The Old Rules Don't Apply
By Cliff Banks Ward's Dealer Business, Jul 1, 2007 12:00 PM

Judy Williams, director-parts and service for Downtown LA Motors, spends much of her time trying to find ways to streamline the department's operations to provide service advisors more time to sell to customers.

The Mercedes Benz store's service department is the 27th largest with $11.6 million in service revenue, according to the inaugural Ward's Service 150, a ranking of dealership service departments based on service revenue data from the Ward's Dealer 500, published each June.

Williams is at the front of what is a quickly changing tide in service departments today. The old rules don't apply any more — especially for dealerships that have relied on warranty work to carry their service departments.

Overall service revenue generated by franchise dealerships declined by nearly $5 billion in 2006. Much of that is due to warranty work that is quickly disappearing as quality continues to improve, according to Wayne Phillips, a Twenty Group director for the National Automobile Dealers Assn.

“The old days of hoping service doesn't lose money are gone,” he says. And that is true for brands such as Mercedes, whose vehicles sometimes require a lot of repairs — especially in the area of electronics.

“The factory has never condoned us relying on warranty work,” Williams says. “For us, the focus is on customer retention now.”

In short, successful service departments are getting creative in how they generate the customer-pay business. E-mail campaigns, customer-relationship management initiatives and online scheduling applications are some of the ways savvy service directors are capturing more business.

Downtown LA Motors is starting to use e-mail and is seeing strong responses, says Williams, but one of the more successful initiatives was a simple double coupon direct-mailed to the store's current customers, many of them who had not been in the service department for nine or 10 months.

“Our Saturday business was drying up,” Williams says. Many of the dealership's customers work in downtown Los Angeles but live up to 40 miles away — not a recipe for strong Saturday sales.

Following the mailer, the store increased its Saturday repair orders from a range of 20 to 30 to 75 to 150 repair orders. Customers received as much as $50 off for service.

But many service departments aren't even doing something as simple as that. “Not maximizing all of the opportunities is one of the biggest challenges in service departments today,” Phillips says.

Ironically, part of the problem is that service advisors are too busy answering the phone setting up appointments rather than walking the customer around the vehicle in the service lane upselling necessary repairs.

Service advisors leave a lot of money on the table when they don't fully evaluate the vehicle with the customer.

“Unfortunately, our competitors, such as the independent quick lube shops are upselling much better than we are,” Phillips says. “There's an old mantra in the finance and insurance departments that says ‘Present 100% of the menu 100% of the time to 100% of your customers. It really needs to be the same in the service department.

“The dealers doing a better job of selling to their customers, I can assure you they are probably on your Ward's Service 150 list — that's how they got there.”

Last year, Williams implemented Xtime's online service scheduling tool to free up her advisors so they could do more selling.

“It took me four or five months to sell my advisors on the concept,” Williams says. “I love it but it was hard to implement.” One of the challenges was developing a pricing guide for the service advisors.

“That may have been one of the hardest things I have ever done,” Williams says.

Customers are beginning to use it, Williams reports. “It frees us up and even helps us capture more e-mails.”

Although it sounds simple, getting e-mail addresses is proving to be a challenge. “This industry always seems to be a bit behind, doesn't it?” Williams says.

She has added a line in the repair order that almost forces the service advisor to ask the customer for the e-mail address. Williams also is looking at doing a raffle for the service advisors based on the number of e-mails captured.

“The e-mails are getting higher retention,” she says.

There are firms such as IMN, AutoRevenue and OnStation, the Cobalt Group's e-mail marketing and lifecycle management tool, that help dealers capture e-mail addresses as well as maintain their e-mail databases.

“There can be as much as 25% to 35% annual churn on a dealer's e-mail list,” says Charles Tildon, product marketing manager for OnStation.

One of OnStation's clients recently e-mailed a $4.99 oil change coupon to its customers to fill up the quick lube bays providing the advisors an opportunity to upsell. Over a two-day period, more than 100 people showed up with the coupon.

