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.

PICKUP PROFITS
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.”

I love mobility in all forms, and the incredible opportunities that are created give people greater access to safe, affordable, and reliable transportation. This includes the exciting prospects for vehicles capable of providing transportation on the road or in the sky.

Flying cars seem to create more problems than they solve. However, easy access to vehicles that move people above the traffic quickly and affordably could have many benefits, especially along the country’s busiest corridors like the Long Island Expressway or the 405 in Southern California. Both roadways seem to be jammed regardless of the direction traveled or the time. These roadways are little more than slow-moving parking lots. Think of the loss in productivity our society is forced to endure while people are stuck in their vehicles.

On Long Island, there are services like Blade that shuttle commuters back and forth from the Hamptons via small aircraft or helicopters. Flying past congested roadways, arriving at their destination in 1/5 the typical driving time must be quite the treat for those able to afford the airfare (typically $500 per one way trip). But somehow this fantastic service misses the mark. Creating a fleet of medium capacity flying taxis with specific routes could help to create mobility options for many (more) people alleviating road traffic and more importantly giving the riders more time.

As more people opt-in to new services the prices of these services will inevitably be reduced. Additional services will be added to more markets, and many more customers will be able to take advantage of the offerings, whether we are talking about flying cars or autonomous cars. Think of the freedom that will be available to customers who have been liberated from unnecessary hours spent stuck in their cars. People would be able to go upstate during the weekend to visit their country home or to go apple picking or see the fall foliage, without being subjected to the hours of traffic going to and from these wonderful locations. Imagine the business implications as these remote locations become accessible to many more customers.

Make no mistake; mobility solutions will continue to evolve, on the roads, above and below the ground. As they do, more and more opportunities will be created as society moves quicker and more efficiently. May the best user experience!

https://www.bloomberg.com/news/articles/2019-08-04/where-s-my-flying-car-the-lowdown-on-personal-flight-quicktak

Artificial intelligence will enhance the relationship between the retail salesperson and his/her customers. The best companies in the world are using artificial intelligence to reliably and predicatively serve their customers.

In the world of CRM’s, there is no better example of this than Salesforce. Most CRM’s are merely data gathering repositories for the user. Data without intelligence is like a book sitting on the shelf that you’ve never read – it’s useless. Salesforce has introduced AI in a unique way and they are leveraging this with their clients. The exciting news is that retailers in every industry can utilize sales and customer data to create lookalike audiences and set up predictive cadences for communication. This will enable us to serve our customers better (while protecting their data).

Those who can get this balance right can substantial advantage over those who are using intuition and trailing data to make decisions. Facebook and Google have incredible advantages in this space (perhaps to a fault). There is great power and opportunity in the legal use of first-party data. This is increasingly incumbent for retailers to understand as regulators continue to limit activities surrounding data. We have an incredible advantage over some of the larger aggregators of data. Namely, our ability to and use first-party data to serve our customers better.

When we combine this advantage with platforms such as Facebook and Google, we can leverage readily accessible data. Not only to serve our customers’ needs but to anticipate them in such a way that everybody wins. The future is fast, frictionless, and intelligent.

https://www.forbes.com/sites/falonfatemi/2019/08/10/5-ways-artificial-intelligence-is-transforming-crms/

I’m fascinated by the recent explosion of smart gyms. Recently, there have been several articles written about Peloton, Classpass, and a host of other entrants into the smart gym space.

This should come as no surprise to retailers as today’s consumer is all-powerful, selecting winners and losers with a simple swipe to, or away from, a retailer. They use their smartphone as their personal mission control center, firing instructions from their device as they dictate the terms and conditions they require.

Consumers demand shared control of the process; consider Uber or Netflix. In both cases, the consumer selects what they want and when they want it, from the convenience of their phone. Peloton has capitalized on this. They provide users the ability to select the instructor, the length and intensity of the class, the genre of the music, and the time they would like to take it. Frankly, it is brilliant.

Today’s all-powerful and all-knowing consumer presents many opportunities and a few challenges for today’s retailers. It is indeed an incredible time to be in business. As a side note, I am sorry to see Jennifer Jacobs leave Peloton. She was one of the very best instructors and had a cult-like following. People matter.

https://www.cnet.com/news/three-smart-gyms-tested-peloton-mirror-classpass/

 

There are several lessons that we can learn from the adjustments being made by supermarket retailers, and companies like Best Buy in order to offset Amazon’s incursion into our respective businesses. The good news is that several companies are making solid gains against the retailing behemoth.

