Dan Shine – Fixed Ops Roundtable

Last week, I attended an online forum where dealers, fixed ops directors and service managers shared their views on how the coronavirus pandemic was affecting business. They traded ideas on how best to deal with the current situation and pondered what the service drive would look like in the future.

Most agreed that dealership fixed operations will not go back to business as usual once COVID-19 passes. Customers have become accustomed to some of the concierge services that have been rolled out by service departments as they attempt to do business while also honoring social distancing protocols. Things such as vehicle pickup and delivery, mobile servicing, video multipoint inspections and touchless payment.

Brian Benstock, whom you can read about in this newsletter, said service departments need to change and reinvent themselves. Why?

“Because the game has changed,” said Benstock, general manager of Paragon Honda and Acura in Queens, N.Y.

The message was the same at an NADA Academy webinar this month. The crisis is a chance to innovate, to be creative, to launch something a fixed ops department has been considering but hasn’t had the time or courage to try.

“It is a great time to do amazing things in fixed operations by showing customers the true difference between yourselves and the competition,” NADA Academy instructor Bob Atwood said.

With dealership service departments being deemed an “essential service,” the fate of many of those stores rests with the men and women turning wrenches and running parts.

“Service is the backbone of the dealership. It’s not the back end,” Atwood says.

“Most of your states have said the service department is an essential business. It is essential to the U.S. economy.”

Alyssa Ruane, CPA

Automotive Mobility Trends

Trends within the automotive industry are often referred to as “disruptions” given the shift in consumer behavior and technology. However, as Michael Maroone, CEO of Maroone USA, has noted, these disruptions are “pivotal moments” for the industry as a whole. Dealers can benefit from these changes by focusing on long-neglected areas, like fixed operations.

According to NADA, consumers spent $485 billion on vehicle repairs in 2018, but dealers captured only 20% of the revenue. Therefore, there is ample opportunity to advance a dealership’s service department by implementing innovative, competitive programs.

Pickup and Delivery Program

One dealership that seized this pivotal moment is Paragon Honda in Queens, NY. Paragon became pioneers of automotive mobility by implementing a program known as Pickup and Delivery. In collaboration with Google and RedCap Technologies, they have streamlined the process of vehicle services and maintenance- every auto owner’s dream.

First, customers schedule a service appointment either online or using Google Voice Assistant. Then, Paragon Honda uses RedCap Technologies to have the vehicle picked up from the customer’s desired location and returned when the service is complete, adding an unprecedented level of convenience for consumers.

Since the implementation of Pickup and Delivery, Paragon Honda has reported an astounding 475% increase in ride count growth from August 2017 to August 2019. Additionally, their Repair Orders have increased by approximately 56%, and their fixed operations gross profit has increased by around 58%.

Dealership Competition

Although the Pickup and Delivery program may seem more feasible for metropolitan dealerships, other dealers, and even service centers, in rural areas have implemented similar mobility services programs. For example, Oxford Automotive in Ohio has a similar program that will even leave a loaner car for the customer in the event of prolonged service.

If auto repair businesses are taking advantage of a Pickup and Delivery program, dealerships are at risk of losing even more of the market share then they already have.

Paragon Honda is using this pivotal moment in the automotive industry to identify how the modern consumer behaves and offer a solution to the modern consumer’s needs. Automotive mobility solutions, such as Pickup and Delivery, are a seamless way to generate loyalty and provide a convenient service for current and future customers. Though this program may not be practical for all dealerships, it forces the industry to reexamine its traditional service model or otherwise risk falling behind the competition.

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JIM HENRY  Fixed Ops Journal

WOODSIDE, N.Y. — Brian Benstock’s service department is operating at peak efficiency, working three shifts around the clock. Yet there’s no rush-hour logjam of customers waiting to drop off their cars and trucks at his dealership.

Benstock, the general manager and partner of Paragon Honda-Acura, in the New York City borough of Queens, wants to see few — or no — customers in the service waiting area. He loves the sound of phones not ringing off the hook with service calls, even though that would drive most dealers crazy.

“The customer provides absolutely no value by being at the dealership,” Benstock told Fixed Ops Journal. “I don’t need the customer. I do need the car.”

Benstock gets thousands of service vehicles to his dealership each month by picking them up from customers’ homes or workplaces and returning them when the work is done, at no extra charge. The most prevalent inquiries from service customers — “When will it be ready?” and “How much will it cost?” — are responded to by text message, along with the details of vehicle pickup and delivery, Benstock says.

Benstock: Valet service pays for itself in bigger repair orders.

Paragon launched its valet service in 2017. After some growing pains and false starts, the service’s customers now use an app on their mobile phones to arrange more than 3,000 valet trips a month, or an average of more than 100 each workday, Benstock says. Paragon does not limit the service to customers who bought their cars or trucks at the dealership — it’s available to anyone.

