Profitability is at the forefront of every general manager’s mind. How profitable is your service department? What can you and your managers do to increase revenue?

We’ve found that most general managers and fixed ops directors primarily think about “more” — selling more cars, servicing more cars and selling more parts. What often gets overlooked is the optimization and getting better at selling, marketing and pricing their parts and services.

The following list is designed to enable your service department to increase its revenue.

1. CP Repair & Maintenance Labor Price Optimization

There are a few different elements that go into CP repair and maintenance labor price optimization. Both repair and maintenance are closely related, with strategies for both being nearly identical. The ultimate goal should be building client retention through transparent and “perfect pricing.”

Know Your Maintenance Mix Frequency
LOF and maintenance business is done to develop your customer’s perception of the work you do, the price you charge and, ultimately, the service you provide. If your customer’s perception of you is well developed when a repair comes along, you’re their guy, and they won’t even shop the price.

Capitalize on Repair Mix Frequency
Repair work is where your dealership has the opportunity to recapture some of the marketing dollars you gave the customer in the form of discounts early in the relationship. Over time, your shop will be able to make up for the discounts that have to be offered for the more competitive services (LOF and maintenance).

Getting customers and keeping customers with those LOF services is critical to building the trust and confidence that you do good work for a fair price so that when the repairs are needed, you are the default choice.

Perform an Op-Code and Pay Type Analysis
Incorrect Op-code usage can cost dealerships $2-$3 in CP ELR alone!

On the other hand, proper usage also allows technicians to check order history to confirm that a service they want to offer a customer has not been performed recently. Improper documentation can also create reduced price work, resulting in a lower warranty labor rate increase. Consistent documentation not only creates a better customer experience, but also allows meaningful sales history analysis.

Once your dealership has created a set of proper op-codes within your DMS, print out the list and provide it to your technicians as an easy reference guide!

2. CP Labor Compliance

It is essential that your service department tracks service advisor level price compliance by helping you generate daily labor sales/ELR compliance reports. Every dealership has a way of pricing out labor. Whatever your strategy is, service advisors who aren’t compliant can cause a major loss in profit.

In an effort to avoid losing out on a specific job over price, service advisors may offer discounts or even change the price on an RO. This is an understandable tactic; however, once your prices are determined and set, you’ll be surprised by the loyalty your consistency creates. Nearly every dollar in ELR improvement makes it down to your bottom line, so small but consistent changes add up significantly over time.

3. CP Parts Price Optimization

Oftentimes, when a service department is looking to increase their revenue, the first thoughts lead to selling more to existing customers or increasing traffic to get new ones. However, there is a third option, price optimization, which is usually overlooked. Formulating a strategic pricing strategy can be done by evaluating, identifying and optimizing specific parts to increase revenue.

The average dealer sells 1,200 different services. Doing some quick math, suddenly, you are managing and trying to optimize 4,800 different price points. Even if it were possible that you were able to optimize all these price points, they must be reevaluated every quarter to ensure they’re still perfect for retention and profitability. Having access to a robust database will set you up for maximum success.

Doing the work to optimize pricing pays off dividends when it comes time for warranty filings. It is equally important to apply price optimization to both parts and labor. Labor is updated on average three times every year, while parts is updated only once every two years!

4. Optimized Services Benchmarking

Monitor and improve your ELR by gaining visibility into which and how often your optimized services are being sold with the intent of driving more business to those services. Begin by tracking and identifying the top 5-10 services with your highest margin and encourage your service advisors to increase the sales of those services.

Service advisor training is the key to improving each advisor’s up-sell revenue generating potential.

5. Warranty Labor and Parts Rate Optimization

When your dealership does the tips previously mentioned in the months leading up to a warranty submission, you’ll be set up to obtain the maximum potential increase. Points 1-4 are designed to increase your CP, which in turn, optimizes your CP ELR for the submission process.

Filing warranty claims isn’t just about going through the motions. Be wary or critical of companies that help you file without assisting you through the other points listed here because you’re leaving money on the table by not getting the maximum possible reimbursement.

In Conclusion

We hope that you find the tips above useful for increasing the profitability and performance of your service department. With the information provided, any service department can take the steps necessary to work toward increasing profitability!