Service Absorption Rule #3

“Maintain a 6 to 1 ratio of C/P RO count to total vehicle sales” says Don Reed, CEO of DealerPro Training Solutions.

That sounds simple enough.

 If you are currently selling 100 New and Used a month, then that pencils out to 600 Customer Pay Repair Orders per Month. This does not include Warranty and Internal.

Maybe you just realized that your RO count is low, right? What are you going to do about it?

If you are thinking that you need something that costs a lot of money and the only thing that you can do is advertise to get more Customers in the door, think again. 

Certainly advertising can be a part of the overall strategy to bring customers back in. “You don’t need to spend more money-you need to spend more of your money wisely” says Don.

Which means that you need to look at reallocating some of what you already spend elsewhere (Sales) and give it to Service where you can realize a much better ROI.

The average dealer is spending $500 to sell a new customer while spending $8.40 to keep the customers they have.”

And, if you do the math on a typical 500 RO store with sales in the front end of around 100 cars a month, you can expect to pay $50000.00 (National Average)  in advertising  to get results that are somewhere north of  say $145,000.00 in Gross Profit from the sale of those cars…

OR

you can spend $5000.00 in your Service Department ($10.00 per Customer) for a $114,750.00 Gross Profit return. 

That is Average Advisor selling Average Labor (1.5 per RO) at the Average Labor Rate (Nationally at $85.00 an hour) at 500 CP Repair Orders.

You know what is crazy? What happens if you get an additional 10% ROI by getting 50 more CP ROs through the door that month? You get an additional $11,475.00 in Gross Profit. That is only 2.5 Customers per day.

What if you get 4 more per day? And your Average Advisor starts selling an additional .3 or, dare I say it, .5 per Repair Order? What is your ROI now?

Thats 25 times over what you invested…vs a 2.9% ROI in Sales. 25 times! If I asked you to give me a $10.00 bill and I told you that in exchange for that $10.00 I would give you back $250.00, would you do it? Of course you would! 

What am I talking about?

I am talking about taking a portion of your current advertising budget and reallocating that to the Fixed Operations. This amount of say $10.00 per CP RO will generate sales out of proportion to what you spend. 

While advertising is part of the overall strategy and is part of your planning, it is another tool to be used in conjunction with everything else you do in Customer retention and marketing.

In fact, there are at least 2o different things that you can do right away (in the next few months) that will have an immediate impact on your RO count. Most of them require nothing more than a little elbow grease and Customer awareness.

Send me an email at lbuchholz@dealerprotraining.com and put “Send me the 20” in the subject line and I’ll send you back 20 ways you can increase RO count in your service department.

In the meantime, measure your current numbers using the 6/1 Rule and see where you stackup. If you are struggling, it might be time for a fresh look.

Getting to 100% Service Absorption is a decision.

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