customers can and will go to the aftermarket competitors. For the most part, we aren’t losing our customers to other dealers, but rather to Jiffy Lube, Goodyear, Pep Boys, Meineke and independent shops. It’s not uncommon for a metro dealership to have a couple hundred of these types of shops within a five mile radius of their dealership. This makes the competition fierce.

The advantage we have, as dealerships, is all of the customers start as ours. Let’s think about this. Every vehicle that is on the road was originally sold by a dealership. It was what we did after that point that allowed us to either retain or lose that customer. In an effort to retain more of these customers, express service became a battle cry.

The Advent of Express Service

Virtually every manufacturer and most dealerships started some sort of express service system. The problem with this was twofold.

The first problem is, because the state of the industry a few years ago, dealers had to accelerate their implementation of express service to try and get more customers, immediately. As vehicle sales plummeted, and due to better quality of vehicles being produced, warranty work continued to decline. Virtually overnight, industry contraction had mandated that we must fight for every customer we have. The years of continual industry growth and a strong economy had ended; a true focus on retention had begun, and thus express service became a mainstay.

This happened so fast that the dealer body didn’t have a chance to really learn how to implement a profitable express service program.  We didn’t have time to start by learning to crawl, then walk, then learning to run. Instead we had to start running immediately, and this caused many to stumble.

The second problem was that the automotive business was so tough, we got really focused on metrics. Unfortunately, traditional service metrics and express service don’t correlate well together; they don’t truly relate how the business is doing. The very acts of becoming more price competitive and pursuing more oil changes and light maintenance work, negatively effects metrics like: hours per repair order, effective labor rate, and gross profit margin. Though there are ways to negate this downward pressure, most dealers didn’t have the time, forethought and information to understand or implement the solutions.

When we start to focus on express service and drive a higher number of low mileage vehicles or light maintenance vehicles to us, these are the circumstances that commonly occur. Drops in hours per repair order and effective labor rate start the cycle of stress and the conversations of “What is happening to our business? Why are our numbers falling?” This is the common. How we react to this can make or break our retention goals.

Doesn’t every vehicle eventually wear out or break down?

Tires, brakes, batteries, air filters, wheel bearing, cv boots, transmissions, head gaskets… the list of items that wear out or break goes on and on. If we have done a great job of retaining our customers, we will get the repair work and that will help keep our overall mix healthy.

It seems many times we take the short term view and give up just before things get good for us. But how do we avoid this? If we follow our processes, give great service, present the items needed, develop a great relationship with the client and know that even if they don’t buy today, we will be the one they contact when the car won’t start, or the tire finally blows out, or the brake squeal gets so bad they must have it repaired. They will do this because we have the relationship with them and we have earned their trust. At that point we are their “go to” place and they are still ours to lose.

Even if the customer decides not to repair anything, they WILL need another vehicle, so keep this in mind. Never forget the CNW Marketing Research study that we talked about earlier. Remember the key results: 86% of regular servicing customers that you originally sold will become repeat vehicle buyers. Yet, it falls all the way down to only 8% of customers you originally sold will become repeat buyers if they never service their vehicle with you.

You can easily see that once we do a great job with retention, by utilizing express service as a retention tool, we will be able to grow not only our service department but also our complete dealership for the long term. Utilizing better metrics will allow you to do that with less stress and more understanding of the real picture of what it takes to build your business.

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Steve Hall

Customer Retention in the Service Department (Part One)


Is YOUR service department’s overall gross profit growing year-over-year? The automotive industry as a whole has been in a growth mode for the last five years.  Unfortunately, too often we want to continue to look back and blame the financial meltdown of 2008-2009 for what we are doing today. Although that did take a hard toll on us, currently we are actually in a good place going forward in the service department.

Since new vehicle sales have been on a steady rise for the last five years, the number of vehicles that are less than six years old coming into our service departments have continued to increase. These vehicles are our core target vehicles and allow us our highest retention possibility. So the question remains, is YOUR service department steadily growing year-over-year?

