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This happens because each department attempts to preserve revenue within their own department – other departments be darned!
For example, the used car manager will complain about the cost of reconditioning vehicles because it eats into the potential front-end gross profit they could potentially make– and that’s what their pay plans are based on. Or, the service department is hesitant to refer customers back to sales and/or to F&I for service contracts, preferring instead to keep revenue in their department through higher RO dollars.
A recent article in Automotive News reports how this dynamic only serves to hurt a dealership’s overall bottom line. However, according to the article, there may be a solution – at least one that’s working for several dealerships; and that is sharing the wealth, if you will, by incentivizing service to refer customers to sales and/or to F&I for service contracts when a customer comes in and is presented with a hefty service estimate. In fact, at one dealership, 30 percent of customers referred by service purchased extended service contracts, 10 percent purchased new vehicles and, as a desirable bonus, the retention rate in service was a very healthy 84 percent. All for $25 per service contract!
The key? Creating pay plans that incentivize both sales and service to refer customers to F&I for service contracts. Think about it. Any salesperson or service advisor is eligible to make some extra $ and its great motivation to refer their customers to F&I.
The result is that, overall, the dealership wins for multiple reasons. First, there is less in-fighting and more teamwork in the dealership which improves the company culture. Second, the employees are happier because they can make additional money every month. Third, customers who purchase a service contract will continue to service at that dealership, rather than any competition. And last, but not least, the profit generated in F&I will increase the dealership’s bottom line.
Seems like a win-win to me. And my guess is that dealers would rather have the profit and service retention gained through the sale of a service contract than the $25 they pay the service advisor or salesperson who referred them.
Help your dealership employees and departments work together by incentivizing them to do so. It has been proven to be extremely successful for other dealerships, so why not yours?