Optimizing the Service Department for Increased ProfitsBy Sam Komeha
When car sales begin to fall, dealerships often find themselves scrambling to come up with new and innovative ways to attract new customers and earn some much-needed sales. From slashing prices to hosting cookouts, nothing is off limits when it’s time to get cars off the lot. However, these measures may be unnecessary, since the key to keeping a dealership above water during difficult times may not be more car sales, but more car service.
It’s now estimated that up to 49% of a dealership’s gross profit comes from the service department. This means that the service department can be the deciding factor of whether a dealership sinks or swims, especially in times of low sales. When considering this high percentage, it’s clear that optimizing the service department is no longer a luxury, but a necessity. So, how can the service center be optimized to ensure they maintain a high percentage of the gross profits? The following steps are a great place to start when optimizing a dealership’s service department.
1. Communicate with Customers
Just like with the doctor for people, cars have a yearly schedule they should stick to when it comes to maintenance. This makes it easy to predict when existing customers will need to come in. By having a list of customers and their maintenance needs, such as brake and oil changes, diagnostic tests, fluid checks, and other maintenance appointments, service departments can call customers to schedule appointments instead of waiting for them to call the shop. Once an appointment is made, service departments should also call to confirm the appointment a day or two beforehand, since no-show appointments cost service departments thousands of dollars each year. This extra communication with customers will set service departments apart from the others and increase profits.
2. Utilize Apps and Other Mobile Technology
These days, nearly everyone is plugged in all day, every day. In fact, though estimates vary greatly, some studies suggest that American adults spend nearly four hours per day on their cell phone. Service departments can use this cell phone usage to their advantage by developing apps or even simple email services for customers to schedule appointments, check the status of their vehicle, and chat with service professionals. By widening technological reach, service departments can increase sales, improve customer retention, and make the customer experience more enjoyable. Utilizing mobile technology early will put the service department ahead of the curve and make them more desirable for the current generation of customers as well as future generations.
3. Invest in the Service Department
By putting a bit of money into the service department, the returns seen can be incredible. New pieces of equipment, adding to the department, and investing in employees are all safe bets when it comes to putting money back into the service department. These investments will increase productivity, reduce each vehicle’s repair time, and increase employee satisfaction which, in turn, increases customer satisfaction. Investing just a small percentage of profits back into the service department in the form of new equipment and pay raises will produce a much-appreciated return on investment.
4. Appreciate the Importance of the Service Department
Dealerships who recognize how important their service departments are, especially in times of decreased sales, are much more likely to succeed than those who focus solely on sales. The service department can be a dealership’s saving grace, especially in tough financial times, so it should be optimized to the best of the dealership’s ability and revered as one of the most important portions of the business.