1) Realize that Amazon is only gaining market share by providing better service to our customers, so it seems like a simple solution to simply think in advance about how we can improve our customer experience. It is much easier to keep your existing clients than to attempt to regain their trust after they have defected; do it now.

2) Supermarkets are now focusing on the special and the specific needs of the wealthier consumer by offering upscale product offerings and customization to this group of shoppers. It would then make sense to spread the customization to a larger group of consumers in different sectors providing “customized scalability”. By providing these services to our entire customer base we can increase our value proposition and retain/expand our customer base. Clearly, we can do this in our respective industries.

3) Provide better value in everything that you do. We have to disrupt ourselves by anticipating the needs of our customers from their perspective. Chances are the front line associates that work for us can provide great insight into how we could make things easier, better, faster for our customers; harness the brainpower of your staff! The more consistently we do this the less appetizing our respective business will be for Amazon to consume.

When we set out to create the Paragon Honda/Paragon Acura pickup and delivery service we considered a number of pricing strategies, from having the customers pay a subscription fee to offering it as a line item on their service bill. We decided to take a page out of Amazon’s book and to offer the service of picking up and delivering customers cars, for service, for free. The luxury car manufactures will be hard-pressed to provide better value than we are currently offering to all of our Honda and Acura customers. The response from our customers has been outstanding.

Thank you to Jim Fitzpatrick of CBT News for capturing the essence of the Google Marketing live meeting/ ThinkAuto2019.

Ride-sharing companies like Uber and Lyft have completely revolutionized transportation over the past several years, hindering business for taxi companies and impacting people’s decisions to purchase cars. Despite their popularity with consumers, the New York City Council made a move in early August to stop their growth, halting the issuance of new for-hire vehicle licenses for 12 months.

Stopping the issuing of licenses prohibits new individuals from using their own personal vehicle as a hailable car. The only thing that the cap does not limit is the granting of licenses for wheelchair accessible cars since there is a shortage of accessible cars in both services. This means that the number of available options, in the city, will either remain stagnant or decrease (if/when drivers decide to stop driving).

 

rideshare

The New York City Council said that they made their decision not because they want to get rid of the services in the city.

Instead, they said their decision was motivated by a desire to study the service and how it works. Since they have limited understanding of Uber and Lyft, and have not done a deep dive into the data surrounding it, they want to take some time to look at how the apps work–then regulate them better when they start issuing new licenses again. 39 members of the city council voted in favor of the cap, while 6 members voted against it.

The city council is currently considering another bill regarding ride-hailing companies, and it would require Uber and Lyft to hand over their data to be analyzed by the city. If they fail to provide the data, they’ll have to pay a $10,000 fine.

While the city council members claim they made their decision so that they could study the services more closely, there may be other reasons that they chose to limit the expansion of ride-sharing services.

First, the city council says that they believe that limiting Uber and Lyft will help ease traffic in NYC (have you ever been in NYC when there wasn’t traffic–even before Uber and Lyft existed?).

Also, Lyft and Uber have impacted the taxi medallion services that serve New York, since many people prefer the convenience of arranging a car from their smartphone, rather than having to stand on the street and hail a cab; ultimately this will force the medallion holders to provide better service(s) to their customers in order to remain competitive. The same forces may also be impacting subway and bus ridership; again, forcing those providers to rethink the convenience factor in favor of their riders. The city council should indeed take the time to study and understand the market forces behind this move by the consumers to do what is in their own intelligent self-interest. It is not Uber or Lyft that have been disruptive, it is the consumers that have elected to do what is best for them.

I applaud the New York City councils’ approach by making the cap temporary so that they can gather more information in advance of setting additional policies. I think even in the short term we will see a number of negative results, here are some of the most significant:

First, Uber and Lyft both think that riders will experience longer wait times since supply will dwindle, I agree. Additionally, service will become less reliable and costs will go up. Because there will be fewer cars the price of a ride will rise, and this will hurt consumers (voters) because it will cost them/us more money to get around.

Next, sadly, this cap will impact minority riders disproportionately. Uber and Lyft have all but eliminated the discretionary selection of passengers based on their appearance. Are we prepared to go back in time to an era when drivers had the discretion to select who they will pick up, and from which neighborhoods?