Looking at the big picture, we are able to see the overall industry growth pattern, but let’s take this a step further. The next question is what does YOUR retention look like? I’m going to quantify what I mean by retention. In my opinion, the definition of what a retained customer is varies depending on your manufacturer’s service interval. For instance, if your manufacturer recommended maintenance interval is 5,000 miles, then I would want to see two customer paid visits, per year, to be considered a retained customer. If your manufacturer recommended maintenance interval is 12,000 miles then I would consider one customer paid visit per year a retained customer. Looking at it this way, you will be able to find a figure that correlates with YOUR brand.

Why is this so important? I’m going to give you two thoughts on this; both are critical to the growth of a dealership.

Future Sales and Service Loyalty

The first reason I’m going to share is sales based. CNW Marketing Research studied owners of General Motors vehicles and correlated future sales with service loyalty. Here were their results:

  • Customers who regularly serviced their vehicles at the selling dealership became repeat vehicle buyers 86% of the time
  • Customers that occasionally service their vehicles at the selling dealership became repeat buyers 46% of the time
  • Customers who seldom serviced their vehicles at the selling dealership became repeat buyers 18% of the time
  • Customers that never serviced their vehicles at the selling dealership became repeat vehicle buyers only 8% of the time

Those numbers are just staggering. As we have just seen, service retention absolutely drives repeat dealer vehicle sales. And vehicle sales are a great long term by-product of service retention.

A Focus on Retention Leads to Total Dealership Growth

Now let’s look at the second reason that retention is so critical. It’s the immediate gratification that comes from increased service and parts gross profit. These two components make it so that if you are truly focused on retention, it will feed the whole dealership, both in the short term and long term.

Think about it this way, a retained service customer creates service and parts gross profit, they are more likely to repurchase from the same dealership and when they do, you will more than likely get the trade in. Over time, this helps every department within your dealership! So, if we know the “pie” or market is growing, and we know that increased service retention gives us an even larger slice of that larger “pie,” we start to see a positive pattern of current opportunity within our fixed operations.

Stay tuned for Part Two to learn how to capitalize on these opportunities. Subscribe to the Up to Speed blog to get our best practice articles sent directly to your inbox! 

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Jeff Cowan

How Service Appointments and Reservations Destroy Customer Retention, Survey Scores and Upsells


In my workshops I always like to have plenty of Q & A time so that I can address the real concerns that Service Advisors believe keep them performing at their highest level. One concern that never fails to be mentioned revolves around the issue of service appointments and reservations.

Typically, when your Business Development Center (BDC) or your Service Advisor sets your customer up with an appointment or reservation, the customer assumes it means the same thing as it does at a restaurant: when they arrive at the given time, their seat will be ready with no waiting. And just as when they make airline reservations, they expect to be on the plane backing up from the gate at that reserved or appointed time. When you set up a reservation or an appointment for your customer, they have been trained by business in general to believe that the work will begin at the appointment time. No matter how many times or how well you try to explain to your customers what is really going to happen upon arrival, the mere usage of the words “reservation” or “appointment” reinforce their belief that the work will begin at the exact time of the reservation.

This is a serious problem.

According to what I hear from your Service Advisors, and based on what we witness when providing our training on your service drive, three fourths of the customers your service staff work with everyday have this misunderstanding at the initial write up. As your Service Advisors try to explain that the time set for the appointment was for the purpose of gathering information, the exchange with the customer quickly turns into an argument. Therefore the write up and the relationship began with an argument. An argument that your staff can’t win; an argument that takes about six minutes to resolve; an argument that only gets the customer thinking that what they were told was just a ploy to get them in; and an argument that sets the mindset that you don’t do what you promise. Anytime you start out a relationship like this, you put yourself at a big disadvantage toward accomplishing the goals of customer retention, high survey scores and the chance to acquire any necessary up sells.

The simple and easy solution to stopping this and turning it around is as simple as implementing the following two steps.

Step 1: In service, never use the words “appointment” or “reservation” again. Not verbally. Not on signs. Not in print. Not online. Not anywhere. Appointment and reservation times imply an exact time that an event is going to begin. Check-in time implies that waiting will be involved. For instance, when you go to the airport you are encouraged to arrive two hours prior to check-in. Once you check-in, the next step is to wait for the reservation time when you will board the plane and take off.

From now on, you are going to start scheduling “check-in” times for your service customers so that after they check-in, they will wait for the appointed time set by the Service Advisor after they have had a chance to talk with the customer in person about their needs. In the customer’s mind, appointment and reservation times indicate that the event will commence at that specific time. Check-in time however, precedes an appointment time. In the customers mind, check-in time refers to a preliminary period designated for the collection of information. After the information is given, an exact time for work to begin can be determined. Check in time and its implications are familiar to customers.