It's not just the service department that benefits from increased selling and customer retention. Most dealers understand that car sales drive service sales. If you're not selling cars, over time, your service revenue will begin to dry up.

But there is a flip side to that statement. Service sales can impact vehicle sales. The problem is, very few people in the industry consider the service department as a tool for creating vehicle sales.

Phillips recently moderated a Twenty Group in which one of the dealers was creating an incredible amount of business using a business-development center for the service department. He had originally implemented the BDC for his showroom, but it failed miserably.

The trick, says Tildon, is to approach marketing and customer service from a lifecycle management perspective.

“The goal at the end of the process is to get the customer back into the showroom and into another vehicle,” he says.

One thing is certain, the service departments that stay ahead and continually innovate are going to end with a majority of the service business, and in the end, most of the sales.

The trend is already happening. Service revenue accounts for 5.3% of total revenue for the Ward's Service 150. For the rest of the dealerships on the Ward's Dealer 500, service generated only 4.6% of their total sales in 2006.

That number has not changed much since Ward's began tracking it in 1998, although average service revenue per store has increased just over $2 million since then.

Rank	Dealership	Owner/Principals	City	ST	Service Revenue	Total Revenue
1	Fletcher Jones Motorcars	Fletcher Jones, Jr.	Newport Beach	CA	$36,580,343	$588,608,822
2	Braman Motorcars	Norman Braman	West Palm Beach	FL	$24,012,981	$393,985,468
3	Longo Toyota	Penske Automotive Group	El Monte	CA	$21,592,000	$703,103,000
4	Smythe European	AutoNation Inc.	San Jose	CA	$20,706,682	$169,297,275
5	Fletcher Jones Imports	Fletcher Jones, Jr.	Las Vegas	NV	$16,193,903	$202,416,692
6	JM Lexus	Patricia G. Moran	Margate	FL	$15,489,741	$421,916,093
7	American Service Center	Morton Zetlin/Alvin J. Brooks	Arlington	VA	$15,387,711	$190,488,548
8	Penske Motorcars	Penske Automotive Group	West Covina	CA	$15,238,000	$201,562,000
9	WI Simonson Mercedes	Sonic Automotive	Santa Monica	CA	$14,365,418	$209,262,235
10	Crevier BMW	Donald Crevier	Santa Ana	CA	$14,350,640	$269,366,380
11	House of Imports (Mercedes-Benz)	AutoNation Inc.	Buena Park	CA	$14,282,159	$284,750,832
12	Autobahn Motors	Sonic Automotive	Belmont	CA	$13,693,778	$162,019,096
13	Mercedes-Benz of San Diego (& Maybach)	United Auto Group	San Diego	CA	$13,540,936	$170,939,614
14	Mercedes-Benz of Walnut Creek	Sonic Automotive	Walnut Creek	CA	$12,382,669	$125,055,042
