To increase revenue in today’s retail auto industry, many dealers are focusing on boosting profits in the service department. Here to tell us how to develop a comprehensive revenue growth optimization plan is Michael Roppo, director of dealer fixed-ops consulting and training for WithumSmith and Brown’s automotive division.
VIDEO TRANSCRIPTION:
Jim Fitzpatrick: Let’s kind of jump right in here. What steps can dealers take to increase the volume of work in their service department? I know that’s a loaded question but …
Michael Roppo: That is a very loaded question, but there’s a loaded answer to it. I think you need to start paying more attention to what’s in the shop.
You have to stop hoping for more, and start doing a lot more and what it is that you have. Because a lot of times, there’s a saying in the industry that 50% of the vehicles that come in for service go underserviced and non-serviced because of what people say and what people do and what they don’t do. Very important to pay attention what comes into the shop. Shop load it properly. Make sure that you are making the MPVIs valuable. Communicating it to the customer. Not just putting lines through them anymore. And communicate and give a copy to that customer and make sure that they get the information that they need. Make an intelligent decision.
Jim Fitzpatrick: Right. So you are saying most dealers have business that right underneath their nose, currently in the shop.
Michael Roppo: Absolutely. It’s in the shop.
Jim Fitzpatrick: They just focus more on that business. You got nothing to worry about.
Michael Roppo: Yeah. Because you know what? One of the questions that I like to ask that as soon as I go into the dealership, as soon as they tell me that, “Hey Mike, I need more business.” I start to ask questions like, “Can you handle more business properly?” Okay? That’s really one of the questions that I ask. Can you really do it properly? And what’s going on with the jobs that you do have? Are they being done on time? The right time? The first time? So, all those things have something to do with doing it properly on time, every time.
Jim Fitzpatrick: Sure. For sure. For sure. We all know about the shortage of auto technicians out there, for sure. So how do you get more jobs into the service department? I mean, right now-
Jim Fitzpatrick: Every dealer will tell you, I’m short three guys. I’m short four guys.
Michael Roppo: Well, you know what, the people that are basically telling you that they’re short four guys, three guys, whatever have you, that’s part of poor planning. And I think you need to look at a process that basically hones in on why you are short three guys. Everybody’s looking and jumping ship for a dollar more when you can just spend another hour in your shop, reduce one more hour and get yourself an automatic raise. So, the thing is, the flat rate system in the industry is struggling a little bit. But all these curfewed times that the manufacturers are putting to the table, there’s a lot of people leaving the industry, and quite honestly, they are not looking back. So the thing is, you gotta train them from the get go when you get them out of UTI or Lincoln Tech or whatever they come from, and make sure that you create the PSA system in your shop. And I’m not talking about just another plug and play program. I’m talking about putting a technician that basically comes out of school as an apprentice, ready? And putting them with a master tech. And also pay that master tech on the training that he provides that apprentice.
Jim Fitzpatrick: That’s a good idea.
Michael Roppo: That’s how you hone and then you gotta keep them. The problem is, that they say they tried it. They never did properly. So the thing is, you have a person that basically is generating 60, 70 hours. That technician’s not gonna give away his time. Okay? So that apprentice gets a little discouraged and he looks up for something else to do and he jumps ship.
Jim Fitzpatrick: That’s right.
Michael Roppo: That’s where we lose him.
Jim Fitzpatrick: That’s right. NADA says we’re gonna need 76,000 plus technicians over the course of the next four years in the retail auto sector. It’s a real problem out there, isn’t it?
Michael Roppo: It is. I think it’s a lot more than that. But you know what? As they say that they’re building these smart cars, well, smart breaks and when they break, they need smart people to fix the cars. So the thing is this, the problem is, the problem is some of that technology … most people, the technicians today, even today, and these guys come out of school with almost like an engineering degree. So the thing is, it gets to a point where do they understand the technology? Do they understand how those things work? Do they understand how the engine communicates these days? Or the vehicles communicates to you? It’s gotta get to a point where they actually know the vehicle. So brand quality. Brand knowledge. Product knowledge. Whatever have you, is of utmost importance these days.
Jim Fitzpatrick: Yeah. That’s for sure. Oh my gosh.
Michael Roppo: No doubt. No doubt.
Jim Fitzpatrick: Yeah. So what kind of training should dealers utilize to influence their revenue optimization?