Step 2: Now that we have replaced the words “appointment” and “reservation” with “check-in” time, the following word tracks are how you are going to explain check-in times and stop the arguments forever.

Word track one is to be said by your BDC or by the person scheduling the check-in time:

“Now that we have established your check-in time for 9:00am tomorrow, allow me to take a minute to explain to you what that means and what will happen once you arrive. First, you will want to arrive as close to your check-in time as possible. Getting here early means you will have to wait and getting here late could result in you losing your place in line. Once you do arrive, your Factory-Trained Service Advisor will be ready with all of the information you just gave me.

During the first part of the check-in process they will go over all of this information to ensure that I wrote everything down correctly, to make sure they understand what your concerns are and to see if anything needs to be added to your list.

The second step in the check-in process is when you and your Factory-Trained Service Advisor will walk around your vehicle to collect numbers off your vehicle and do a quick visual inspection.

The third part of the check-in process is when it will be determined which department and which Factory-Trained Technician will be the one best suited to diagnose and repair your vehicle. That decision will be based on what you and your Factory-Trained Service Advisor discussed and saw during the earlier part of the check-in process.

Once that is determined we will then look at the schedule for that department and Factory-Trained Technician and that will determine approximately when your vehicle will enter our state of the art shop.”

By using this one minute long word track, I have fully explained to the customer exactly what to expect when they arrive, exactly what happens if they are early or late, and exactly what will happen and why. I have explained that the check-in time does not mean reservation or appointment. I have explained and prepared them to wait. Once they arrive prepared, the Service Advisor has two word tracks to deliver:

“Thank you for arriving on time to get your vehicle checked- in. Now that you are here let me explain to you what we will be doing to get your vehicle checked-in. First, I will be going over all of the information you gave us on the telephone to ensure that it was written down correctly, to ensure that I understand your concerns, and to add anything that needs to be added.

Once that is done, we will both walk around your vehicle to collect some numbers off of it and to do a quick visual inspection. Based on what we discuss and what we see during the visual inspection, we will select the department and or Factory-Trained Technician that will be best suited to address your concerns today. Once that is determined, we will take a look at their schedule which will dictate approximately when your vehicle will enter our state-of-the-art Service Department.”

After the Service Advisor completes everything as they said they would, they follow with this final check-in time word track:

“Now that we have reviewed all of your original concerns and have completed our visual inspection, I believe the department/ Factory-Trained Technician that would be best to diagnose and repair your vehicle would be ____. Right now they are working on another customer’s vehicle, so it is likely your vehicle will be entering our state of the art facility at approximately _____. Let’s give them about one hour to an hour and a half to complete your diagnosis, meaning you can expect a telephone call from me between ____ and ____ with an update on the status and findings regarding your vehicle. Fair enough?”

By using these two word tracks, which combined take one minute to deliver, you have done the following:

  1. You have started the relationship on an up note and not with an argument.
  2. You have done everything to the letter that your BDC told them you were going to do.
  3. You have established the reality that when you say something is going to happen, it is going to happen. They can count on you.
  4. You have saved about four minutes at the write-up by being in control of your customer and the write-up itself.
  5. You have slowed the customer down giving yourself more time to build rapport and inspect their vehicle which will substantially impact customer retention, survey scores and your ability to get necessary upsells.
  6. The customer has been educated that speed is not the most important thing in getting their vehicle repaired.

It’s really that easy.

By changing your verbiage from appointment or reservation to check-in time and by delivering these three, simple word tracks, you will experience immediate impact and the arguing will end forever. I have always felt the best way to win an argument is to eliminate all possibility of an argument arising. You can always tell a great Service Advisor by the number of scars they have on their tongues from years of biting back argumentative words. The solution I have presented here will do two things; stop the arguments before they start and save your Service Advisors from acquiring unnecessary scars.


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Tom Hopkins

Avoid Awkward Beginnings


When you meet someone for the first time in your dealership, your goal is three-fold. You want to get them to:

  1. Like you
  2. Trust you
  3. Want to listen to you

Those three elements are absolutely necessary in order for them to make a buying decision.