That number probably reflects about 2,000 monthly service customers, Paragon says, since not all valet customers opt for both pickup and delivery. The service has exploded in popularity: Paragon says it logged around 2,000 valet trips a month in October 2018, and about 1,000 a month in October 2017.

Cox Automotive estimates that 28 percent of new-vehicle dealerships offer some form of valet service (related story, Page 30). But the nature of such service varies widely, and few dealerships’ valet service is as extensive as Paragon’s.

Paragon Honda Acura says the values of its average repair orders are substantially higher for service customers who have their vehicles picked up and dropped off than for customers who take them to the dealership
With valet service Without valet service % increase
Avg. customer-pay r.o., Honda $566 $278 103.60%
Avg. customer-pay, r.o. Acura $650 $295 120.30%
Avg. customer-pay, r.o., total $600 $283 112.00%
Avg. warranty r.o., Honda $303 $199 52.30%
Avg. warranty r.o., Acura $520 $307 69.40%
Avg. warranty r.o., total $405 $240 68.80%
Source: Paragon Honda Acura

Anthony Petito, service manager of Paragon Honda, says the Honda-Acura dealership originally intended to provide valet service only to and from Manhattan. That decision included what Benstock now calls his “stupid” plan to pay for space in four Manhattan parking garages where Paragon service customers could drop off and pick up their vehicles.

Demand for valet service didn’t take off until the dealership switched to an Uber-style reservation service and allowed customers to choose their own locations for pickups and deliveries, Benstock says.

“We wanted to be like Starbucks — there’s one on every corner,” he says. “We can’t put a garage on every corner. So we decided we will put it on every corner by putting it on people’s phones.”

Once word got around, Petito says, service customers in Queens wanted pickup and delivery, too. “We said OK to a 5-mile radius around Manhattan,” he says. “Now it’s 10 miles. But the reality is, if someone asks, we go to New Jersey; we even go to Montauk” — more than 100 miles from the dealership, at the far opposite end of Long Island.

Petito: Going 100 miles to pick up

“We don’t do it very often,” Petito adds, “but we do it.”

Benstock says those extra-long rides don’t “pencil out,” but he figures they are worth it to encourage service-customer loyalty. Thanks in part to the valet service, he says, his fixed ops revenue is a leader among Honda and Acura dealerships. His customer satisfaction scores have greatly increased from their “notoriously poor” levels earlier in the decade, he adds.

The greatest proof that pickup and delivery works, Benstock says, is that the average repair order for valet customers is considerably higher than for customers who drive themselves to the dealership.

“We expected loyalty — return customers,” he says. “But we never expected it to pay for itself, and it’s paying for itself. So, really, it’s free.”

Spend it to make it

Well, not exactly free. Petito says the average cost of a valet trip is about $53 one way. Those occasional, extra-long rides could cost $300, he adds.

To run the system, Paragon uses a logistics platform provided by RedCap Technologies of Fort Lauderdale, Fla. It accepts and dispatches orders for valet service, tracks the valet drivers and their driving behavior, supports customer surveys and handles customer communications. Paragon obtains its 30 valet drivers from another supplier, Driver Network Service.

Benstock says he insisted from the beginning that the valet service would be free.

“When we first started discussing this, we were wondering, how much should we charge?” Benstock says. “Would it be a subscription that you purchase? For how much — $20 a month, $99 a year? Something F&I would sell? So I said, let’s make it free.”

Petito says dealership managers were floored by Benstock’s decision. “We all said, what? You know, you can’t go the other way. You can’t make it free and then charge people if you find out you have to.”

That hasn’t been necessary. Through August of this year, customers who used the valet service averaged $405 per repair order for warranty work — almost 70 percent more than customers who delivered their vehicles to the dealership and retrieved them when the work was done.

The difference was even greater for customer-pay work — $600 per repair order on average, more than twice the average for customers who took their cars and trucks in. This added revenue more than pays for the valet service, Benstock says. When Paragon’s service department recommends additional work, customers are more willing to approve it in return for the convenience of valet service, he adds.

Outrunning the bear

Valet service is an example of creativity that dealerships need to show to win service business from aftermarket providers, Benstock says. “We are presenting this as an antidote to the independents,” he says.

Some dealerships don’t bother to advertise their quick-lube services, Benstock says, because they think they can’t compete with the aftermarket on price. “That’s baloney,” he says. “Customers don’t do it for $9 oil changes. They do it for convenience.”

Instead of ceding business to independent and chain stores, dealership service departments must make themselves more convenient by offering such things as pickup and delivery, he says. He cites the old joke about the hiker who doesn’t have to outrun the charging bear — he only has to outrun the other hikers.

“I don’t have to outrun Jiffy Lube or Pep Boys,” Benstock says. “I only have to outrun the other Honda dealers.”