Michael Roppo: I love that question, man. So this is the thing. Growth revenue optimization is about growing everything at the same time, right? You grow your people, you grow your process, you grow your profits. So the thing is, it’s gotta get to a point where I call it the three P’s. If you understand what it is that people need, and that specific person need that level of training, one service advisor does not get the same level of training as the other person. They learn different ways, okay? So, as Paul Cummings used to say, you gotta apply the cash analysis, right? Knowledge, attitude, skills, and habits. You have to have all four. You can’t have just three, or minus one.
Jim Fitzpatrick: That’s-
Michael Roppo: And I gotta tell you, service managers, like we spoke about the last time, they are responsible for training, okay? If people do not want to be trained because we encounter this when we go into the field, if people do not want to be trained anymore, they cannot work there.
Jim Fitzpatrick: Yeah. Make it a condition of employment. Shouldn’t be optional.
Michael Roppo: Absolutely. It should not be an option. If you are an A-tech, an A-tech is there to do what you need him to do when you need him to do it. A lot of times, we have these people with ASE patches on it and it basically stands for ask someone else. Okay? So it’s gotta get to a point where people get the understanding of I’m an A-tech, I’m gonna give you an A level job. And an A-tech can do three B level jobs to make you even more money. So that’s how you transfer that process to making it even better for the dealership and the individual that’s in that process.
Jim Fitzpatrick: Absolutely. It can’t be something that is only for the new guys, right? Training’s gotta be just standard.
Michael Roppo: It’s not only for the new guys or for training sake. You can’t do that. So the thing is it’s gotta be training is ongoing and you gotta do it with that specific individual. So if one of those areas is missing, quite honestly, you may have a different problem. They have to apply the three R process. Redeploy, retrain or replace. I hate the third R. But there’s not a lot of stuff that’s going on in the two first R’s to get that process stopped. Because there’s too much transfer going on.
Jim Fitzpatrick: Right. You got dealers looking for perfect technicians and you got technicians out there looking for the perfect dealer, and neither one of them exists, right?
Michael Roppo: 100%. That is 100% true statement. I think people need to latch onto what it is that they’re responsible for. So grow from within is the most important process that you can stem inside your dealership to grow your own technicians. You’re not gonna find them. You’re gonna get problematic people in your dealership if you just run ads.
Jim Fitzpatrick: That’s right.
Michael Roppo: So I like to think that you know what? A good tech knows another good tech. So that’s where you get them from, and that’s what you recruit from.
Jim Fitzpatrick: That’s right. That’s so true. So true. I’m gonna ask you another loaded question. We could be here till July. How can dealers improve their customer retention? Still is an issue today in 2019 with dealers. It has been for years. How do they get those people to come back?
Michael Roppo: Jim, there’s a statement that’s made and I think this was one of Paul Cummings’ lines, because I am an advocate of Paul Cummings.
Jim Fitzpatrick: He’s great. He’s an [crosstalk 00:07:52].
Michael Roppo: I gotta tell you, he’s one of the greatest trainers out in the field. So the thing is, business goes where it’s asked for and it stays where it’s appreciated, right? You truly gotta appreciate your customers. You got to get in contact with your customers. You gotta stay in touch with them. You gotta keep them informed about the status of the vehicle while it’s in your possession. All those things have to be done simultaneously. You can’t just do it some of the time. You gotta do it all of the time.
Jim Fitzpatrick: That’s right. That’s right. And that’s what people want now. They wanna know what the status of the vehicle is. What the cost is. When they can pick it up. Or if it could be delivered to them, or if they’ve got a loaner car program that’s very important these days. And if it’s not a loaner car, as some dealers are using, they are using Lyft and Uber to fill in that gap for consumers so it’s all about pleasing the consumer, isn’t it?
Michael Roppo: 100%.
Jim Fitzpatrick: Yeah.
Michael Roppo: 100%.
Jim Fitzpatrick: So what are the biggest profit killers in fixed ops and how can dealers put a stop to them?
Michael Roppo: Not paying attention to the CPIs that we talk about. I call it managing the significant [inaudible 00:08:53], not the important many. Effective labor rate is one. The customer effective labor rate. The overall effect of labor rate. The hours per RO. The frequency of MPVIs that you do or you do not do. How many are filled out properly. How many are communicated properly to the customer. Is a copy being given to the customer. And I’m talking about the greasy parts so that people can see that you actually worked on the car. So you can reprove yourself over and over again to your customer base. And that’s how you retain customers. That’s how basically you get the same customer over and over again. That one time high five, $1,500 RO doesn’t exist anymore. And if it does, you’ll never see that customer again.
