Investing in the Future
What’s the right investment to make for the future?
That’s the question on every business owner’s mind, isn’t it? Regardless of the industry, businesses are always looking for ways to remain relevant and appeal to customers.
What’s the next hot piece of technology?
Should I be going to this training—or is this one better?
Is this trend here to stay or is it just a buzzword?
Will the ROI justify the investment?
There are countless questions to ask and, unfortunately, these pages do not contain the holy grail of investment.
But, please, keep reading.
There is no one (or two, or three…) right investment for a dealership to make because every single dealership is different. From the manufacturer (luxury or domestic?) to ownership (family owned and operated or massive automotive group?) to location (East or West Coast?), every dealership has a different makeup.
That being said, the goals of most every dealership are the same: to be successful now and into the future.
The industry is changing—fast. What once was a trade focused on turning wrenches has now become hyper-focused on technology with vehicles having more lines of code than a Boeing 787 or Facebook, according to Information is Beautiful, a data research firm.
Not only is the field becoming more technologically advanced, there’s also less interest overall in entering it, as the technician shortage reaches an all-time high. Add to that the most knowledgeable customer in history (thanks to the Internet), which makes selling repairs more difficult than ever.
So, circling back to the beginning, what’s the right investment for your dealership?
There are countless right investments. That’s why FIXED decided to tackle as many as possible—26, to be exact—and provide the ABCs of investment.
You may be doing some—or even most—of these, but it’s important to make sure that you do each effectively and continue to improve. Inside this guide, you’ll find information on what you should invest in and tips on how to take that particular investment to the The next level: From tools and training to marketing and procedures, these pages will provide a jumpstart on what to invest in next.
DJ Heller, dealership management consultant, National Automobile Dealers Association (NADA)
Heller has more than 30 years of experience in the automotive industry. Prior to joining NADA, Heller served as a dealer principal and president of a Ford Hyundai Dealer. Heller specializes in improving processes and turn-around strategies.
Gary Schechner, senior digital strategist, Infosys Digital
Schechner has worked in a number of sectors, including Big Oil, retail, technology, as well as automotive. Before coming to Infosys Digital—a company that works with OEs on digital strategy—he served as the vice president of sales and marketing for Drake Automotive Group and was the vice president of marketing and sales for Shelby American. Schechner’s expertise is in implementation of technology and how to better handle the customer experience.
Casey Scheirer, director of advisors, KEA Advisor
Scheirer has 19 years of commercial truck service experience. When he started in the industry, he says there were a lot of mechanics, but not many technicians, which is an area where he was able to shine. An understanding of electrical theories allowed him to be successful and move up the ranks to service director of multiple locations. Scheirer has been with KEA for three years and specializes in service and DMS optimization.
David Steinberg, co-founder, Adpearance and inventor of Foureyes
Steinberg’s company works with businesses to solve challenges with digital solutions. He has been invited to speak at 20 Groups, OEM-level educational summits and recently presented the Five Secrets of Great Dealerships at NADA. Steinberg’s expertise includes the sales process, marketing and technology.
Jeff Swanson, advisor, KEA Advisors
Swanson has over 35 years of dealership experience with four OEMs. He’s worked in almost every position you could imagine in the industry and has experience on both the operational and sales side of the dealership. Swanson has been with KEA for a little over a year, so his experience with dealership life is fresh in his mind. Swanson’s expertise includes parts, service and variable operations.
In order to move your dealership to the future, you need to have…
“You need to know where you stand every day,” Heller says. “You need to hold staff accountable for those numbers and then figure out where you stand every day.”
Once that’s been figured out, you will be better equipped to make decisions on where to make a time or financial investment. If you’re having trouble bringing people into the service department, investigate ways to improve SEO or marketing campaigns. If you need to reduce cycle time in your body shop, look at the layout and processes to improve efficiency. The answer to what to invest in will be different for every shop, but the first step is to become aware of where your business is falling short.
Once that’s been figured out, it’s time to make a decision of what to invest in based on the information gathered. Here are a few suggestions for different tools, processes, strategies and technology in which to invest:
The necessity: A brand is how customers differentiate you from the competition. A strong, memorable brand will bring in more customers.
Steinberg says that the larger automotive groups are investing in branding, but the smaller operations and “mom and pop” dealerships don’t do much beyond what the OEM does. And, if they do, Steinberg adds that it’s “trite and cliche” branding such as, “We value you as a customer.”
“I think that’s cliche and overused and [most of the time] the experience doesn’t match,” Steinberg says. “If you brand this way and a customer has a typical experience, where is the takeaway?”