If they came in after calling and speaking with you, it’s likely you said the right things on the phone to get them to at least come in and see what you have available in both vehicles and terms. You’re starting out on the right foot here. They’ll be curious to learn more. That means they’ll be listening to you.

However, their curiosity will only take them so far. Once they’ve gotten the basic idea of what you have to offer, they’ll need to like and trust you enough to want to do business with you, rather than taking their newfound knowledge to another dealership to see what might be different or better there.

To help people to like you, you must be likable.

That’s pretty simple. Develop the traits you admire in someone you deem as being likable. These could be something as simple as having a relaxed manner. Understanding and using some of the more formal courtesies is also helpful. This includes introducing yourself with both your first and last name. Use the clients’ last names, ie. Mr. Smith, Ms. Jones. Then, ask for permission to use their first names.

Use their names a few times during your initial conversation.

I recommend this for two reasons. First, it will make them feel important. Second, it will help you remember their names. There’s little that’s more uncomfortable than making it to the paperwork stage of a sale and having to ask again what the buyers’ names are.

Another way to be likable is simply to smile.

This may seem obvious, but if your mind is on a personal matter or if you’re worried about meeting your quota this month, it’ll show in your face. Your face muscles will tense up. You won’t be smiling and the prospective clients will likely see dollar signs in your eyes. To avoid that situation, really look at your clients (don’t stare them down) and smile. You’ll be focused on them. Anything else that’s been on your mind will be forced away for the time being.

To begin building trust, establish common ground.

Seek areas of common ground by asking questions about the situation that has brought them in to see you. You need to determine their needs without coming across as if you’re interrogating them.

It happens plenty of times that a young couple will come in looking for a mini-van, but fall in love with an SUV. Someone else might come in seeking the same kind of vehicle they’ve driven for 15 years, even though their driving needs have changed. You could easily help them see the advantages of a different type of vehicle when you ask questions about their needs.

It won’t hurt, if in conversation, you are able to tell them about a situation with another client they may be familiar with (maybe a friend who referred them to you) where you demonstrated dependability. Be careful not to sound like you’re bragging. Use the term “we” as in “we, the company” when relaying information about other situations. That way, if they’re even the least bit shaky in their opinion of you, they’ll build faith in the fact that the company stands behind their promises.

Look and listen for ideas of what’s important to each client beyond their interest or need for a vehicle. If you don’t see or hear anything that you would feel comfortable asking about, don’t become anxious. You don’t want to create an awkward situation by looking like you’re struggling to come up with a subject. Avoid the weather unless there’s some unusual weather phenomenon occurring. It’s just too trite.

Train yourself to keep in mind: like me, trust me, want to listen to me when approaching every prospective client and you’ll soon find yourself doing the things you need to do to win them over.


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Russell Grant

Why Your Best Conquest Sale Isn’t a New Customer

magnetOver the past 20 years, one of the most common questions I get from dealers is: “What can you do to get me some conquest business?” My response is, “Why is that so important to you?” And they usually respond by saying they need new business to grow their business. Their statement is true, but that approach is also much more expensive per vehicle sold—and the grosses are usually lower. My point is that if a dealer just wants incremental business because they want to grow their business; they’re missing out by not focusing on customers who are lost or inactive.

The Sales Department sells the first car; the Service Department sells vehicles two through ten.

Your lost and inactive customers must become a vital part of any owner marketing strategy or customer retention plan. What is your dealership’s strategy and do you have a plan? Most dealerships have touch points with service customers while they are active, but not with lost customers. And if the dealers do reach out to lost customers, they use techniques similar to those for their active customers. The problem is, you can’t approach lost customers with the same plan you used when they were active customers and expect the same results.

There’s a reason customers are inactive or lost.

Most customers become inactive and defect at the point the warranty expires. They leave because, in most cases, the value proposition from an independent is more appealing to them. This is usually a perception issue, because quite often, dealers have very competitive pricing, are just as convenient, employ factory-trained technicians, and use genuine parts.

Do you have a value proposition?