15	Mercedes-Benz of Pompano	AutoNation Inc.	Pompano Beach	FL	$12,288,952	$155,027,738
16	Galpin Jaguar Lincoln Mercury Inc.	Herbert F. Boeckmann II	Van Nuys	CA	$12,276,255	$211,429,749
17	Mercedes-Benz of Houston Greenway	AutoNation Inc.	Houston	TX	$12,242,548	$196,552,502
18	Braman Motors	Norman Braman	Miami	FL	$12,242,071	$266,412,037
19	Mercedes-Benz of Fort Lauderdale	AutoNation Inc.	Ft. Lauderdale	FL	$12,203,513	$204,535,203
20	South Bay BMW/Mini	Frederick E. Hitchcock	Torrance	CA	$12,035,551	$224,038,794
21	Towbin Dodge	Daniel Towbin	Henderson	NV	$11,994,794	$146,407,686
22	Global Imports	Sonic Automotive	Atlanta	GA	$11,981,724	$181,150,954
23	Ray Catena Mercedes Benz	Raymond Catena	Edison	NJ	$11,817,154	$264,925,093
24	Galpin Ford	Herbert F. Boeckmann II	North Hills	CA	$11,778,706	$346,371,509
25	Chapman Scottsdale Autoplex, LLC	J. Baxter Chapman	Scottsdale	AZ	$11,683,595	$210,992,157
26	Longo Lexus	Penske Automotive Group	El Monte	CA	$11,664,000	$369,953,000
27	Downtown L.A. Motors Mercedes-Benz	Jeanette Shammas/Darryl Holter	Los Angeles	CA	$11,580,312	$218,424,527
28	Mercedez-Benz of Tysons Corner	United Auto Group	Vienna	VA	$11,482,133	$140,308,479
29	Earnhardt Ford Sales Co.	Hal J. Earnhardt III	Tempe	AZ	$11,447,977	$210,496,700
30	Stevens Creek BMW	Sonic Automotive	Santa Clara	CA	$11,402,615	$158,620,344
31	Gaudin Motor Co.	H. Gary Ackerman/H. Don Ackerman	Las Vegas	NV	$10,860,526	$230,008,835
32	Midway Chevrolet	Larry Van Tuyl	Phoenix	AZ	$10,589,353	$284,448,423
33	Norm Reeves Honda Superstore	David M. Conant	Cerritos	CA	$10,545,887	$252,700,866
34	Mark Christopher Auto Center	Christopher Leggio	Ontario	CA	$10,527,202	$222,598,460
35	Hendrick Lexus	Hendrick Automotive Group	Charlotte	NC	$10,347,653	$162,627,550
36	Beverly Hills BMW	Sonic Automotive	Beverly Hills	CA	$10,331,663	$132,757,085
37	Roseville Toyota	Sullivan Auto Group	Roseville	CA	$10,310,277	$235,018,466
38	BMW of Mountain View	AutoNation Inc.	Mountain View	CA	$10,256,940	$122,164,360
39	Tustin Lexus	David W. Wilson	Tustin	CA	$10,123,016	$181,943,022
40	Mercedes-Benz of Miami	AutoNation Inc.	Miami	FL	$10,112,262	$215,117,150
41	BMW of San Diego	United Auto Group	San Diego	CA	$10,025,496	$159,222,202
42	Momentum BMW/Mini	Sonic Automotive	Houston	TX	$9,839,053	$149,627,821
43	Power Chrysler Jeep Dodge	AutoNation Inc.	North Phoenix	AZ	$9,782,253	$181,967,218
44	Mercedes-Benz of Westmont	AutoNation Inc.	Westmont	IL	$9,647,116	$127,193,471
45	Mercedes-Benz of South Bay	AutoNation Inc.	Torrance	CA	$9,628,281	$286,972,987
46	BMW of Dallas	AutoNation Inc.	Dallas	TX	$9,564,763	$147,276,626
47	Capitol Toyota	Autofocus, Inc.	San Jose	CA	$9,551,686	$173,100,374
48	Mercedes-Benz of Chicago	Fletcher Jones, Jr.	Chicago	IL	$9,523,139	$96,418,997
49	Three-Way Automotive Group	Harold Meek	Bakersfield	CA	$9,469,527	$198,912,510