Also, the city government has elected to (albeit for a limited time) impact market forces by trying to regulate supply and demand. I believe, that the free markets should make that determination.

Finally, Uber and Lyft provided a great service to the consumers by giving the consumers shared control of the process. Consumers get to pick the type of vehicle, the driver, the time, and the location of pickup. Consumers get to select their driver by evaluating the experience of other consumers, this again allows the market force of customer satisfaction to weed out drivers that do not provide good service.

Ultimately, this decision hurts consumers and new drivers alike, by limiting options for consumers, and eliminating employment for those seeking this as their profession. It will be interesting to see the results of the market study one year from now…

Sales Strategy

For generations, the fundamentals of automobile sales strategy remained pretty much the same. Cars were sold in ways that produced results, year after year. However, in an era of rapid change, it is fair to ask how long the status quo will suffice.

Futurist Alvin Toffler warns that “The illiterate of the 21st century will not be those that cannot read and write, but those that cannot learn, unlearn and relearn.”

There are those in our industry who will survive and even thrive because they are truly willing to learn, unlearn and relearn. Or, put another way, “lather, rinse and repeat.”

Inertia, the tendency to do nothing, is a powerful force. Many won’t change until negative stimulation demands it. Individuals and businesses will finally change when their very survival is at stake. In today’s automobile marketplace, that time is fast approaching.

Times of Change

There’s evidence the traditional way of doing things is rapidly falling out of favor. There are three key reasons for this.

First, when Google surveyed North American automobile buyers, it found that 49 percent were frustrated during their dealer visits. Results were even worse among younger purchasers, with 63 percent of 18 to 34-year-olds saying they were frustrated by the process.

Second, the long-term brand loyalty that automakers once enjoyed is fading fast, and consumers are more than willing to look at new brands. In fact, 59 percent said they would consider a new brand, opening the door for a new wave of competitors.

Brand loyalty must be earned during every interaction between businesses and consumers. Today’s consumers won’t hesitate to flock to better deals and more interesting offers. They will often respond to innovation with a viral intensity unknown before the advent of social media.

Third, the consumption of transportation is rapidly shifting. In addition to radically new products, there are more transportation options, including ridesharing, flexible transportation platforms and even subscription-based services.

Where does this leave us?

Although we don’t have the financial resources of marketplace giants like Google, Walmart, Amazon, and Facebook, we can certainly learn from them. For example, Amazon’s Jeff Bezos teaches us about leveraging existing technologies to provide new levels of service to consumers.

In our industry, there’s simply too much friction damaging too many transactions. We must learn to leverage technologies from both inside and outside our industry to achieve more frictionless transactions.

Recommendations

Accordingly, I offer you these five recommendations:

1. Their experience, not yours

It is vital to develop innovative sales strategies that enhance your customer’s buying experience rather than your team’s selling experience. Walk in the customer’s shoes to the extent that you truly empathize with them and understand where they are coming from.

2. Stay current

Thanks in part to the power of the internet and social media, today’s consumers are more broadly educated and more aware. To keep up with them, you need to keep pace with changes inside our industry and in the world-at-large. Understand emerging trends in technology, retail and marketing. “Bundle” your emerging skill sets, and you’ll be better positioned to make new connections before your competitors do.

3. Think like a customer

Carefully listen to your customers in order to better see things from their perspective. You’ll quickly generate new ideas that will positively impact your business. Walk a mile in their shoes, and you’ll be glad you did.

4. Innovate with purpose

Don’t innovate simply to innovate. Align change with new consumer behaviors that are disrupting our industry. Embrace change, and focus your innovative efforts where they truly address the needs of today’s customer. Customers will ultimately do what’s best for them. Become the best alternative there is, and customers will seek you out.

5. Read an hour a day

Your mind is the very best tool you have. Lubricate, refine and expand your mind by reading at least an hour every day. In times of rapid change, an agile mind is priceless.

Finally, I urge you to look for other ways to follow Toffler’s advice to “learn, unlearn, and relearn.”

As you consider how your customers are disrupting the industry, disrupt your own long-held perceptions and challenge your traditional beliefs. Forge a new path into the unknown with confidence, dedication and imagination. Change always separates the also-rans from the leaders of tomorrow.

Remember, there is no better way to predict the future than to create it yourself. Carpe diem! Seize the day, and create your own compelling future!