Dealers need to address the value proposition with customers to make sure they understand the difference between what an independent offers and what the dealership offers. In order to do this, you need a marketing strategy that communicates this effectively using three important techniques:

  1. Identify the best customers to target. Defining an inactive customer will not be effective by just segmenting your data. You can’t just target customers who have not been to your dealership in 12 months. Every customer has different driving habits, so a customer who drives 7,500 miles per year may still be active, while a customer who drives 30,000 miles per year may have become inactive six months ago.
  2. Employ multi-channel marketing. The customers you’re targeting are important—so contact them in multiple ways. Consider social, email, mail, digital and mobile techniques with your offer.
  3. Provide multiple ways to respond. Your marketing strategy must make it easy to respond—building microsites for each customer is an excellent way to do this.

Make it an event.

After identifying which customers to target, invite them to a service clinic that includes a free inspection of their vehicle. The goal isn’t to just get the RO, but to keep the customer coming back. To do that, you need to sell your value proposition to the customer. And if you’re successful, then not only will they keep servicing, but they will buy their next vehicle from you. In fact, customers are six times more likely to replace their vehicle at the same dealership if they’re an active service customer. It’s why I say your best conquest sale isn’t a new customer, it’s the one you’ve already had and lost. And that’s why it’s so important you develop a multi-channel owner marketing strategy to win them back. service_mgmt

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Lycia Jedlicki

What’s the Secret of a Well-Defined Second Chance Process?

callWhat would happen if we treated the service department more like the new and used car departments? Why do we think the customers should be treated differently? Maybe because “it’s just the BACKEND”!

Think about this: If someone doesn’t purchase the vehicle they came in to see and test drive, how fast are we calling that customer back trying to get them to return and buy? What about the customer on the service drive; do we call and ask for that sale again if they declined a repair while they were in our service department?

Service departments that have a well-defined second chance process claim they are getting as much as 60% of their customers back to do the repair.

What do I mean by a “Well-Defined Second Chance Process”? It’s just this simple:

A telephone call to the customer the next day from someone other than the original service advisor.

It could sound something like this: “Hi, this is Samantha from ABC Motors and I was calling to thank you for your visit to our service department yesterday. Was everything satisfactory? By the way, I noticed that we recommended new brakes while you were here, was there a particular reason you decided not to have the repair done?” The customer could give us a multitude of reasons for not having the repair done such as, “I didn’t have time,” “I don’t have the money,” “I needed to discuss it with someone else,” “It was too expensive,” or my favorite, “My advisor didn’t tell me I needed brakes!”

Now we know why the customer decided not to have the repair done and we can take the necessary steps to get the customer back. It is important to have someone other than the original service advisor ask for the sale again, just as we do a turnover in the sales department.

Many dealers think sending out an email two weeks or 30 days later with a discount is the answer, but I ask you this question: Would you wait two weeks or a month to ask that customer to come back in and buy the vehicle they were looking at? I’m pretty sure this would not be acceptable at anyone’s dealership, so why is it acceptable in our service departments?

Do what you do in the sales department — make the call. Ask for that business again, and you could get back as much as 60% of those customers.


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Lycia Jedlicki

Two Simple Steps to Customer “Royalty”

crownWhen are we going to start treating the pre-owned vehicle customer like royalty instead of the “red-headed step child”?

When a customer takes delivery of a new vehicle, we try to make sure we do everything possible to ensure they come back to our service department (at least for the first visit). We may do this by giving them their first service free or scheduling their first service appointment. Why do we do this? Hopefully because we want to retain that customer and not just to keep the manufacturer happy!

What would happen if we treated ALL of our pre-owned vehicle customers like new vehicle customers, not just our certified pre-owed, but every pre-owned we retailed?

I have a dealer in one of my NCM 20 Groups that did just that! Guess what happened? Her service department gross profit increased 69% (yes, she was already profitable). Her customer pay repair orders increased 8.9% and her customer pay hours increased 42%.

What did she do differently?

  1. On every pre-owned vehicle sold, a one-year, 15,000-mile maintenance package was included ‒ the only exclusions were luxury high-end vehicles ‒ there were no mileage or age limitations.
  2. They also slowed their process down so the service advisor actually had time to build a relationship with a customer and had time to sell.

According to DMEautomotive Research increasing service intervals have cost the average dealership $91,000 in annual revenue, so why not retain the customer we already have? This includes servicing all makes and models; after all, you don’t want them getting treated better by your competitor do you?