50	Lexus of Stevens Creek	Patrick Kane	San Jose	CA	$9,429,000	$177,074,000
51	Fred Haas Toyota World	Fred Haas	Spring	TX	$9,425,172	$253,655,035
52	Bill Heard Chevrolet, LTD	William T. Heard	Sugarland	TX	$9,424,000	$219,395,000
53	Pinnacle Nissan-Infiniti	Martin Peters - Larry Van Tuyl	Scottsdale	AZ	$9,335,464	$180,783,669
54	Drew Ford, VW, Hyundai & Isuzu	Joe Drew/William Drew	La Mesa	CA	$9,308,440	$138,124,166
55	Carr Chevrolet	Wallace Preble/Gene Bradshaw	Beaverton	OR	$9,252,049	$199,383,753
56	Lute Riley Honda	Sonic Automotive	Richardson	TX	$9,205,922	$158,263,731
57	Camelback Toyota	John O'Malley & Larry Van Tuyl	Phoenix	AZ	$9,141,449	$208,406,788
58	Lexus Kearny Mesa	United Auto Group	San Diego	CA	$9,069,320	$141,215,774
59	BMW North Scottsdale	United Auto Group	Phoenix	AZ	$8,939,734	$153,334,590
60	Sanderson Ford, Inc.	David Kimmerle	Glendale	AZ	$8,865,271	$241,603,394
61	Momentum Jag Porsche Volvo	Sonic Automotive	Houston	TX	$8,852,698	$111,153,876
62	Sam Galloway Ford, Inc.	Sam Galloway, Jr.	Ft. Myers	FL	$8,799,783	$218,393,142
63	Mercedes-Benz of Orlando	AutoNation Inc.	Maitland	FL	$8,799,361	$137,957,238
64	Courtesy Chevrolet	William R. Gruwell	Phoenix	AZ	$8,771,780	$297,029,779
65	Braman Honda	Norman Braman	Miami	FL	$8,705,369	$190,756,478
66	Hendrick Imports	Hendrick Automotive Group	Charlotte	NC	$8,702,968	$137,191,131
67	Herb Chambers Motorcars of Boston	Herb Chambers	Somerville	MA	$8,605,976	$104,782,323
68	Dave Smith Motors	Ken Smith	Kellogg	ID	$8,545,142	$438,366,312
69	Lund Cadillac Hummer Saab	John R. Lund	Phoenix	AZ	$8,501,105	$115,951,144
70	Rick Case Honda	Rick Case	Davie	FL	$8,453,000	$218,435,000
71	Gwinnett Place Honda	Hendrick Automotive Group	Duluth	GA	$8,417,515	$180,170,923
72	Stevens Creek Honda	Sonic Automotive	San Jose	CA	$8,416,857	$123,920,521
73	Greenway Ford	Frank Rodriguez; Carl Atkinson	Orlando	FL	$8,387,159	$145,233,238
74	Kearny Mesa Toyota-Scion	United Auto Group	San Diego	CA	$8,327,373	$113,001,268
75	Herb Chambers Honda of Boston	Herb Chambers	Boston	MA	$8,286,921	$123,262,287
76	Desert Toyota	AutoNation Inc.	Las Vegas	NV	$8,238,732	$164,898,694
77	Brown & Brown Chevrolet	AutoNation Inc.	Mesa	AZ	$8,236,044	$255,579,846
78	Mercedes-Benz of Houston North	AutoNation Inc.	Houston	TX	$8,191,554	$122,962,089
79	Power Toyota Tempe	AutoNation Inc.	Tempe	AZ	$8,191,253	$204,845,902
80	GO Toyota	AutoNation Inc.	Centennial	CO	$8,165,010	$236,240,037
81	Roseville BMW	AutoNation Inc.	Roseville	CA	$8,116,684	$120,226,842
82	Atlantic Automall	John Staluppi	West Islip	NY	$8,086,952	$238,786,832
83	Lexus of Palm Beach	AutoNation Inc.	West Palm Beach	FL	$8,071,302	$176,233,163
84	BMW of Austin	United Auto Group	Austin	TX	$8,058,028	$114,612,068
