Service generates profits beyond parts counter

Dave Koshollek
Publish Date: 
Apr 22, 2014
By Dave Koshollek

A dealership’s reputation has a lot to do with how its service department performs.

Admittedly, there are dealerships that have a strong reputation for other things, such as low prices. Low prices will draw customers, but they may not stay if there’s a mediocre service show.

Low price is the easy attraction. Set basement-level pricing and advertise same to attract the masses; but that can be a slippery slope. You generate a lot of ill will within the dealer network when you pull customers away from your competing dealers. Some of you dealerships have learned the hard way that, by poking the dealer network nest with rock-bottom pricing, you upset another dealer to such a level that he digs in and makes it his life’s ambition to shut you down. Being the low-price leader can put you dead center in a price war that has only one direction: down.

Noble Effort, not Necessary Evil

The more noble and understandably more complex path is to build your dealership’s reputation on delivering fantastic customer service -- and that must include a phenomenal service department. Problem is, many dealership owners (and business consultants, for that matter) don’t understand the broad value of a great service department. They talk about the service department as an unholy place -- after all, there are some scary individuals working back there. Some owners go so far as to disparage their own service department as a “necessary evil.”

More than one owner has told me they would shut down their service department in a minute if it wasn’t for the contractual obligations of their franchise agreement.

I say it’s long overdue to rethink what the service department brings to the game, which is a lot more than just vehicle maintenance and warranty repair. We need to question how we calculate the profit and loss in service, which until now has been based solely on service revenue and the cost of doing business in what is the most complex department in the store. We need to put a value on the strength of the service department’s magnetic attraction.

Service sells vehicles

We are moving in the right direction. In the last two years I’ve heard a handful of sales trainers finally admit, “Sales sells the first bike and service sells the second and third.” I’m happy to hear this, but it’s only half true. A top-notch service department creates a reputation that can be the deciding factor for a potential buyer when selecting which dealership to visit first.

Word-of-mouth is still the strongest marketing tool in this industry. Riders talk to each other often, and a common question is, “Is your dealership’s service department any good?” When the answer is a strongly expressed “They’re the best!” it’s often all that’s needed to motivate the visit that turns into a buy.