Monday, Monday, Monday, it's the battle of the century! Today's big match is Dealerships vs. Independent Shops…. Who Has the Advantage? Find out now! But before we get to the title fight, let's start with what's happening outside the ring…
So I rented this Airbnb on this lake up in Washington. My family's had property there forever and every summer I would go there and we would water ski until our hands swelled off. Swelled? Swole? Anyway, even if we got there late, we'd still water ski in the dark with a flashlight.
However, this generation of kids you guys are raising don't water ski. You know what they do? They blow up these inflatable lounge chairs, not even inner tubes, and they sit there texting behind the boat!
Listen: everyone tell your kids to put down the phone or Xbox and actually go outside and – I don't know – throw rocks at cars or something. Just as long as it's not from an overpass…
We gotta acknowledge that these kids are lazy. You're raising a generation worse than the last lazy generation!
Okay, the “back in my day” rant's over. Now onto the next one…
I drove by the Chevy dealership by my mom's and there were no cars for sale. Zero. They won't have cars until the middle of next month. Meanwhile, we still got clients. We did three of our monthly calls and our elite call with all the elite managers in our coaching group. Then, we had two of our bigger dealer groups and record months, booked out, two weeks, crazy.
And the whole time, I wasn't wearing pants!
But now… the moment you've been waiting for… Let's get ready to rumble!
The Shop Showdown: Dealership vs. Independents. Who has the advantage?
Two enter, one leaves… with the advantage. Today, we're going to talk dealerships and, in the next episode, its the independents' time to shine. Think of it like they're coming in with their entrance music right now, sitting in their corners, getting psyched up by their coaches. “You're gonna eat lightning and crap thunder!” All that.
In the blue corner is dealerships. That's gonna be me while next episode is gonna have Jeremy plead his case.
Number 1: Dealerships sell cars
The first advantage they have is that, in addition to service, they sell cars. If a car needs more work than it's worth, the customer can just walk up to the sales department. Granted, service is an afterthought in most dealerships, but the fact that they can sell a car is still an advantage. Not saying that they always use that advantage, but they could if they wanted to.
Number 2: Dealerships have perks
The next one is perks. Dealerships have more perks for their customers than independents. For example, loaners and shuttles.
Part of those perks is contingency. In most independent shops, there's like three customers that need a shuttle at the same time. In a dealership, you can pull somebody from somewhere. I'm sure there's somebody sitting around in Parts that's not doing anything. Another one is carwash. We had a dealership client that even had a movie theater! Christian's even seen one with a sushi bar!
Number 3: Dealerships have expertise
Number three is expertise, meaning expertise at fixing the same model car over and over again. In an independent shop, you could get an F-150 pickup one day and a BMW 3 Series another day, and so you might not have the special tools for each one. Sometimes you don't even have all the diagnostic equipment!
In a dealership, you have the tools and you have factory training. Part of that means they train techs to work on specific cars. Some dealerships not only have technicians that work on specific cars, some techs only do a specific service like suspension or transmissions. They're specialized so if you got a drivability guy, he knows everything about drivability ever for that manufacturer.
Number 4: Dealerships have the Parts Department
Next is the parts department. Believe it or not, that's actually an advantage. If you're a Ford dealer and you have a lot of F-150s and they go through brakes a lot, you have those brakes and rotors on hand. If the parts manager is doing their job, you're going to have the stuff that's needed, and they'll have a bunch of them right there in the back based on trends. You just walk back and somebody's there to put it on a repair order.
Number 5: Dealerships do everything
Next one is dealership service departments are one-stop shops. Most of the independent shops we talked to don't do tires or alignments or they don't have a body shop. If a dealership doesn't have a body shop, they'll have a relationship with the body shop that they get kickbacks from for sending them business, right? Let's say you wanted to exercise your home field advantage by being a one-stop shop. It would be very inconvenient for a customer to go to your shop to get the widget replaced, then go to another shop to get tires.
I don't know if you guys experience this as a day-to-day thing in your personal life, but the one thing that people don't have enough of is time, right? So a lot of times, a dealership is gonna have tires that are more expensive, but a customer isn't going to spend another two hours at some other shop they don't trust when they can get it all done at the dealer and save time. And if the car is there for the day, why not just have it all done there to save multiple trips?
Number 6: Dealerships have built-in traffic
This next one's a huge advantage: dealerships have built-in traffic. The service department in a dealership has built-in traffic because the customer has to come back in for the warranty when there's recalls. You don't have to be good at marketing! Basically, you can live off the marketing of the dealership most of the time while an independent shop has to spend money on marketing. The amount of money an independent shop spends on marketing is maybe 10 times what a dealership service department would.
