Key secrets to customer pay success for auto dealer service departments

key secrets
to customer pay success

presented by

KEY SECRETS TO CUSTOMER PAY SUCCESS : INTRO

dear ﬁ xed operations
directors/managers:
A Growing number of dealerships are embracing the challenge of improving their
customer pay business in a down economy—and they’re doing it in spades.

The following eBook, “Key Secrets to Customer Pay Success.,” highlights how these
dealers are using technology and improved processes to help you:

• Ensure thorough inspections of at least 90 percent of the vehicles entering
your service department

• Generate an average $130 or more incremental customer pay work per vehicle
and RO

• Boost “Declined Services” come-backs by 25 to 35 percent

• Improve fixed coverage, retain customer loyalty, and create more effective and
satisfied advisors and technicians

• Protect your good name and mitigate risk by documenting every completed
and declined service/safety recommendations

Baseball great Yogi Berra once said, “The future ain’t what it used to be.”

I couldn’t agree more. Today’s economy puts greater pressure on fixed operations
departments to perform at “world class” levels. This eBook offers a wealth of
insights and how-to best practices to help you get there.

Enjoy the read.

Sincerely,

David Boyle
MPi President/COO
April 2010

KEY SECRETS TO CUSTOMER PAY SUCCESS : PG. 1

secret 1:
take advantage of new technologies
and processes.

Carrie Meo, vice president of fixed operations at the Darling’s Family of Dealerships
in Maine, wasn’t sure why her cell phone was ringing with queries from service
customers—but she was glad to get the calls.

“Customers were calling my cell phone about their vehicle inspection reports,”
Meo says.

The calls were unusual: Customers rarely called following a service visit to inquire
about technician recommendations and “declined work”—and those inquiries
went straight to her service departments. With a little investigation, Meo figured
out why her phone kept ringing.

First, the Darling service department had recently installed a
“The reports are powerful,” Meo new vehicle inspection report process that included take-home
says. “They’re one of the reasons reports detailing service recommendations that the advisors and
we’re staying busy all the time.” technicians had “cautioned” as to-do items for a next visit or rec-
ommended work customers declined during their service visit.

Further, Meo wasn’t supposed to be getting the calls—the service department
phone number should have been printed on the reports rather than hers.

But Meo recognized the positive. The calls were positive affirmation that the
group’s decision to revamp its approach to handling service customers’
business was paying off.

“The reports are powerful,” Meo says. “They’re one of the reasons we’re
staying busy all the time.”

Since Meo implemented the new vehicle inspection/report process, Darling’s
has seen consistent growth in its customer pay business. She credits the growth
to a group-wide effort to ensure technicians inspect every vehicle and advisors
prioritize and sell service recommendations (see chart).

RESULTS FROM MANDATORY VEHICLE INSPECTIONS
Vehicles in for service now inspected 90%
Average additional recommendations per vehicle 2.5
Additional average customer pay per RO +$130


Meo’s success at increasing customer pay business at her stores comes at a
time when many dealers are struggling to boost customer pay business in
fixed operations.

Dealers and fixed operation managers know these struggles well: Units in
operation are down; warranty work and warranty reimbursements are both off;
and, service/maintenance intervals are out of the ballpark. All of these factors
create extreme pressure to boost service revenues.

Thus, the key question of our current time:
the “ideal”
write-up
How can customer pay sales and profits be
increased without a steady stream of new Your service advisor greets the
1
customers? customer promptly on arrival.

This question has led Meo and other fixed 2 Your advisor performs a walk-around
vehicle inspection with the customer
operations directors to drill further into their to show any body damage or visible
current customer pay processes and their repair, wear, or fluid items that need
potential shortcomings: attention.

3 Your advisor listens to the customer
1. What processes or technologies are and documents the reason(s) for
available that we can use to ensure their visit. Next, the advisor discusses
maximum customer pay opportunities items the customer can agree to have
performed at the time of write-up
with the customers the dealership and those that require a diagnosis,
does have? recommendation and estimate.

2. What customer pay processes will yield 4 Your advisor adds the “agreed to”
items from the walk-around
sustainable, long-term results and not inspection and notes those the
simply drive a short-term boost in service customer declines.
and parts revenues?
5 Your advisor checks for unaddressed
repair items from previous visits and
For fixed operations professionals like Meo, offers to address them. Your advisor
the solution came through technology-enabled, should note those that get an “OK”
customer-friendly processes and procedures that and those the customer declines.
position the dealership as a true partner with 6 Your advisor offers to take care of
customers and maximize their mutual lifetime any current or past due scheduled-
value with the dealership. maintenance items, noting the
“OK’d” and declined items.
Admittedly, this thinking isn’t new to Meo or 7 Your advisor informs the customer
other fixed operations mangers. Nor is it news that the technician will perform a
that instituting, reinforcing and monitoring vehicle inspection in the shop and
advise him/her of any work
process improvements like mandatory vehicle recommendations once the
inspection is complete.


inspections is critical to customer pay success—and that this is often difficult,
if not elusive, to accomplish.