The next level: Build a brand that in and of itself gets customers to come in by creating a strong brand message that is reflected in everything you do.
Here are a few examples of companies that have differentiated themselves through the brands that they’ve created: Apple, Starbucks, Nike, Tesla.
Regardless of whether or not you shop those brands, most people can either picture a brand, slogan, CEO or experience that the companies provide.
What is your dealership’s brand? ________________________________
How do you reflect this in your operations? _____________________________________
If you don’t have anything written on one or both parts, it may be time to invest in stronger branding.
The necessity: Fifty-three percent of consumers will return to a dealership based on trust, according to the 2018 Cox Automotive Service Industry Study.
Being able to show customers that you have gone through the training and met the requirements to perform a repair will help make you seem more reliable, which will make them more likely to come to you.
The next level: Display your certifications and educate your customers on what each certification means and how it qualifies your department as the best of the best.
The necessity: Schechner says that being able to measure results will help show you what’s working in marketing versus what’s not working.
“Customers are online and need to be able to find you,” Steinberg says. “We’re in a multi-attribution society where people are coming through a variety of different ways. We need to get our information in front of the customer and digital marketing is an important way to do that.”
The next level: Schechner says to pair digital marketing with direct mail to have the widest reach possible and apply to the majority of your demographic. For those that are intimidated by it, Schechner says that there are people out there that will help set it up.
The necessity: Parts and service make up a disproportionate percentage of profits at a dealership, so anything that can be done to sell more in those departments will benefit the overall operation, Schechner says.
“eCommerce is the single best— and mostly untapped—channel to evaluate and shore up sales,” Schechner says.
In May, FIXED examined selling parts online and came up with these three tips:
- Don’t bring everything in-house.
- Prepare for additional product expenses.
- Develop a process that works for you.
The next level: Partner with a company like RevolutionParts to help get your site set up, recommends Schechner.
Understanding (F)inancial documents
The necessity: Without the knowledge of how to read a business plan or a financial forecast, there’s little room for growth as the managers will not understand what needs to be improved or the cause of the problem.
“Teaching your employees and managers about financial statements is huge,” Swanson says. “You’re asking them to run a small part of your business.”
The next level: Train your people on cause and effect, explains Swanson. Discuss financial statements with your team and explain why certain trends are happening so they have a better understanding and are more likely to buy-in.
The necessity: Geotargeting is delivering content to a user based on location. Location plays a huge factor in whether a consumer comes to the dealership, according to that 2018 Cox Automotive Readership Study. State lines, rivers and highways can make dramatic differences in who chooses to do business with you, explains Steinberg.
“The old days of drawing a circle around your business are long gone and the ability to use geotargeting to market strategically in the areas you do business is one of the key differentiators of the Internet—use it.” Steinberg says.
The next level: Create a specific campaign that speaks to customers’ specific interests. It will result in higher engagement that can lead to additional revenue, according to a Forbes 2018 article, “Why GeoTargeting Isn’t Just a Strategy for Local Businesses.”
The necessity: Extended hours need to be examined. In fact, Heller says that’s one of the reasons that dealerships lose out to independents.
Any change that can expand or broaden a dealership’s customer base should be looked at, Heller says.
“The longer you can be open, the more successful you’ll be,” Scheirer says.
All five experts agree that the customer experience is one of the top—if not the top—area that dealerships need to invest in for success, and a big part of that is the customer experience.
“We can’t assume everyone wants to come in between 8 and 10 on weekdays,” Heller says. “We’re dealing with a changing workforce and some people work different hours.”
The next level: Make it even more convenient for customers and offer vehicle pick-up.
The necessity: Inspections should be done on each and every vehicle. Managers need to invest the time into explaining the importance of this.
“It will increase CSI and give you opportunities to sell more,” Scheirer says.
Scheirer says that the reason many do not do this is because when work starts to pile up and it gets a little crazy, it’s easy to start skipping steps, especially when it doesn’t seem that important. While it may be easier in the short term, it does an injustice to both the customer and the bottom line of the dealership because all of the work that needs to be done on a vehicle is not addressed.
The next level: Use inspections that utilize video and photos. It’s easier to create trust with customers this way and is more likely to help sell the work.
“It’s all in how it’s portrayed to the customer,” Scheirer says.
The necessity: With a technician shortage upon the industry, it’s more important than ever for dealerships to invest in their job postings and make sure they’re reaching the most talented candidates possible. Steinberg shares a few questions to ask yourself when creating a job ad:
Are you a good employer?
If you are, great. What makes you a good employer?
