Whether a GSM, a service manager, a fixed operations director, or a GM, your show-rates are important. We believe this is a metric that can take dealers from Good to Great. If you’re in management, you’re probably aware of the show-rates for each of your departments, because it’s one of the easiest ways to increase revenue.
This is the first post in a two-post series focused on the importance of show-rates. Here we’ll focus on show-rates for fixed operations and in the second post, we’ll focus on sales. In each post, we’ll share why show-rates are more important than most people think, how to properly quantify the impact of your dealership’s missed appointments, and how you can improve your show-rates leveraging the latest advances in artificial intelligence (AI) to augment your existing efforts and staff.
For service managers and fixed operations directors, show-rate is very important because you are running the true profit center of the dealership. We all know that the gross profit margins for a service appointment can be nearly twice that of a new car sale, at 46.3%1. Not converting appointments means your service department isn’t only losing potential revenue, but also absorbing the cost of running your facility without generating revenue.
Before we embark on this journey into your service department and show-rates, allow us to add this disclaimer. We are making our assumptions based on NADA’s 2018 data. Therefore, our numbers will be relevant to some and less relevant to others. Our goal is not to get wrapped up in the weeds of OUR numbers, but rather to give you the tools and the formulas to plug in your service department’s data and start to convert YOUR appointments.
Quantifying the Impact
Calculating your show-rate is a fairly simple exercise: Show-Rate = appointments that show / total number of appointments scheduled. But how do we quantify the impact show-rates have on your fixed operations to create urgency for your staff? We’ll begin by calculating the value of a missed appointment using the average revenue per service customer ($298). We’ll also assume the average service department show-rate is 60%, and we know the average dealership completes 62 ROs per day. To be realistic, let’s take out the unscheduled RO’s such as walk-ins and quick service, which we’ll assume is 15% of the total ROs. This means 35 customers every day are not showing up for scheduled appointments. This equates to lost revenues of:
$10,430 / Day or $260,750 / Month
(To see the breakdown and math see the appendix below)
Next, let’s look at the cost implications of these missed appointments by including the operational expenses associated with a missed appointment, which include technicians and service advisor salaries. To keep things simple we’ll use the Federal Bureau of Labor Statistics average hourly rate for a fully burdened employee at a dealership of $30.232 and we’ll exclude other operational expenses like electricity, rent, etc..
According to NADA, the average dealership has 16 technicians per service department. At 62 ROs per day, each technician is completing 4 RO’s in an 8-hour workday. Therefore, each RO requires 2 hours of the technician’s time. And, since the average dealership has a support staff ratio of 1:3 per technician3, let’s just assume that the service advisor contributes a third of their time per RO. This gives us a per missed appointment fixed cost of:
$2,814.35 / Day or $70,358 / Month
(To see the breakdown and math see the appendix below)
In summary, you are scheduling 88 customers per day to get 53 to show up for their appointment and the 35 no-shows are actually costing you nearly $3,000 in lost productivity (the cost of the Tech and SA to not work on RO’s), and over $10,000 in revenue per day. So what’s the annual impact on your dealership?
$3.79M / Year
That’s a huge number! It shocked us too, but the numbers don’t lie. So now that we’ve quantified the value of each appointment and hopefully created some urgency, here’s what you can do to increase your show-rates.
Use Engaging Reminders
The quickest and easiest thing you can do is be proactive and send reminders to your service customers. Many scheduling and service systems offer this service. While these are helpful and better than nothing, they’re not adequate. These reminders put the burden entirely on the customer to follow up. How many reminders, notifications and emails have you personally received and ignored? Your customers are busy just like you, and if they receive a reminder while in a meeting, with the family, or doing one of the hundred other things they have in their day, they’re not likely to stop what they’re doing to call and reschedule their service appointment, even though it is important, they just won’t show up.
Case in point- We have a customer that used one of these other systems and still had a show-rate of just under 50%. They decided to dedicate one of their BDC reps to manually text each customer to confirm and engage customers needing to reschedule. Their customers were significantly more likely to text back to reschedule. This increased show-rates by nearly 40%. This jump is largely due to the power of engaging their customers with the opportunity to reschedule before they no-showed. But this solution does not scale and is costly with a fully burdened BDC representative costing nearly $5,000 per month.
Connect with your customers at the right time. Your customers expect timely, courteous, and helpful communication. Understanding when your customers are likely to engage is extremely important. Do your current systems leverage your dealership’s data to send reminders at optimal time intervals before their appointment? Are all of your reminders going out at the same time, inundating and frustrating your staff and driving your service levels down? Measure the performance of your reminders according to the time they go out and be sure your staff is ready and able to serve your customers when they’re needed.
Mode of Communication
Are you emailing, calling, or texting your reminders–if you’re doing anything at all? Don’t forget your customers are used to doing business with companies like Zappos and Amazon, or even more relevant Dominos. Yes, Dominos. Your customers can watch their pizza make it through every stage from preparation to baking and finally to delivery. Isn’t that amazing? They can watch a $7 pizza being made and know exactly where it’s at, but they have no insights into service progress for their $35,000 vehicle. Customers have their phones on them at all times and are over 90% likely to read a text message within the first 3 minutes4. While traditional text message reminders are helpful, how many customers are going to stop what they’re doing to call and reschedule an appointment? We know the answer: Not many.
“Dealers need to give their customers an opportunity to reschedule while they have them engaged, on the device most convenient for them, using the mode of communication most convenient for them.”
The Law of Reciprocity
When customers receive a reminder that is clearly not personal and system generated, there is no equity or investment in that customer from your dealership. This means customers feel no need or obligation to respond or update your dealership of whether they’re showing up or not. They don’t know and likely don’t care about the cost or revenue implications for your dealership. By conversationally and personally engaging every customer, the law of reciprocity kicks in and customers feel obligated to respond.
Auto Labs has developed Sophi, the first productivity bot designed specifically for automotive retailers. Whether a single location or a multi-franchise dealer group, Sophi can scale to deliver personalized and conversational engagements that drive a strong quantifiable ROI. For the fraction of the cost of a BDC agent, Sophi Reminders conversationally engages your customers and helps them to reschedule their appointment before they no-show, increasing your show-rates, revenue, and profitability. If you’d like to learn more about Sophi Reminders, visit our website at http://184.108.40.206, or schedule a demo with us here.
NADA 2018 Data https://www.nada.org/nadadata/
Federal Bureau of Labor Statistics https://www.bls.gov/ooh/installation-maintenance-and-repair/mobile/automotive-service-technicians-and-mechanics.htm
Assessing service advisors https://www.autodealertodaymagazine.com/308539/the-number-of-service-advisors-you-need