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Dealerships Lose Service Departments in Record Numbers

“Dealerships Lose Service Departments in Record Numbers”

“Manufacturers Cut Mega Parts Deal with Aftermarket Suppliers”

This could be a headline from the future – the very near future.

I see the same stats that everyone else sees and has seen for years regarding service departments at automotive dealerships.  For years these numbers at best have been stagnate and, at worst, they are falling. Customer-paid labor sales averages are trending down and customer retention is at its lowest in the automotive history – and falling.

These facts took me back to nearly three decades ago — a time when nearly every dealership had a body shop.  As you will remember, nearly every one of those body shops closed down. And just like that, dealerships, with few exceptions, were out of the body shop business. Why? What happened? Why did a department that was so profitable for so many years seem to disappear so quick? Simple. The aftermarket made it easier for customers and the insurance industry to do business with them instead of a dealership.

Service Departments in Trouble?

Could this happen again to another department in a dealership? Yes, your service department. I know it sounds crazy that the dealership’s most profitable department would go away or that dealers would ever let that happen. But it may be already happening and there will be little to nothing the dealers will be able to do – once it gets past a certain point.

Allow me to make my case. Just like the aftermarket made it easier to do business with them in the body shop world, they are doing everything in their power to do the same with the service business. Even worse, they already have the edge largely because of what the press constantly puts in customers’ heads.

If you asked average consumers their opinions of service centers, in general, they’d say that dealerships are more expensive, slower, not honest and non-caring. Even though the facts support none of that, it is what they believe. These are big issues in this critical contest, especially in the areas of expense and honesty. Two very big areas. What do dealerships do to fight off those false facts or to change the perception? Very little.  It is almost like we are content to be the “bad guys”.

Consistency Is Key 

Another area the aftermarket is killing it in is consistency.  Although there are still a reputable number of independent service centers, increasingly the number of chain service centers that make up the bulk of the aftermarket service business is growing. These chains are smart.  They are consistent in what they offer and how they offer it. They are like Starbucks.  If you have been in one, you have been in all.

Customers like consistency in the companies in which they do business. No matter what location they visit, they get the same level of customer service with an identical experience. It draws them in like bees to honey.

On the dealership side, finding two dealership service departments that are identical in the way they are run or the experience they offer is harder to find then Holy Grail. Go to 100 (name your manufacturer) service departments and chances are you will have 100 different experiences. And, when you do find some consistency, it’s probably the bad type.

Manufacturers try but fail. Until they legislate consistency into their franchise agreements, any attempt to make this happen, will be as it always has been – futile. Dealer groups of all sizes fail too. Their mindset is to put successful people in the general manager’s chair, fixed operations manager’s chair and the service manager’s chair and let them do what they know works.

The problem is that even if they do know what works, if your service is not consistent from store to store in your group, your brand is compromised. That means that your customers are confused and your clientele flees to the aftermarket where consistency and brand are front and center. How long do you think the Ruth’s Chris Steak House chain would survive if chefs were allowed to prepare the food they way they wanted? Two years?

The large dealer groups are just as bad. What good is it to have 75, 100, 200 or more stores if you are not consistent from location to location? What’s mind-boggling is that the largest groups fail to understand that the easiest way to grow the number of locations is to name their stores all the same, advertise how they would deliver their service and develop a brand.

What’s the point of having 100-plus locations if the general public does not know you are part of chain? By branding and being consistent in what and how you deliver your service, you can then make the case that your volume affords lower prices, better service over a wider area and safety to the traveling public.

Another area worth mentioning is that the aftermarket understands it is not technology that impresses people and wins them over, it is their people. Online scheduling, iPads, multi-point inspections, texting and e-mailing all have one thing in common. They can not look a customer in the eye, ask for and get the sale in such a manner that it motivates the customer to sit down, complete a survey the way you want it, return for future services and, ultimately, purchase another vehicle. Only an expertly trained employee can do that.