85	Al Serra Auto Plaza	Joseph O. Serra	Grand Blanc	MI	$8,015,647	$244,970,841
86	Michael Cadillac, Inc.	Michael L. Rosvold	Fresno	CA	$7,995,972	$225,631,620
87	East Bay BMW	Hendrick Automotive Group	Pleasanton	CA	$7,985,581	$103,985,666
88	Showcase Honda	Tom Buis - Larry Van Tuyl	Phoenix	AZ	$7,936,261	$154,396,683
89	Libertyville Toyota	AutoNation Inc.	Libertyville	IL	$7,839,728	$147,654,639
90	Bill Heard Chevrolet Corp.-Las Vegas	William T. Heard	Las Vegas	NV	$7,806,000	$130,253,000
91	Champion Toyota Austin	AutoNation Inc.	Austin	TX	$7,788,664	$169,020,822
92	Maroone Ford of Margate	AutoNation Inc.	Margate	FL	$7,766,802	$178,750,656
93	Lexus of Rockville	Sonic Automotive	Rockville	MD	$7,713,893	$113,134,032
94	Millennium Superstore	John Staluppi	Hempstead	NY	$7,707,285	$219,975,066
95	Desert BMW of Las Vegas	AutoNation Inc.	Las Vegas	NV	$7,648,134	$106,479,555
96	Newport Auto Center	AutoNation Inc.	Newport Beach	CA	$7,521,531	$150,194,621
97	Folsom Lake Ford	Chuck Peterson	Folsom	CA	$7,506,772	$94,321,276
98	Fletcher Jones Motorcars of Fremont	Fletcher Jones, Jr.	Fremont	CA	$7,476,795	$91,224,255
99	John Sullivan Chevrolet	John L. Sullivan	Roseville	CA	$7,429,121	$176,058,113
100	Lexus of Tampa Bay	AutoNation Inc.	Tampa	FL	$7,381,444	$148,924,034
101	Maroone Chevrolet of Pembroke Pines	AutoNation Inc.	Pembroke Pines	FL	$7,353,998	$167,730,858
102	Toyota of Orange	David W. Wilson	Orange	CA	$7,350,396	$219,951,607
103	Mercedes-Benz of Pembroke Pines	AutoNation Inc.	Pembroke Pines	FL	$7,311,986	$122,159,885
104	Herb Chambers BMW/Mini	Herb Chambers	Boston	MA	$7,260,972	$143,735,734
105	Performance Chevrolet	Hendrick Automotive Group	Chapel Hill	NC	$7,258,370	$100,479,896
106	AutoWest Chrysler Jeep Dodge Roseville	AutoNation Inc.	Roseville	CA	$7,234,641	$128,011,109
107	Koons Tysons Toyota	James Koons	Vienna	VA	$7,223,895	$216,818,086
108	BMW of Fairfax	Sonic Automotive	Fairfax	VA	$7,182,979	$119,665,091
109	Hudson Toyota - Scion	United Auto Group	Jersey City	NJ	$7,155,574	$184,890,676
110	Power Nissan Tempe	AutoNation Inc.	Tempe	AZ	$7,053,264	$139,944,712
111	Herb Chambers Lexus of Norwood	Herb Chambers	East Walpole	MA	$7,051,425	$165,423,430
112	Chapman Chevrolet Isuzu, LLC	John H. Chapman	Tempe	AZ	$7,022,848	$197,888,764
113	Ancira Winton Chevrolet Inc.	Ernesto Ancira Jr.	San Antonio	TX	$6,997,647	$136,247,359
114	South Bay Toyota	David W. Wilson	Gardena	CA	$6,993,018	$147,755,588
115	Fairfax Honda	Robert Rosenthal	Fairfax	VA	$6,989,491	$118,350,861
116	Power Toyota Irvine	AutoNation Inc.	Irvine	CA	$6,977,792	$171,208,267
117	Mercedes-Benz of Sarasota	AutoNation Inc.	Sarasota	FL	$6,934,809	$119,186,684
118	Gillman Honda South	Ramsay H. Gillman	Houston	TX	$6,926,193	$130,247,348