Are you communicating that in your job openings?
The next level: Steinberg advises recruiting at all times, rather than waiting until you need someone. That way, you’re not recruiting from what he calls the “B-team.”
“The problem with general ad postings is that you’re getting people who were laid off or disgruntled employees,” Steinberg says.
Rather than wait, look on LinkedIn or contact people that you think would be a good fit—even if they’re already employed, Steinberg advises.
Another way to stand out to potential employees is to set a clear career path and offer training (See “T” for training), Swanson says.
The necessity: KPIs drive success in fixed operations.
Invest in training your manager on the importance of KPIs, Scheirer says. Most of the time, managers are service advisors or technicians who were promoted. They were never taught how to effectively monitor and track KPIs. Without this training, the information is basically useless.
The next level: “Our goal is to close ROs in three days.”
Say that to your team and the response will likely be to nod in agreement, but there won’t be any real buy-in. Buy-in comes when your team knows why the KPI matters. Swanson shares a story that helped him understand the importance of transparency:
“One of the best things that happened to me when I was a young general manager was the CFO told us the importance of why we were trying to get punch-in to punch-out of a vehicle to under three days. ‘If you can do that,’ he explained, ‘there’s more income to the dealership coming in quicker.’ That money would then be invested and would turn into revenue and then we realized that that was one of the reasons that helped the dealership make more money.”
The necessity: All of the experts agree—customer experience is key. And, where does that start? The lobby.
“It’s a representation of your dealership,” Scheirer says. “Dealerships that have nice looking and clean, professional looking lounges provide a more comfortable atmosphere.”
For tips on how to do that, read the breakout on “Optimizing Your Lobby.”
The next level: Rather than relying on free coffee as an amenity, think outside of the box. Motorcars Honda in Cleveland has a built-in Kid’s Dealership, where customers can let their kids play at the mini Honda dealership.
The necessity: $1.3 trillion in annual buying power.
That’s the amount in annual buying power that millennials have. Let that sink in for a moment. Millennials have the highest spending power of any generation, so it’s essential that you’re investing in the right ways to market and serve them.
The next level: The millennial model is faster and more digital, so embrace that, Schechner says. Find ways to make it easier for them—whether it’s through mobile payments or offering to pick up their car.
(N)ew Hire Training
The necessity: The technician shortage is at an all-time high (see “Y” for Younger Generations), which means finding the right people and holding on to them is more important than ever.
According to Swanson, the industry does a horrible job of the onboarding process. The industry has a trial by fire mentality, he explains.
“Here’s your packet and tools, go do it,” Swanson says when explaining the current process in most dealerships.
This causes frustration and can lead to a good employee leaving—something that’s so dangerous in the technician shortage that’s occurring (see “J” for Job Ads).
The next level: Rather than having an employee shadow someone for a few days and then leaving them to fend on his or her own, make sure there are SOPs put in place so they can be self-sufficient and learn how to do everything on his or her own. Swanson said one of the most successful companies that he ever saw do this even had an SOP for ordering new business cards.
(O)nline Review Filters
The necessity: The reality of 2019 is that people are using online tools like Yelp and Google to evaluate, Steinberg says. Dealerships need to be monitoring what people are saying about them, because, in the age of the online shopper, that information will determine whether or not future customers come in the door.
“Everyone is scared when they’re getting their car worked on,” Steinberg says.
The next level: Monitoring these reviews is important, but what’s even more important is getting to the bottom of why these reviews are being left.
“The best way is a proactive strategy,” Steinberg says.
Find out where you went wrong and put a process in place to make sure it doesn’t happen again.
Monitoring (P)arts Obsolescence
The necessity: The longer a part sits on a shelf, the less of a chance that part has of ever being sold. Swanson stresses the importance of checking and monitoring inventory to make sure what you have is what you want and that parts aren’t just sitting idly on a shelf.
Parts obsolescence should be below 5 percent, according to Dave Piecuch, vice president of Automotive Consultants and NADA’s go-to parts guy.
In a past story, Piecuch shared a formula to help calculate recommended inventory amount.
Total annual parts sales at cost/8 inventory gross turns = recommended inventory amount
*8 inventory gross turns comes from NADA’s recommended annual parts inventory gross turns to represent a total days supply of parts inventory, which is 1.5 months supply. 12 divided by 8 is 1.5
If you have a total annual parts sales of $1,313,445, that means your recommended inventory amount should be $164,180.62.