Saving Your Service Department

If we, as an industry, keep doing the same thing with the same over-hyped and anemic solutions, we are going to continue to lose sales and customers to the aftermarket. Ultimately we could lose our service departments. As a matter of fact, I think there is only a couple of things keeping that from happening.

•   Parts.  Presently, only dealerships can get factory parts at factory prices with factory warranties. In this area, the dealers win – for now.

But if I am a manufacturer and my dealer network is losing customers that annually cost me millions, if not billions, in parts sales, why would I not negotiate a deal with places like NAPA auto parts or chains like Goodyear?

By aligning themselves with these types of companies, a manufacturer gets excellent distribution networks and would likely triple parts sales annually. You say no way! I say Tesla, Uber, Amazon, etc..  Let us look at Tesla. If the manufacturers, NADA and the state dealer associations allow Tesla to exist without a dealership and sell directly to the consumer, what I am discussing is a real possibility. Tesla is allowed because it is a test to see what happens when you eliminate the middleman.

•   The Factory Info. The dealerships win this category too as they are the only ones with factory-trained technicians and factory- trained service advisors who have access to continued training and immediate product updates. But again, all the manufacturers have to do is open the training and information up to the aftermarket and the service landscape changes overnight. We lose our ace in the h***.

•   The Dealership Building and Waiting Room. The dealerships have the advantage here too, but does it really matter? Sure, beautiful seating areas, Wi-Fi, Starbucks coffee and big flat screen televisions are nice, but does the customer really care? I lean toward “no” simply because most customers drop off their vehicles and rarely — if ever — use those amenities. Let’s be real. The aftermarket service centers have very small waiting areas with average coffee and smaller televisions and they have the lion’s share of the market.

In closing, do I think dealerships losing their service departments is imminent? No. Do I believe it is a real possibility? Yes.

How do you prevent it? The industry as a whole needs to get serious and develop plans and processes to have nationwide conformity in the way service employees dress, talk, act and deliver their services. Strict guidelines and minimum performance standards need to be put in place and enforced. Think Starbucks, McDonald’s and Nordstrom’s. Visit one of those businesses in any of their locations and everything is identical in every aspect on every level. It is what draws people in and keeps them coming back and buying your products and services.

Consumers like to go places where they know what they are getting regardless of location. Your service department does not have to go the way of the dealership body shop. It is as simple as stopping, taking a look around and recognizing the early signs of service department degeneration. Next, admit they exist and do something about it. And that something is literally as easy as creating a process that delivers world class service, training your service staff to expertly execute that process, set minimum acceptable standards and hold your employees accountable.

This and only this type of action from the manufacturer down to the service employee on the front line will remedy what should be seen in the dealership world as a serious concern. And, it’s getting more serious by the day.

If you want more clarity on exactly how to do this and see just how easy it really is, contact me and I will schedule a meeting with you. I can show you how doing this will be one of the hardest easy things you ever have done or one of the easiest hard things you have done. The winds of change are all around. You can either take control of those winds and control who gets blown away or sit back and continue to allow the winds of change to change your way of business forever.

For more information call (800) 248-2931 or from outside the U.S., call (949) 713-4469. Ask about our On-Site Training and our Manager Training programs for Service Departments.

About the author: Jeff Cowan, in his 29th year of Service Department Sales Training, is recognized as the creator of the modern-day, walk-around and selling processes for dealership service departments and after-market auto service repair shops. Jeff is the nation’s authority when it comes to training service managers, service advisors, and service support staff. Currently partnered with NADA, EasyCare, NCM, Marellen, Elead1One and other vendors and manufacturers.

Visit his website at AutomotiveServiceTraining.com get info on On-Site TrainingPublic and Private WorkshopsDVD Training Program, and Virtual Training! Also, Jeff Cowan’s Pro Talk is now offering Dave Anderson’s Virtual Training Game Changer for general sales staff. Call today for more information. For more great tips and advice, follow Jeff on Twitter at @JCowansProTalk. “LIKE” Pro Talk on Facebook, and add him to your circles on Google+. You can also watch Jeff Cowan’s videos on YouTube! 

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