Jim Fitzpatrick: That’s right.
Michael Roppo: That’s right.
Jim Fitzpatrick: The dealerships that are doing walk arounds seem to always do more. I mean just plain and simple. But then you get dealerships where they are actually allowed to work there as service advisors and they don’t do walk arounds.
Michael Roppo: Not doing a walk around is putting a cursor on the process of you wanting your minimal acceptable performance number which is two hours per RO.
Jim Fitzpatrick: Right.
Michael Roppo: Not a lot. However, if you do not do a walk around, and you don’t follow through, whether it’s before or after the customer leaves, if you don’t do that process alone, you’re going down to .93 of one hour.
Jim Fitzpatrick: Right.
Michael Roppo: 1.2. We have struggling dealers because they have struggling processes. If they do it all of the time, they get the money all of the time. The problem is, when we look at the DMS systems called the dealer money systems like we talked about the last time, we looked at the process that it measures every RO every tenth. Every labor operation, right? So the thing is, I like to look at two plus labor operations per RO. At least. I [inaudible 00:10:43] two hours per RO. I like that number. But I look at and focus on effective labor rate. Those are the numbers that matter every day. The amount of appointments. People still take for granted this BDC thing. This BDC thing is a business plan. And the thing is, if you don’t have that in your process, you’re missing appointments.
Michael Roppo: If you have busy advisors making appointments for your customers, the [inaudible 00:11:06] process may be broken. Don’t leave it up to the advisors. You have to make sure that people understand that are making appointments, they understand your schedule. They know how many hours you have available, and sell from that process.
Jim Fitzpatrick: If you had to pick one or two things that dealers or maybe fixed ops directors should focus on in building a stronger profit in their fixed ops department for the balance of 2019, what would those one or two things be?
Michael Roppo: People need to understand, service advisors need to understand, I go into dealerships constantly and I see things like, excuse me, do you know how you get paid? And then an advisor would turn around and basically say to me, “No, I don’t.”
Jim Fitzpatrick: That’s a problem.
Michael Roppo: [crosstalk 00:11:45]. Now I have to … You see what happened? Look at his hours per RO. They are struggling because he doesn’t understand how he gets paid.
Jim Fitzpatrick: That’s right.
Michael Roppo: He doesn’t understand what lines he gets paid on.
Jim Fitzpatrick: That’s a problem.
Michael Roppo: The thing is this, when we go into a customer pay line, we tell him, “Listen, we want two hours per RO. Then we want to do a warranty line, we want two hours per RO. What do you gotta look at, okay? You’re not going to get it but you need to look to get the minimal acceptable performance that you are looking for. The thing is, the biggest problematic thing is paid plans do not fix businesses. As a matter of fact, they cause a lot of problems. But the thing is this, if you are going to give one, you’re ready? Go to a job guy that you explain to the individual that’s [inaudible 00:12:25] on how to do that job. And this is how you get paid on it. That’s the most important part. A lot of times, they’re going to dealerships and quite honestly, when I see that an advisor does not know how he makes money, the dealership doesn’t either. You realize it right away.
Jim Fitzpatrick: Yeah. It’s a very good point. Very good point.
Michael Roppo: 100%.
Jim Fitzpatrick: Well Michael Roppo with the three R’s and the ASE, ask someone else. I love that.
Michael Roppo: [crosstalk 00:12:50] three R’s are Paul Cummings’ by the way.
Jim Fitzpatrick: Oh, really?
Michael Roppo: Not mine.
Jim Fitzpatrick: Okay. It’s a Paul Cummings deal that you-
Michael Roppo: [crosstalk 00:12:55] ownership of them. Not allowed to do that.
Jim Fitzpatrick: Live by. And keep up the great work that you are doing out there for dealers all over the country and love to have you back on in a couple weeks, and we’ll pick up on some more of these topics that we didn’t get to today.
Michael Roppo: Any time, Jim. Any time.
Jim Fitzpatrick: All right. Thanks so much.
Thank you for watching the official news source of the retail automotive industry. This has been a JBF Business Media production.
