Tuesday, January 13, 2009

Service Retention from a Dealer Perspective – Jay Cremins

(With half of his 28-year automotive career in retail, Jay Cremins has been with Carlisle & Company for the past seven years. He focuses on dealer issues – in fact, he spends 100 days each year directly with dealers in training and teaching forums. Last year, Jay facilitated the Terms and Conditions session at our Parts Conference and the Dealer Employee Retention session at our Service Forum.)

In last week’s Crystal Ball, we wrote: “We need to use this recession for adding clarity and critical examination.” To a dealer (Oldsmobile is in my distant past), nothing clarifies more than a Friday morning when the cash in bank is less than the total of the payroll checks waiting for your signature. Welcome to our world.

Who will survive? I don’t know. How to survive is the real question. There’s an old joke that goes: “How do you avoid being eaten by lions? Run faster than everyone else.” In your world, this means running faster than your aftermarket and aftersales competitors. It means that we, a partnership between THE FACTORY and the dealer, must stanch the Service Retention hemorrhaging. In the short term (and the long term for that matter) The Answer (apologies to Allen Iverson) is Service Retention.

What?! We’re talking about Service Retention … Service Retention … not the game … not the game … Service Retention … What are we talking about?????? Service Retention? (apologies again to Mr. Iverson – and for those unfamiliar with this reference: http://www.youtube.com/watch?v=frsId3goYYE).Most dealers have no idea that Parts & Service are as important to you as it is to them. I didn’t. At a 1998 dinner with other dealers, I was stunned to hear this exchange.

Dealer: “Well, another record year selling Hondas. I bet Honda made a ton.”
Koichi Amemiya (President, American Honda): “Yes, part sales were very good.”
Talk about clarity. In the middle of a two decade run of consecutive record annual new vehicle sales, Mr. Amemiya was talking about the core, the money maker – Parts (and Service).

While I knew we dealer folks survived on Parts & Service (according to NADA, it has been two decades since dealers made money in New Vehicle Sales without F&I), I didn’t know it was important to THE FACTORY. Well, I have an excuse. Like Mr. Iverson, I was younger.

Recall, from paragraph one, the “critical examination” comment. People in pain make bad decisions. The trick in a cash flow crunch is not deciding where to cut budget; it is deciding where to invest your thimble-sized remnants. According to several dealer friends of mine, the best investment for THE FACTORY is a Service Retention partnership with your dealers. Why?

Help me … help you. If dealers capture more sales customers for service, we both win. When I was preparing to write this blog from a “dealer perspective,” I chatted with several current dealer friends to confirm my thinking. They all agreed, just like you would, that Service Retention is critical to success – now and later – so we won’t spend time on that point. Instead, let’s talk about how. Below you will find two ways, from a dealer perspective, that you can help me … help you. They are “Bust the Price Myth” and “Send the Cavalry”.

Bust the Price Myth

Ask a dealer at random how THE FACTORY tries to influence Service Retention and, generally, the answer is “advertising convenience – hours, etc.” Great start … but not enough; the 800 pound gorilla in the room is named Price.

We discussed the “Dealer’s Price is Higher” myth last week. Mission 1 is to bust this myth. Dealers can do this at the micro, dealership, level. THE FACTORY has to do it at the macro level.

Del Mugford (Dealer Principal, Royal Chevrolet; Richmond, Virginia) agreed when I talked to him today.

“The perception is that we are overpriced. So, we now show a flat fee rather than just a formula (.X hours at $Y per hour + $Z for parts). Our service customer sees $37 on the invoice and they think our quick service is competitive.”Eddie Lee (Dealer Principal, Lewisville Volkswagen; Lewisville, Texas) also agreed.

“We continually fight price perception.” Eddie, like Del, strategically places service price boards in the service drive, waiting lounge, and showroom. While Eddie does not include competitor prices in comparison, Del does.

On a macro level, dealers do not have the reach to convey the Price Myth-busting message and local dealer ad associations do not have the depth to figure this out; however, you do. Navigating the legal shoals will require a lot of coordination, but it can, must, be done.

Del and Eddie suggested, independently, that every service communication you send our mutual customers (all service reminders, payment due alerts, satisfaction surveys, etc.) include a Price Myth-busting message. The dealer provides the numbers. You provide the forum. Could this be the seed of one workable idea?

Whatever the range of potential solutions, we have to do something quickly – remember that we (dealers) also want to avoid being eaten by the lions. You have to help me … help you.

Send the Cavalry

Dealers, like pioneers in the old west, like the feeling that they are out on the prairie by themselves. No pioneer, though, minds seeing the dust from a company of Cavalry coming down the trail when trouble is a’brewing. In the current environment, it sure would be nice to see THE FACTORY pull into the drive. But, where are they? Well, the Cavalry is back at the Fort due to travel restrictions. We understand the need for saving money – especially when there isn’t any – but can we compromise?

Pick the dealers you really want to survive (you know the ones) and send in the Cavalry. Keep all the “box checkers” (you know the ones) at the Fort and send out those really top drawer people (you know the ones) who can help me … help you.

Acura is sending out Zone Managers (two levels higher than “the rep”) to conduct Dealer Business Plan sessions with select dealers. The objective is to identify the couple of things we (the dealer) need to concentrate on – now.

These are not your couple of things. They are the dealer’s couple of things. Usually, though, they align with your objectives anyway. The biggest Acura dealer in the country sent a note to THE FACTORY this week to say (I paraphrase):

“Hey Tony, thanks. I only really tolerated this EXCELL stuff in the past; but, this Business Planning meeting really helped. We now have a few immediate, critical objectives and plans for achieving them. Great timing.” What if one of the couple of things is a strategy to increase Service Retention? Interested? Hey, what if they surprised you by showing interest in accessories, quick service, or wholesale mechanical parts? It could happen. Would that make you happy?

Send the Cavalry. Help me … help you.

The Future

Since the blog title is “Crystal Ball,” I should venture a prediction before I conclude. Here it is … the business is cyclical (That’s right. You heard it here first.) and those who weather the bust will enjoy the boom.

Survivors will be those who created, in addition to a thousand other things like cash flow, a firm partnership with their dealers to successfully stanch the Service Retention hemorrhaging ... those who ran faster than our aftermarket and aftersales competitors.

After the chase, when a field clear of excess competition generates profit like “the old days,” we can get lazy and do this all again. In the meantime, like David said last week, “We need to use this recession for adding clarity and critical examination.”

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