Posted by Joe Gargiulo on Thu, Mar 29, 2018 @ 11:45 AM
Increasing parts sales at auto dealerships is an ongoing challenge across the industry. Many experts have thrown their hats into the ring of public opinion on the matter, but few are thoroughly connecting the dots or offering one-stop shopping for useful information. The following discussion was established after reviewing numerous articles followed by much needed aggregation. Sources are credited where necessary.
Any list of recommendations for increasing parts revenue at 21st century auto dealerships should include the use of technology. It is possible to take small steps without it — such as improved merchandising at the parts counter — but significant impact requires the application of two essential technologies (dealer management systems and online sales) in conjunction with effective merchandising and customer service.
Dealer management systems (DMS) are the focus of this first installment in a two-part series.
Dealer Management Systems
Dealer management systems provide a framework for controlling the functionality behind parts sales and the means to analyze every manner in which parts sales influence dealership revenue.
More specifically, DMS platforms include suites where changes affecting parts sales can be implemented: accounting, service, sales, F & I, CRM (customer relationship manager), marketing, advertising, social media, ecommerce and web content management. For example, the accounting suite can provide the reports and key performance indicators (KPIs) enabling informed decisions about parts purchasing, pricing and inventory; CRMs can identify potential parts buyers among hundreds of existing service department customers; and web content management can reach thousands of new parts customers worldwide.
DMS platforms also include suites that don’t directly impact parts revenue: human resources and payroll, contracts and forms, auditing and tax returns, vehicle inventory and registration, lender management, warranty claims, reference sources such as Kelly Blue Book and much more.
Ken Rock discusses three approaches to increasing parts revenue in the article “Three Simple Pricing strategies to Grow Profits in Your Parts Department.”
His first two ideas are good, but his final suggestion, “Margin Pricing,” is an absolute must for parts sales at auto dealerships. Given that certain items have minimum markup, Margin Pricing automatically calculates the profit margin of every part to prevent items from being sold below cost to wholesale customers (independent garages or consumers called “shade tree mechanics”) who may receive discounts of 20 percent.
Customer Relationship Managers
Customer relationship management programs (aka CRM or customer relationship managers) organize and optimize contact lists and interactions with business-to-consumer (B2C) and business-to-business (B2B) customers. Salesforce and Zoho are among the leading stand-alone programs, but CRM suites are major components in most DMS platforms.
At the hands of creative individuals, CRMs offer unlimited potential for increasing parts sales at auto dealerships.
Consider this scenario: a dealership receives a memo from the manufacturer that it will be producing a new accessory to augment existing luggage racks on luxury SUVs. Knowing that his/her dealership has customers owning those same luggage racks, a parts department manager searches the CRM for individuals who purchased the racks in the past 24 months. Those customers are now the target market for this focused marketing campaign.
In a perfect world, someone who understand direct marketing pens a short pitch to introduce the item — and depending on the capabilities and automation of the DMS’ communications suite — a postcard, text message, or email containing an image of the accessory, or an automated voice mail message, is sent to each person in the target market. Some dealerships may send all four!
Conducting follow-up communications is also possible as long as direct replies to the postcards, texts, emails or voice mail messages are accurately logged into the CRM by dealership staff. For example, the parts manager can send a second round of memos to individuals not responding, or offer demos or complementary installations of the accessory for a limited time to those who did.
CRMs can also be used to increase parts sales at auto dealerships by tracking service or body shop customers. For example, the target market described above can be approached about the accessory the next time they visit for a service appointment. The service department manager should be apprised of and look for these marketing opportunities via updates in the CRM.
Other ways to market this same accessory include mentions in newsletters and email subscriber lists as well as the tried-and-proven method of outfitting showroom vehicles with accessories to create demand at the sales department and F & I levels.
Key Performance Indicators
CRM are also loaded with financial and inventory management capabilities that can be used to boost parts sales at auto dealerships.
Whether they are stock or customized calculations, a variety of reports and key performance indicators (KPI) can be generated to provide insight into parts department profitability: slow-moving inventory, obsolete parts, turnover rates, supply days, fill rate, fixed expenses as a percentage of total gross profit, purchase performance, gross profit margins (by department or individual), sales mix, monthly sales (by department or individual), sales per salary, internal versus external sales, sales revenue per square foot of retail space, and so on.
They can also be tracked by time period (day, month, quarter, year), period to period (month-to-month, etc) or by industry standards.
Parts department managers can expect help from the executive team, business office or accounting department in this instance. Those individuals can explain the significance of KPIs in terms of stocking strategies, pricing and promotions.
Part two of this series covers online sales, merchandising and customer service. In the meantime, consider all the ways for customers to purchase auto parts.
CrossCheck has been providing payment processing solutions to merchants since 1983 and even has a customized service for auto dealerships. Called C.A.R.S., naturally, CrossCheck's Auto Industry RDC Solution contains the Check on Delivery (COD) premium that simplifies parts sales to wholesale customers like auto repair, body and transmission shops. C.A.R.S. and COD are easy to use.
Checks are approved over the phone before parts are delivered because COD is used in conjunction with the Remote Deposit Capture and Check Guarantee components of C.A.R.S. Download our free guide to learn more.
Tags: Auto Dealerships