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Promote fixed ops during tough times: dealer roundtable

November 17, 2010

Contrasted to the rollercoaster ride on Wall Street, economists don’t predict many near-term rallies for U.S. automobile retailers. Dealer gross profit was off 25 percent last month compared to September 2007, and Automotive News projects that one in five dealers could shutter by 2009.

With that backdrop, local dealers gathered at the CATA Oct. 13 for roundtable discussion in a presentation named "Mining Gold in a Down Market." The presentation was hosted by OneCommand, a CATA allied member.

Sales and service both drive revenue and profit in the current market, but Ron Fortt asked the audience how much of their ad budgets focused on parts and service, not sales. "You may need to shift the budget," said ForttOneCommand’s vice president of business development.

George Schaffner, general manager of Saturn of Rockford, agreed that not all dealers are enthusiastic about their service departments. But his store renamed the department "Quick Service Plus" and advertises it independently of the dealership. Schaffner said the department’s revenue has increased 30 percent annually since 2005.

"If 50 percent of my gross comes from the service department, then 50 percent of my ad budget should go to promoting the service department," he said.

Schaffner added that 60 percent of his service customers don’t drive a Saturn. That requires broad training for his service writers and technicians, but he said the various maintenance schedules are available online.

Service can be the subject of calls to existing customers, whom Fortt said in the current economy might respond to a new-car pitch with "Are you kidding me?"

"Tell your customer, ‘In these times, you’re going to want to hold onto the car longer, so let’s get it in here and make sure it’s running right.’ And if the saleswoman can set the appointment, she’ll get a positive vibe of ‘Hey, I got him in on Tuesday,’ " said Fortt.

Allan Cooper, another OneCommand executive, agreed on the benefits of reaching out to past customers. "Tell them, ‘Hey we do value your patronage, even though we can’t sell you a car now.’ When we get through this cycle in 12 or 18 months, we have a positive relationship that could draw them back into the dealership," said Cooper.

Bill Nuccio, who operates Lamborghini Chicago, in Westmont, said he is close to instituting multiple shifts in his service department, but said he is "on pins and needles" about bringing on another employee because financing woes have devastated his luxury vehicle sales.

Fortt suggested that dealers should calculate their dealership’s gross profit on a per-employee basis.

"If it’s $10,000, that’s excellent. If it’s $7,000 to $8,000, that’s good," he said. "But once you dip below $7,000, you’ve got to look at, maybe you have too many workers.

"If you don’t want to let anyone go, what do you have to do? Generate more gross profit. And if you can’t do that, you’re going to have to let someone go."

Customer reward programs can be helpful, but Fortt said they must be operated correctly. James Samaras, president of Viking Dodge in Crystal Lake, said his dealership offers free tires for the life of the car if the customer gets all his service work done at his dealership.

"But if they’re not getting their 15K and 30K (service), it creates a problem," said Samaras. "They come in after three years for new tires, and you haven’t seen them since they bought the car. It’s a problem."

Fortt said all dealership employees must be trained about how any program works so they can convey that to the customer. And celebrate the customer, Forttsaid, with greetings like "Oh, you’re a loyalty customer!"

The cable news channels can exasperate consumers’ outlook on the economy, the group agreed. One dealer said he changed the television station in his waiting room from CNN to the Food Network.

Chuck Parker, publisher of the Internet magazine, Automotive Digest, also noted that people are looking for "comfort" now.

"Younger people coming up are not going to be buying vehicles the way we are used to selling them. They want trust and comfort," said Parker, who suggested a dealer might remove one or two showroom vehicles and install soft furniture instead.

"Things have become so transactional," said Fortt. "If it’s just about the money, I’ll go next door (to buy). There needs to be trust, there needs to be comfort."

Parker also said dealers should halve their advertising budgets and use the savings on community events like educational seminars, held at the dealership, that explain things like how consumers can extract themselves from vehicles in which they are upside-down in credit, or why the dealership is better for service than Jiffy Lube.

"We've had 16 years of unparalleled growth," said Fortt. "Thirty-year-olds can't remember a recession. We just have to get through this cycle."