“We always did inspections but we didn’t know if the inspection reports were
being regularly given to customers and when they were the reports lacked the
kind of detail that might prompt the customer to reschedule for that work,”
Meo says.

The difference now is that technology makes it easier to manage and monitor a
dealership’s customer pay business, without reams of ROs and other paperwork.

Today’s technology allows managers like Meo to drill into metrics that reveal the
individual performance of technicians and advisors to see where they shine and
where they fall short.

In Meo’s case, she uses MPi’s EDGE system to give her the data she needs to
manage technicians and advisors and ensure they climb all steps of the customer
pay ladder—from the initial inspection to follow-ups with customers who recently
completed work.

The system gives her real, money-making insight into customer pay processes:
“Do I have one guy selling the same thing over and over again? Do I have another
not selling enough?” Meo asks. “We never measured these things before.”

Other insights:

• Technicians take responsibility for customer vehicles. The vehicle
recommendation reports become their way to communicate with customers.
“Some customers ask for technicians by name,” Meo says. “We never had that
before.” Tip: Print technician photos on vehicle reports to further cement
the customer-to-technician relationship, a move Meo plans to make in
the near future.

• Advisors become better sellers. Metrics allow Meo to spot and address
sales deficiencies. For example, she found some advisors not selling flushes
as con-sistently as they could. The fix: Get more sales training from the flush
vendor. In the end, the advisors become true “advisors” and less like
“order-takers.”


secret 2:
understand “new school” management

Through its work with dealers, MPi has
researched and studied why it’s historically what about
‘no-shows’?
been difficult for service departments to achieve
ongoing, self-sustaining gains in customer Some service departments are pro-
pay work. actively following up with ‘no-show’
customers to re-schedule the missed
The findings, which flow from reviewing data visit –an effort that typically boosts
at client stores before and after they adopted monthly customer pay sales.
a technology-based system to manage and
measure customer pay performance, suggest That’s because most dealerships
two broad problems: wait for ‘no-show’ customers to
re-schedule.
problem 1:
“We didn’t even think about making
The inspection of customer vehicles—
the effort in the past,” says a fixed
the critical first rung of the customer pay ladder
operations director for a public dealer
—is completed less often than managers think. group. “It’s worth the effort to retain
MPi’s data show that inspections occur about these customers.”
50 percent of the time at stores where manag-
ers believe they do well on customer pay work.
Upshot: For every 100 vehicles in a service department, 50 will never undergo a
full evaluation to determine potential opportunities to up-sell customer pay work.

Why would this happen? In most cases, it’s due to the traditionally time-consum-
ing nature of manually assessing the inspection process. Flatly stated, advisors and
technicians understand that their managers are often hard-pressed for time to do
the paper-based comparisons and calculations that would assess how well they’ve
followed a store’s customer pay processes.

50%
Missed Profit
For every 100 vehicles that come into the
service department, clearly half never receive
full evaluation by a technician. What is this
Opportunity costing you in your dealership?


problem 2:
Service department managers often know where the deficiencies lie; it’s proving
these performance problems that can cause hand-wringing.

Steve Jellen, director of fixed operations for Flemington (N.J.) Car and Truck
Country, notes he’s achieved near 100-percent consistency in getting inspections
completed, thanks to MPi’s EDGE technology, which allows him to track technician
and advisor performance.

“I didn’t have any way of tracking with consistency what technicians were
doing or weren’t doing, “ says Jellen, who affirms that his oversight of 13 service
departments for the Flemington dealer group does not afford enough time for
a manual review of thousands of ROs. “Now, I can break it down and see when
technicians aren’t doing inspections and evaluate the types of recommendations
they make.”

Now he knows the answers to three, often-vexing customer pay
process questions:

1. Are advisors asking technicians to do inspections? Sans technology-driven
performance data, this question often triggers a “he said/she said” scenario
between advisors and technicians. That’s all gone now, Jellen says, noting he
now doesn’t have to sift through stacks of un-reviewed ROs and estimates to
answer this key question.

2. Are technicians following through on the inspection request and/or completing
inspections? At Jellen’s stores, technicians consistently complete more than
90 percent of vehicle inspections.

3. Are advisors selling the technician’s recommendations? At most stores, it’s
virtually impossible to answer the question with certainty. Jellen, however,
knows the exact close ratios for each advisor (more on that in a minute).