The pre-owned vehicle customer (owner) is one we already have; wouldn’t it make more sense to try to retain them instead of spending money to try to find a new customer? Try giving them the royal treatment then watch your metrics for loyal soar!

UV Training


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Jeremy Anwyl

What Drives Great Success?

surefire-pathway-to-increased-profitsI have been doing lots of flying recently. The travelling is rarely fun, but the meetings I have been having with dealers usually are. You’d think that dealers would be pretty happy these days, and that generally is the case. Sales are looking good and the dealer count is down — seems a surefire pathway to increased profits.

Despite this, there are some conversations that take a different turn. Sometimes, a dealer is focused on increased regulation, competitive discounting, bullying from manufacturers, (think stair-steps and facility mandates), employee turnover — the list can be lengthy. Meeting with these dealers can leave me drained. But then I run across a dealer who is completely different. These meetings can run all day, but feel like they lasted an hour. The dealers tend to be optimistic and thoughtful. Most interestingly, these dealers have what I call an “itch.”

They acknowledge the competitive pressures all dealers face. Despite all these, they are successful, but still not satisfied. Their “itch” drives them to try new things, push different boundaries; not in the simple pursuit of profit, but to find a way of doing business that is dramatically better.

I have been thinking along these lines for the better part of my career as well—so we have lots to talk about. What anchors these talks is the opportunity articulated in my last post where I noted there are a few dealers around the country whose performance is head and shoulders above what we would normally consider successful. These stores draw from very larger geographic areas. They are stable. And perhaps the biggest twist is that their gross profits are higher than average. (Proving that really high volume doesn’t have to mean low—or no—profit.)

Very simply, the opportunity is for more “typical” stores to achieve this heightened level of success. And with the opportunity being so huge, the wonder is that every dealer is not working to achieve it — especially when we realize that what these stores are doing is actually not that hard to figure out.

It is really only three things:

First, the dealers have identified the things that a large number of consumers really, really value when buying a vehicle. We covered some of these in my first post; things like efficiency and respect for their time. A feeling of confidence that the dealership’s pricing is fair. A dealership point of contact who has the customer’s “back.” (Someone the customer feels they can trust.)

Second, the dealers have developed processes that consistently deliver on these features. Consistency is the key; meaning that these experiences are delivered every day, to every customer.

Thirdly, the dealership efficiently communicates to the marketplace to build demand and expectations around the aforementioned experience.

A big part of what I am describing is really the building of a brand — at least in the way I think about brands. Valuable brands are built from a set of expectations, or promises about a product. They are also trusted or credible, meaning there is little doubt the expectation will be met. While brands can be influenced through advertising, by far the best way to build a brand is through word of mouth.

These three steps to success are easy enough for me to write about, but I have to also acknowledge they are devilishly tricky to implement. They start out easily enough — understanding what consumers value is no mystery. (Dealers can simply ask their customers, or look at the decades of research in this area.) And it is not that hard to design an experience that responds to these needs. It is the consistency part where things start to get tricky. Sticking to a process is not something most dealerships are good at. Salespeople like to do business in their own way. Turnover also undermines consistency. Perhaps the biggest obstacle is the pressure to hit a number that encourages managers to stretch for a deal that really should have been passed on.

Think about that one for a minute — passing on a deal is really, really hard. But sometimes it is the right thing to do; first, because of the need to deliver the same experience to every customer, with no exceptions. Second, if the dealership did its homework when designing their consumer experience, it will be highly valued by many consumers, but probably not work for some others. You’ve heard the expression “You can’t be all things to all people.” As it relates to branding, you shouldn’t even try. For example, let’s say you have designed a sales experience around fair prices and an expedited sales process. This might be valued by 80% of the market, but the 15%-20% of the market who obsess only about the “deal” will not be impressed. Instead of undermining your credibility with the 80%, why not leave the deal-obsessed to your competition?

Today’s super-successful stores developed their versions of this road map long ago and have followed them for years. When the market was tough, it was not viewed as cause to change. The big payoff for this commitment would have been an ever increasing rate of referral business. Prospects became customers, who shared the experience with their friends, who in turn became prospects then customers and the cycle continued. Referrals are the underpinning of a profitable store and the only real way to build a business, but they build out over decades.

Who has that kind of patience?