To check the makeup of your parts inventory, Piecuch suggests the following:
- 75 percent of parts should have sales activity in the 0-3 month category
- 23 percent in the 4-6 month category
- 2 percent in the 7-12 month category
The next level: Once you’ve got your inventory to the point you want it, manage that by assigning parameters. Piecuch says parts managers need to manage their own stock orders and put parameters on their inventory in order to manage parts obsolescence.
The necessity: Inspect what you expect, Swanson says.
When it comes to managing your department—from delivering quality inspections every single time (see “I” for “inspections”) or monitoring the parts inventory (see “P” for “Parts Inventory”), you as the leader need to be making sure what you ask is actually being carried out. Failing to do that can result in the loss of business.
“If you want something to change and you want to be able to lay your head down on your pillow at night, you need to check that your staff is following the SOPs,” Swanson says. “Live it and change will happen.”
The next level: In order to get your staff to follow this, you need to explain the why behind what you’re asking so they see the quality and understand the cause and effect.
“You can’t say it and walk away. You have to explain why it’s important,” Swanson says.
If your staff has stopped selling tires, call a meeting and show them the numbers and how sales are suffering.
The necessity: “Any time you can add labor or something you can sell—it’s a success,” Scheirer says.
Reconditioning is a very lucrative part of a business because you can get both parts and labor sales, explains Scheirer. Investing in reconditioning is a great way to bring additional profit to your dealership.
The next level: Create your own dedicated reconditioning center with its own staff rather than trying to manage both, advises Scheirer. Go all in or not at all.
The necessity: Here are some eye-opening stats from Hootsuite that will sell you on the power of social media.
As of 2018, there are 3.196 billion people using social media on the planet, which increased by 13 percent from 2017.
Social media advertising revenue is forecasted to grow 10.5 percent annually, according to Hootsuite. For 2018, social media ad revenue was roughly $51.3 billion.
The average user clicks on 10 ads on Facebook every month and 52 percent of American consumers say they’ve seen a product they’re interested in on Facebook in the last three months.
The next level: Millennials (see “M” for millennials) will now make up the majority of your customer base, so as a business, you need to reach them where they are, which is social media. Step up your social media game and go beyond Facebook to platforms like Instagram. Motorcars Honda in Cleveland Heights, Ohio, is a good example of the reach the platform can have if used correctly. It has an Instagram page with 2,243 followers (reported in March).
The necessity: Without it, investing in any of these other areas is pointless. In fact, Swanson says it tops his list as one of the top investments that fixed operations should make.
Managers need to be properly trained in how to lead and understand what needs to be done in the department. According to Scheirer, most managers in fixed operations are promoted from the floor and given little to no training on how to lead. This is not effective. Managers need to be trained in how to manage people, as well as how to use and get the most out of resources—like his or her DMS program—explains Scheirer.
The industry is aging, and many people are unwilling or don’t know how to adapt to the rapid change.
“You need to teach them why they need to change,” Swanson says.
The next level: Create a dedicated training facility. This is something that Swanson recommends for any multi-location dealership or for anyone that has the means to do it.
The necessity: In order to stay relevant, dealerships need to change with the times and that means technology, which require updates.
Technology is a huge investment that requires a lot of overhead in terms of people’s time, knowledge and cost of software services, Schechner says.
The next level: Get the largest ROI for your investment.
“What every dealer should be thinking is not about what they’re buying now—but how long it will work for you,” Schechner says. “Certain software providers have you in a vice and will squeeze you. Sit down with your software provider and figure out the roadmap (for the future of the investment) and [where] the pitfalls are.”
Schechner recommends partnering with a technology company that can clearly articulate their path forward and what you can expect as far as updates.
The necessity: The virtual reality (VR) and augmented reality (AR) device market was worth $1.8 billion in 2018, according to CCS insight.
VR and AR is more than just games that transport you to a different world by placing a headset on your head or the markers on the field during a football game showing how far until the first down. VR and AR can be used as a valuable training or selling tool for many business, including fixed operations. Schechner says that he sees value in investing in both the parts and accessories perspective.
“If [ a customer] isn’t sure how wheels or a window tint will look on a vehicle and you can show them a 360 degree view of the car—that could be useful for upselling,” Schechner says.
The next level: VR and AR can be used for more than just customers—it can be used as an effective training tool. Manufacturers are beginning to release tools—like Porsche’s Tech Live Look glass—that help technicians with repairs. Reach out to your manufacturer and see what options they have available.
The necessity: According to the Cox Automotive 2018 Service Industry Study, 67 percent of consumers want to be able to track service history through the website, 61 percent want recall updates and service reminders and many customers are shopping online before coming in (see “O” for online review).
