Profitability is at the forefront of every General Manager’s mind. How profitable is your service department? What can you and your managers do to increase revenue?
We’ve found that most General Managers and Fixed Ops Directors primarily think about “more”, selling more cars, servicing more cars, and selling more parts. What often gets overlooked is the optimization and getting better at selling, marketing, and pricing their parts and services.
Dynatron Software has leveraged our proven methods to develop the following list designed to enable your service department to increase its revenue. If you aren’t already doing what is listed here, we have the tools to help!
1. CP Repair & Maintenance Labor Price Optimization
There are a few different elements that go into CP repair and maintenance labor price optimization. Both repair and maintenance are closely related, with strategies for both being nearly identical. The ultimate goal should be building client retention through transparent and “perfect pricing”.
Develop a Comparative Pricing Matrix
You know who most of your direct competitors are, but do you know what they’re charging customers for the most common services? Knowing what your competition is offering allows you to zero in on the perfect price for your market. In order to get your “perfect price” you’ll need to develop a comparative pricing matrix. Dynatron customers can participate in our virtual performance groups to compare labor prices against similar markets!
Know Your Maintenance Mix Frequency
LOF and maintenance business is done to develop your customer’s perception of the work you do, the price you charge and ultimately the service you provide. If your customer’s perception of you is well developed, when a repair comes along, you’re their guy and they won’t even shop the price.
Capitalize on Repair Mix Frequency
Repair work is where your dealership has the opportunity to recapture some of the marketing dollars you gave the customer in the form of discounts early in the relationship. Over time, your shop will be able to make up for the discounts that have to be offered for the more competitive services (LOF and maintenance).
Getting customers and keeping customers with those LOF services is critical to building the trust and confidence that you do good work for a fair price so that when the repairs are needed, you are the default choice.
Perform an Op-Code & Pay Type Analysis
Incorrect Op-code usage can cost dealerships $2-$3 in CP ELR alone!
On the other hand, proper usage also allows technicians to check order history to confirm a service they want to offer a customer has not been performed recently. Improper documentation can also create reduced price work resulting in a lower warranty labor rate increase. Consistent documentation not only creates a better customer experience, but allows for meaningful sales history analysis.
Once your dealership has created a set of proper op-codes within your DMS, print out the list and provide it to your technicians as an easy reference guide!
2. CP Labor Compliance
It is essential that your service department tracks service advisor level price compliance by helping you generate daily labor sales/ELR compliance reports. Every dealership has a way of pricing out labor. Whatever your strategy is, service advisors that aren’t compliant can cause major loss in profit.
In an effort to avoid losing out on a specific job over price, service advisors may offer discounts or even change the price on an RO. This is an understandable tactic, however once your prices are determined and set, you’d be surprised by the loyalty your consistency creates. Nearly every dollar in ELR improvement makes it down to your bottom line, so small but consistent changes add up significantly over time.
3. CP Parts Price Optimization
Oftentimes, when a service department is looking to increase their revenue the first thoughts lead to selling more to existing customers or increasing traffic to get new ones. However, there is a third option, price optimization, which is usually overlooked. Formulating a strategic pricing strategy can be done by evaluating, identifying, and optimizing specific parts to increase revenue.
The average dealer sells 1200 different services. Doing some quick math, suddenly, you are managing and trying to optimize 4800 different price points. Even if it were possible that you were able to optimize all these price points, they must be reevaluated every quarter to ensure they’re still perfect for retention and profitability. Having access to a robust database will set you up for maximum success.
Doing the work to optimize pricing pays off dividends when it comes time for warranty filings. It is equally important to apply price optimization to both parts and labor. Labor is updated on average 3 times every year, while parts is updated only once every 2 years!
4. Optimized Services Benchmarking
Monitor and improve your ELR by gaining visibility into which and how often your optimized services are being sold with the intent of driving more business to those services. Begin by tracking and identifying the top 5-10 services with your highest margin, and encourage your service advisors to increase the sales of those services.
Service Advisor training is the key to improving each advisor’s up-sell revenue generating potential. Dynatron Software’s SellSmart solution uses athletic behavioral training principles and regular performance evaluations to measure continued improvement within your service drive!
5. Warranty Labor and Parts Rate Optimization
When your dealership does the tips above in the months leading up to a warranty submission, you’ll be set up to obtain the maximum potential increase. Points 1-4 are designed to increase your CP which in turn optimizes your CP ELR for the submission process.
Filing warranty claims aren’t just about going through the motions. Be wary or critical of companies that help you file without assisting you through the other points listed here because you’re leaving money on the table by not getting the maximum possible reimbursement.
We hope that you find the tips above useful for increasing the profitability and performance of your service department. With the information we’ve provided, any service department can achieve results on their own. However in our experience, most dealerships lack the time, tools, and insights to do these things alone. That is where we come in to provide the scope of data you need, knowledgeable Coaches, and warranty filing experts that allow you to establish a profitable service department.
How We Can Help
Dynatron Software combines best-in-class technology and expert coaching to help our customers find revenue leaks, identify new revenue opportunities, and increase Customer Pay ELR.
PriceSmart, our foundational solution, makes complex DMS data easily digestible, thus actionable for optimizing price, maximizing ELR, and improving profitability. Dynatron’s solutions are powered by our advanced analytics platform ROI Suite (Repair Order Insights) that identifies the hidden revenue opportunities. Our expert coaches leverage proven processes and best practices to turn business intelligence into measurable results. All dealerships will benefit from the services we offer, from a single rooftop to a large automotive group.
Want to learn more about the hidden opportunities in your service department? Visit us at www.dynatronsoftware.com or give us a call at (866)-888-3962.