This is probably the single biggest barrier that blocks dealers who want to see dramatic performance gains: The cycle time. The stores I have been referring to that are already at this level have been at it for decades and they have achieved referral levels that can exceed 80%. (Think about that for a moment. It is a huge number.)

But before you dismiss super levels of success as practically unobtainable, let me offer up a ray of hope…

I just covered an example of how referrals used to play out; one customer sharing with one or two friends where perhaps one of those friends would remember and visit the store at some point in the future. Until just recently, this was the norm. We all had fairly well defined peer groups. Today the Internet — especially social media — has blown those traditional boundaries apart. Communications are no longer one-to-one, but one-to-many. This raises the possibility that the cycle time that dealers had to endure in the past can today be radically shorter.

This could be a big deal — and we will look into it more in my next post.


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Garry House

Is Front Gross $PVR Still a Relevant Metric?

fotolia_45887292_m_salesman on the phone-thumb_One of our “poster” clients—with super market penetration, great customer retention, strong gross profit production, and excellent net-to-gross retention—doesn’t believe in focusing on front $PVR, at least in his new vehicle department. In fact, his business model is based on $-0- new vehicle “total front gross profit.” But please also understand the following:

  • The New Vehicle Net F&I Income (back gross) is approaching $1,400 PNVR
  • This is a GM dealer, and therefore eligible to receive quarterly EBE and SFE incentives (reported in Net Additions to Income)
  • This dealer is privileged to do business in a state that permits a reasonable Doc. Fee (approximately $400.00 PVR reported in Net Additions to Income)
  • The dealer believes that the best source for pre-owned inventory is through trades on new vehicles…and the trade ratio on new vehicles exceeds 65%
  • This dealer is passionately focused on service retention; once the dealership acquires a new owner, there is a very high expectation of retained service business, repeat vehicle business, and referral business

Is this dealer’s new vehicle business model flawed? Obviously not, because the store is extremely profitable and is highly regarded within its franchise group.

Last week I was in the Northeast working with a long term dealer-client who owns and operates a lot of dealership locations. Somehow one of our discussions became focused on used vehicle front $PVR. Allow me to recreate the conversation to illustrate a point.

In reviewing the financials for one of his stores, it appeared his front $PVR was too high, so I said, “I don’t believe you’re maximizing your retail volume, your overall department gross, your inventory turn rate, or your departmental ROI.” He looked at me cross-eyed! “Let’s take a look at your used vehicle pricing, compared to other dealers within the market,” I continued. “Let’s see what that tells us!” So, using his inventory optimization (and market pricing) technology, we sampled the pricing on more than 50% of that store’s retail used vehicle inventory. Guess what? The average retail price on those vehicles examined was 105% – 110% above the market average. I then asked him, “If you reduced your pricing to 100% (or slightly below) of market average, don’t you think the phone would ring (and the door would swing) more frequently and you’d sell more used vehicles?”

“Sure, but then my front $PVR would suffer, probably by as much as $500,” he answered.

“Maybe, and maybe not,” I offered. “But think about the BIG picture! You’re currently selling 70 used units per month, at an All-In Gross (front, back, and Doc. Fee) of $3,000 per unit, for a total department gross of $210,000. Wouldn’t you be better off selling 100 retail used units per month (and achieving nearly a 1-to-1 used-to-new ratio) at $2,500 All-In Gross? And as a further eye-opener, just envision what those additional 30 retail units per month would do for your service department, both in reconditioning gross and future customer-paid gross!”

“But also think about this,” I followed up. “If you adopt a value selling strategy and then manage and measure your Price-to-Sale Gap, your front $PVR should not suffer significantly. However, this will require a culture shift within your vehicle sales department.”

I then explained value selling and Price-to-Sale Gap (which will be the subject of an upcoming Up to Speed article).

So for the last time I ask, should Front Gross $PVR continue to be regarded as a relevant metric, or should we be more focused on total department gross, or maybe more importantly, total dealership gross?

NCMi offers numerous management training opportunities that focus on alternative strategies for maximizing dealership gross profit and return on investment, including “How to Make the Phone Ring and the Door Swing in YOUR Used Vehicle Department” coming to San Diego next month. To learn more, call Brandiss, Kara, or Cassie at 866.756.2620 or click the link below for details.

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