As far as the answer to an effective website, Steinberg says there’s no magic tool. Offer customers the type of experience they should expect upon entering the dealership—clean and elegant. As far as the answer to an effective website, Steinberg says there’s no magic tool. Offer customers the type of experience they should expect upon entering the dealership—clean and elegant.
The next level: “Hi, can I get your name? Can I get your name? Can I get your name?”
Steinberg laughs while describing the pop-ups that accompany most dealership websites, but his advice is meant to be taken seriously.
Do not do that.
“If you don’t want your customers to treat you like a used car person—don’t treat them like that through the website,” Steinberg says.
Get rid of pop-ups and coupons. That gives off a lower-tier perception, says Steinberg.
For those that still think pop-ups are the best way, Steinberg suggest looking at successful online retailers—like Amazon—that have made it without all of that.
The necessity: All of the sources in this piece agree on investing in this one.
“Customer experience is the most important aspect that the dealership has to offer,” Schechner says.
The customer experience is all encompassing—all of these sections touch on it. From attracting the customer through marketing to a seamless experience on the website to the way they are greeted to the explanation of the work that needs to be done to follow up—it’s all about finding a way to provide the customer with the best experience possible. It’s the most valuable investment you can make and the best part is that it doesn’t require a lot of money, Schechner says.
“It’s someone who smiles,” Schechner says. “Following up and making sure that you did everything that you needed to right.”
The next level: Look around. What’s an area that seems lacking or that customers have mentioned in their reviews? If you have a great review for service, but a comment that the chairs in the lobby (See “L” for “Lobby”) were uncomfortable, it may be time to update your furniture. If a customer comments that they had a difficult time booking an appointment through the website, it may be time for an website upgrade (See “W” for “Website” and “U” for “Upgrade.”)
The necessity: 76,000 technicians.
That’s how many technicians will be needed from now until 2026 to replace those retiring or leaving the industry and to fill some 46,000 projected new openings, according to the United States Bureau of Labor and Statistics.
The industry needs to find a way to fill those positions and a good way to do that is to look to younger generations that are or will soon be entering the workforce. For tips on how to do this, visit (J) (N) and (T).
The next level: This tip applies to a hire of any age, but can be used for younger employees entering the workforce. Developing a mentorship program at your dealership can help grow talent. Here are some tips from Jim Shreve, collision center manager at Haasz Collision Center in Ravenna, Ohio:
Teach them like they’re in school.
Pair technicians and mentors that are similar in age
Pay more them more than they could get at McDonalds
Reward the mentor
(Z)eroing in on the Solution
Each source shares their pick for the No. 1 investment that fixed operation leaders should make to help grow the business
If you’ve made it this far, you get the picture. There are many, many different processes, tools, trends and strategies to invest in. Picking the right one can be a challenge. That’s why each of the sources provided their overall pick for what to invest in that they believe will make the biggest impact.
DJ Heller: Dealership management consultant, National Automobile Dealers Association (NADA)
After enhancing the customer experience, I would say invest in the future. Turnover is high in dealerships. With 3 percent unemployment, we have to do a better job of maintaining our employee base. 43 percent of service advisors are turning over per year. That is not good for the industry.
Gary Schechner: Sr. digital strategist, Infosys Digital
Adding a Personal Touch
All the technology and processes in the world are worthless if the customer feels like their business was just another transaction. The most important thing that fixed operations can do is anything that makes the customer is valued. Add a personal touch to everything that is done.
Casey Scheirer: Director of advisors, KEA Advisor
Honestly, I owe my success to servant leadership. Focus on the success of the people that work for you. I cannot emphasize how important it is to take a step back and ask what I can do to make my staff as successful as possible. Their success is the customer’s success, which is ultimately the company’s success. Profitability is the applause you get for being that leader, for creating that time. We need to focus on making the staff successful. There’s a lack of overall leadership. Leadership is everything. It is the number one lacking entity, not just in our industry, but in every industry. Have that servant leadership mentality. It’s not about me. if you’re [the staff] is successful—my customers will be more successful. That’s the full circle of it.
David Steinberg: Co-founder, Adpearance and inventor of Foureyes
Be focused on what best constitutes a great customer experience. I don’t think it’s one system or tool. I think it’s an approach. The way you treat customers at every touch point matters.
Jeff Swanson: Advisor, KEA Advisors
The No. 1 thing that will help grow fixed ops is to invest in training. That doesn’t just mean sending people to train. That means hiring dedicated, trained people. You should have in-house trainers and create training paths for your employees and, if you have multiple locations, invest in a training facility.