Volume or Margin

One of the most important considerations we have in business is to understand the balance in choosing between volume and margin. If a dealership was only concerned about volume they might price customer pay repair labor at $60 per hour. If they were only concerned about margin they would consider a labor repair rate of $180 per hour as reasonable. The reality is neither one of these decisions would not lead to profitability or customer satisfaction in the service department. I still get chills when I think back about a General Motors promotion that gave away free oil changes during the local auto show for those who signed up. General Motors would still compensate the dealership around $20 reducing the expense to bring in new customers. I thought that sounded like a wonderful idea so the dealership I was at signed up for this aggressive program. It filled the bays for many days and made it impossible to process normal repairs for our established customers. It also became evident quickly these individuals would not authorize any additional needed maintenance or repairs. It wouldn’t matter if the air filter had a half an inch of dirt on it they would decline and state “I’m only here for the free oil change.” If price were the only issue in the food industry we wouldn’t have Morton’s steakhouse our choice would be limited to such companies as McDonalds. I am confident Morton’s margins are higher than McDonald’s however, the qualities of food and customer care are vastly opposite. The primary focus should always be on customer care and exceeding their expectations consistently. It’s never going to be exciting to bring a car into the service department needing maintenance or repairs. Dealerships that have developed a culture of customer care understand higher margins are earned with proper scheduling, follow-up, and communication. They train and pay their staff well providing them state-of-the-art equipment to perform their duties. These are the few dealerships that understand you don’t have to choose between volume and margin. You can have both by placing your attention and total focus towards quality customer care.
Rob Gehring, President
Fixed Performance Inc.

Fixed Performance complete fixed operations coaching consulting
Are you taking advantage of the new state law that requires the manufacturers to pay retail price on warranty parts and labor? In October we had a client get approval for cost plus 83.27% on warranty parts claims! That’s right he more than doubled his gross profit margin on warranty parts claims. Let’s have a have a chat about what it would mean for your dealership in additional gross profit. Our company just announced we are assisting dealerships to maximize margins on warranty parts and labor claims. Our program called Margin Plus uses state-of-the-art technology to get your dealership what is deserved. Now is the time to prepare for filing in January. Why not?