Today’s technology serves up a variety of “new school” management metrics:

• Percentage of vehicles with requested inspections. Managers who track this
metric note a 95 percent completion rate.

• Percentage of ROs with completed inspections. At Jellen’s store, he expects
a minimum of a 90 percent completion rate.

• Average number of recommendations per inspection. Managers should
expect a degree of recommendation parity among technicians,


depending on the type/mileage of vehicles
they see. (see box, this page) what’s your
average mileage?
• Average value of technician
The accurate answer might be
recommendations. Are technicians over-
surprising.
or under-loading recommendations? This
metric provides the answer. “Ours is 50,000,” says Steve Jellen,
fixed operations director, Flemington
• Category of recommendations per techni- (N.J.) Car and Truck Country. “It
cian. Does a particular tech favor one type of floored us. We thought it was a
recommendation over others? A consistent lot higher.”
spread of work across tires, suspension, fluids
and other work categories is the ideal. With an accurate read on average
mileage, Jellen could set fair expec-
“Technicians are black and white,” Jellen says. tations for the average number of
“When they see the data that compares what recommendations technicians should
they recommend compared to everyone else, make during vehicle inspections.
they get it.” A benchmark range: 2.5 to 3.5
recommendations per inspection.


secret 3:
measure advisors and everyone wins

Today’s technology also delivers drill-down metrics that assess advisors’ customer
pay sales performance.

For technicians, this is crucial. Often, one of their
main complaints about advisors is that “they’re close ratios
not selling my recommendations.” Here again, and customers
manual reviews of ROs, estimates and closed
When fixed operations director Steve
tickets are often the only pathway for fixed
Jellen of Flemington (N.J.) Car and
operations managers to prove or disprove the Truck Country evaluated his advisor
technician’s assertion—unless they’ve got the close ratio he noticed a trend: There
data right in front of them. were more “declines” on recommend-
ed up-sell work when customers had
A critical new advisor-focused metric: Close big-ticket items.
ratios on technician recommendations.
His suspicion: Advisors might be asking
In a well-managed store, managers should for too much, and not prioritizing
see a degree of consistency of close rates recommendations based on the
across advisors. The data reveals whether degree of “need” for a vehicle.
advisors prefer to sell specific types of work,
such as flushes or brake jobs. “If a guy comes in and needs four tires
and four brakes for $1300, you can
leave the flush for another time,”
Jellen says. “In those cases, we’ll
A critical new advisor-focused metric: Close ratios on technician recommendations. ‘caution’ the service. When offered
the option, it’s surprising how many
customers say ‘do the work while the
Managers can drill into this metric further to see vehicle’s here.’”
first-hand how often customers “decline” work
and the type of work customers decline for each Jellen notes these kind of sales-
advisor. This is the metric Meo used to discern a coaching insights were impossible to
need for additional training to improve advisor determine without the technology to
selling skills for flushes. capture sales information.

For Jellen, this kind of data-driven oversight has “I could never measure that before,” he
yielded positive gains across his stores. “In 2009, says. “If I can measure it, I can fix it.”
we broke all kinds of records for our retail
customer pay business,” he says, noting a $1.1 million increase in customer
pay revenues for the year, a boost driven in part by ensuring advisors properly
use “leave-behind” reports and other point-of-sale materials (more on that in
a minute).


Here’s a look at other technology-powered metrics fixed operations managers
like Jellen use on a daily basis to track advisor sales performance:

• “CP Hours per RO:” This calculation divides total customer pay labor sales by
the “Real RO Count*” to provide a “true” read of overall customer pay activity.

• “CP to total sales”: This ratio uses the “Real RO Count” as a foundation to
accurately compare the customer pay business’ contribution to a service
department’s overall sales.

• “Warranty to CP Conversion”: This ratio offers an overall indicator of how well
a vehicle inspection process and advisor selling combine to up-sell customer
pay work to warranty customers.

• Average up-sell per advisor: The dollar value of this metric will vary from
store to store, depending on the franchise. At highline stores, the average
up-sell can run as high as $452; at volume stores, the figure averages near
$150 to $200. The key is establishing a baseline and managing advisor sales
performance to achieve consistent incremental increases and high customer
satisfaction ratings.

* The “Real RO Count” is an MPi term. At many stores, “Total RO Counts” are used to evaluate customer
pay business, even though the tally often mixes warranty and customer pay customers. The “Real RO
Count” segments these customers for a more accurate read on the overall customer pay business.


secret 4:
make “take-away” materials count

What’s one thing that virtually always leaves customers with a bad taste?

It’s when advisors recommend and up-sell work without clearly explaining the
nature of the work and why it may be important for the customer to address right
away. It’s the “What’s in it for me?” question that lingers in the back of every
customer’s mind when being presented with up-sell recommendations.