119	Fred Anderson Toyota of Raleigh	Fred Anderson	Raleigh	NC	$6,922,334	$159,075,733
120	Lexus of Bridgewater	United Auto Group	Bound Brook	NJ	$6,913,075	$114,821,287
121	Ford of North Scottsdale	AutoNation Inc.	Scottsdale	AZ	$6,904,406	$125,162,893
122	Wilde Lexus of Sarasota	Mark Wilde	Sarasota	FL	$6,902,984	$137,925,064
123	Lauderdale Imports Ltd./BMW	J. S. Holman/Dan Villani	Ft. Lauderdale	FL	$6,874,452	$142,821,870
124	Courtesy Toyota	AutoNation Inc.	Winter Park	FL	$6,799,190	$158,211,513
125	Rosenthal Jaguar Land Rover	Robert Rosenthal	Vienna	VA	$6,787,066	$94,360,747
126	Burt Toyota, Inc.	Lloyd G. Chavez/Lloyd G. Chavez, Jr.	Englewood	CO	$6,751,876	$135,170,693
127	Bell Honda	Larry Van Tuyl	Phoenix	AZ	$6,751,621	$112,859,968
128	Honda of Tysons Corner	Sonic Automotive	Vienna	VA	$6,728,951	$89,554,473
129	Criswell Chevrolet	Harry E. Criswell III	Gaithersburg	MD	$6,723,127	$177,935,421
130	Power Toyota Cerritos	AutoNation Inc.	Cerritos	CA	$6,713,212	$214,457,814
131	Right Toyota	David W. Wilson	Scottsdale	AZ	$6,650,415	$170,273,588
132	Appleway Chevrolet	AutoNation Inc.	Spokane	WA	$6,624,948	$158,113,329
133	Schaumburg Honda Automobiles	Robert V. Rohrman	Schaumburg	IL	$6,586,974	$139,320,695
134	Landmark Honda	Robert Rosenthal	Alexandria	VA	$6,559,244	$106,758,711
135	Prestige Imports	Henry C. Hansel; Stephen E. Hansel	Santa Rosa	CA	$6,552,361	$71,652,209
136	Maroone Chevrolet of Greenacres	AutoNation Inc.	Greenacres	FL	$6,546,683	$148,645,761
137	David Maus Toyota	David Maus & Cecil Van Tuyl	Longwood	FL	$6,539,074	$204,473,251
138	Capitol Honda	United Auto Group	San Jose	CA	$6,501,142	$122,574,071
139	Wilde Toyota	Mark Wilde; Pat Donahue	West Allis	WI	$6,500,468	$152,871,080
140	Van Chevrolet	Chuck Mullins & Larry Van Tuyl	Scottsdale	AZ	$6,492,548	$161,958,893
141	Jones West Ford	Richard West, Jr.	Reno	NV	$6,487,936	$88,317,503
142	Ray Catena Lexus of Monmouth	Raymond Catena	Oakhurst	NJ	$6,477,452	$206,026,300
143	Atlantic Toyota	John Staluppi	Amityville	NY	$6,476,002	$145,208,521
144	BMW of Pembroke Pines	Joseph S. Holman	Pembroke Pines	FL	$6,469,875	$138,277,999
145	Herb Chambers Flagship Motorcars	Herb Chambers	Lynnfield	MA	$6,468,370	$85,635,832
146	Lexus of Serramonte	Sonic Automotive	Colma	CA	$6,449,007	$107,299,200
147	Power Chevrolet Superstition Springs	AutoNation Inc.	Mesa	AZ	$6,441,479	$107,849,089
148	North County Ford	Jim Crowley	Vista	CA	$6,438,771	$78,324,812
149	Westway Ford	Cecil Van Tuyl & George Davey	Irving	TX	$6,422,152	$115,075,475
150	Five Star Ford of Texas	Sam Pack	N. Richland Hills	TX	$6,421,016	$205,374,929
* Based on 2007 Ward's Dealer 500 service revenue data. No advertising or other promotional use of the Ward's Service 150 may be used without the prior written permission of the Ward's Automotive Group.