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Auto dealers know how important their service business is to the bottom line.

There’s no doubt that service absorption is vital to the health and livelihood of many dealer’s financial statements at the end of the month. Automotive News recently reported that Honda has gone a step further.

During a Honda dealer’s meeting in late June, Honda reportedly told dealers that they want them to increase their service facilities and capabilities as well as extend their hours of operation – some to the point of being open 7 days per week. This is all in an effort to make Honda dealers more competitive with independents and regain service business opportunities Honda dealers are currently missing out on. In addition, Honda feels that by 2018, service business will increase dramatically based on rising sales. While only a suggestion for now, according to the article, Honda dealers are feeling pressured by the factory to begin implementation of these changes including extending service hours, adding service bays and technicians,  and remodeling flexibly in case more bays are needed later.

 

These suggestions by Honda represent challenges for dealers. On the one side, there’s no doubt that any dealer would love to increase their service business, as it can only help their bottom line. On the other hand, these changes constitute significant investments. According to the article, Honda will not help finance any expansions, but will expect the dealer to foot the bill. While these investments may pay off in the long run, like any investment, one must consider the length of time it takes to recoup the investment through additional service business. There’s also no guarantee that service business will increase. Simply adding more bays and staff will only offer dealers the opportunity to increase service volume. There are other areas that will also carry additional expenses, such as additional service advisors and new technology to help improve overall service department efficiency.

 

Whether or not the increased service opportunities come to fruition by 2018 as predicted by Honda, it places dealers in the precarious position of acquiescing to the manufacturer and spending a lot of money, or declining. The manufacturer holds a lot of pull with their dealers and there can be many unwritten ramifications to non-compliance, such as lowered allocations. Honda already monitors and dictates how dealers can market, along with many other factors.

 

What could well be missing from this equation is that building more service bays and hiring more technicians may be unnecessary to handling more service business. Just like in professional sports, building a new stadium won’t necessarily translate into increased ticket sales. The key to increasing fan loyalty in sports has everything to do with the performance of the team. Consider the Dallas Cowboys. The owner of the team spent $1.5 billion for a state of the art stadium in Texas. In the first year, attendance increased but every year since has seen a decrease in attendance. Why is that? Many attribute the decline in attendance to the mediocre performance of the team. In football, fans want to see a winning team and, historically, when teams are winning, attendance increases. While the opposite happens when the team’s performance declines.

 

The bottom line is that simply building new facilities isn’t enough to guarantee an increase in service business. What does work, however, is winning games. Winning games involves teamwork, precise timing, the customer experience at the facility and, ultimately, the team’s performance on the field.

  

Your service department is your team. If everyone is working towards the same goal, providing an efficient and excellent customer experience, business will increase. Fans very likely care more about winning than they do about a shiny new building. So, where cost is an issue and a new building is just not an option, you can still increase your service business without mortgaging your future. 

Views: 141

Tags: advisors, automotive, consumers, dealerships, efficiency, expenses, fixed, honda, news, opportunity, More…ops, service, technology

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Comment by Richard Holland on October 2, 2014 at 6:19am

Absolutely agree with you, Ralph. It's also the most overlooked for sales opportunities.

Comment by Ralph Paglia on September 11, 2014 at 3:38pm

If there is one overall most important marketing lesson of the last 4 years, it is that a dealership's service department is capable of becoming the most profitable source of new and used car sales of any marketing strategy...  Last month the team at Paragon Honda in New York sold 194 new and used cars through their "Vehicle Exchange Program" representatives assigned to the service department. Service Departments are the single greatest opportunity to grow sales in a car dealership in 2015.

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