On top of that, the little marketing that a dealership does is co-oped by the factory so they get money back! To be a good service manager at a dealership, you don't really even need marketing in your toolbox most of the time as long as you're at a good dealership that sells a lot of cars. It's dependent on the car sales. If a dealership isn't selling cars, then it ultimately hurts the service department.
Number 7: Dealerships have state-of-the-art technology
The last one I have is that dealerships embrace technology, and a lot of that's driven by the factory. Let's say you own a Chevrolet in Los Angeles and you want to make an online appointment. Out of 10 dealers, how many do you think you can make an online appointment with? The answer is it's 10 for 10, and keep in mind that this isn't just making things more convenient after COVID. Every dealership that you can hit here in LA or Orange County with a rock, you can make an online service appointment. 4 out of 10 independents offer online appointments…
So that's it for round one. Dealerships look like they might retain the title for now, but who knows. Maybe come next episode, Independents will be an underdog story. Between now and then, leave a comment on here or YouTube advantages that you think dealerships have over independents that I might have missed, because I think all you smart people in the audience are going to come up with some good ones to help my case even more. I'm sure some of them are gonna make me go, “Oh man! I wish I would've thought of that!”
So now it's time for our questions of the week:
“What advice would you give a parts manager who wants to transition to service? Let the jokes commence.”
Believe it or not, Jeremy said, “Go for it. It's about time.” I'm serious. Go listen or watch the episode. I think that first round of Dealerships vs. Independents psyched him out. Got into his head…
“Is there an ideal percentage for a door rate that an import dealership should be striving for? Our door rate is $120.”
If you have a good customer experience, well-trained advisors, and a pricing strategy that the advisors are executing on, your door rate means nothing whatsoever and your effective labor rate is what matters. It's all about the execution.
We have an elite member that manages a very big import store in the middle of the country where they do $12.95 oil changes for life if you buy a car there, and his effective was a little over 112. That's a negative effective labor rate. What it means at the end of the day is that he's got a team of advisors that properly execute on that pricing strategy. They're not just throwing it up against the wall and seeing what sticks! It's very thought out and methodical.
Another answer to that is get in on our coaching.
“If they buy repairs, should the customer get the diagnostic fees applied towards the repair shop or on top? I generally try to apply to build more of a relationship, but just curious. What do you guys think? Is that losing money or building a relationship?”
This is an age-old question that Jeremy's got the answer to:
If you give it away, you haven't built enough value in your diagnostic process. Once the diagnostic service is performed, the fee for service has been earned, and it's a fee that stays on the repair bill. You've got to build the value in it. You got to have processes and checklists. In today's world, the fact that you fixed the car right the first time, you should get fairly compensated for that, and the testing is part of it.
I think a bigger part of that question is what value as an advisor do you see for your time? It's more about how you see yourself and that value because, when I was a service advisor, customers were going to pay but I also took really, really good care of them. Unless you have 10 cars coming in every week that you have to do diagnosis on, what's going to happen if you sell the customers the diagnosis without rolling it in? How many of those are going to get towed or pulled out because of that?
Hopefully zero. It just doesn't happen. It's in your head. You're thinking with your wallet and you're not putting a value on your time and how much you're going to take care of customers. Customers pay for better service! Start looking at it like, “Hey, customers are going to pay for me, but I'm going to take really, really good care of them, and I'm going to be the best advisor they ever had.” There's a premium for that.
I've never even quoted a customer diagnosis. You'd be setting yourself up to do everything twice. What I did as an advisor was, I never quoted diagnosis, but I got a repair authorization. Let's say you got a radiator leak on your BMW. I'm going to give a figure of $2,500 to work with but I also tell the customer that it's the worst case scenario and we'll know more after a tech checks it out. If it's more or less, I'll give them a call.
By establishing it with two calls instead of five, I'm saving time for both the customer and for the tech not having to go back and forth. 80% of the time, they sign and say okay. The other 20% says, “Oh, I just want you to check it out. I'm going to take it to my mechanic.” In that case, you can still try to get their business. What if they say they're getting ready to trade it in? Well, in that case, let's not even diagnose it. Let's go down and look at some cars and sales will fix it. But in their mind, they're still working with $2500.
Customers don't come in and expect their cars to get fixed for free or even $150 in diagnosis.
That's it for this week's questions. Tune in next time for round two of Dealerships vs. Independents. I got in Jeremy's head today, but is he going to come back swinging?
If you got anything to add to either list, post it in the comments and let us know what you think. Maybe place some bets. Thank you so much, and we'll see you next time on Service Drive Revolution!