As part of the customer pay processes at his stores, Jellen requires advisors to walk
each customer through every recommended repair and prioritize its importance.

The advisors use two custom-printed reports at the
point of sale (POS):

• The Recommended Action Plan™:
This details all the technician recommenda-
tions and prioritizes them by color to note
the degree of urgency for the customer.

• The Know Your Vehicle Report™:
This is a take-home (grease- and fingerprint-free)
piece for the customer that outlines the work they
completed and declined during a visit. The idea: It
provides a customer a full accounting of their vehicle’s
repair work, as well as a run-down of items to address during their next visit.

Fixed operations directors and managers evaluate how consistently and effectively
advisors use these important point-of-sale materials—and the come-back effect
they have on customers—through two key metrics:

• Percentage of customers who receive a “Recommended Action Plan” and
“Know Your Vehicle Report.” Jellen adds that the reports help advisors sell more
effectively. They can “explain things in plain English and show customers the
value in our recommendations and work,” he says.

• Percentage of customers who “decline” work and return. Jellen and other
fixed operations managers see a 25 percent to 35 percent capture of these
customers—due to largely to the “Know Your Vehicle Report.” “Customers
are taking it home and reading it,” Jellen says. “It’s very powerful.” (see box,
this page)


secret 5:
manage, motivate with transparency

Every fixed operations director and manager understands the power of positive
peer pressure. This dynamic becomes even more transformative as stores collect
and share customer pay metrics with their advisors and technicians every day.

Mangers often post the daily print-outs of
advisor and technician metrics—as well as their prime the
ongoing monthly totals and compliance with “come- back”
pump
department goals—to ensure everyone knows
where they stand and to serve as motivational
reminders of the importance of consistent Dealerships that send notices to
customers with “declined” work two
follow-through on their customer pay processes.
weeks after their visit to suggest a
follow-up appointment see bigger
“Everyone’s rankings go up on the wall,” Jellen captures of these “come-back”
says. “We don’t do it to criticize anybody. We customers than those who don’t.
want them to see how they’re ranked against
their peers.” Some stores also track the type of
follow-up and its success rate to
The pinpoint metrics on advisor performance determine whether phone calls or
also help Jellen set targeted “spiffs” for the entire e-mail is most effective.
department. Example: A $5 spiff program for
technicians might offer the bonus to one
technician for air filters, another for brake jobs and another for alignments.

“I’m able to spiff areas that the data show as weaknesses,” he says. “I wasn’t able
to do that before.”

For broader “spiff” programs, Jellen uses the advisor metrics to establish handicaps
(like those in golf) to motivate advisors who might already sell a particular product
or service well. In those cases, percentage of improvement, rather than volume of
sales, becomes the guideline for rewards.

Other pointers for effectively using data-based performance metrics at your
dealership:

• Expect more work early-on. Typically, it takes 90 days for managers, advisors
and technicians to become comfortable with the greater degree of data and
accountability. But the adjustment gets easier as advisors and technicians see
the benefits of additional work and pay.


• Stick to your guns. It’s the consistent, ongoing use of the metrics to manage
advisors and technicians that ensure they stay focused on completing the tasks
and processes that make customer pay improvement efforts more effective
and long-lasting.


secret 6:
build the buy-in, savor the roll-out

Like any new technology in a dealership, the introduction of a technology-based,
customer pay system and process like MPi’s EDGE cannot be a top-decision.

But buy-in comes more easily as advisors and technicians understand these
systems are even-handed and fair—and they typically bring the reward of
increased earnings and on-the-job satisfaction.

Even so, Jellen and Meo recommend a “phase-in” approach for deploying new
customer pay technology and processes.

“We did it based on where we thought the managers would be most effective,”
Jellen says. “The results we achieved there helped us with buy-in at other stores.”

Customers will also likely help underscore the value of this new approach to
customer pay work. In addition to raves from customers who called her, Meo
found further proof of a satisfied customer in the pages of her local paper.

The writer’s story helps sum up why all fixed operations managers should consider
a technology-backed, transparency-focused approach to handling their customer
pay business:

“Building customer loyalty is critical to business success, especially in these times.
You can do the same by selling your customer what they need, what they can
afford and explaining things to them in terms they can understand so they can
make informed decisions. Eventually I will have to replace Ms. Jetta, and you can
be certain I will purchase my next vehicle from this dealership because of the
service I have received.“

For more on these “Key Secrets to Customer Pay Success”
or the EDGE system,

visit www.mpiﬁ x.com or call 1-888.503.8040

Key secrets to customer pay success for auto dealer service departments

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Key secrets to customer pay success for auto dealer service departments