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Unlocking the Hidden Profits in Your Service Department

14 Mar, 2003 By: J.J. Morrison imageSource

Unlocking the Hidden Profits in Your Service Department

How would you like
to find a locked treasure chest full of profit right in your own dealership?
Service departments, if designed and managed properly, can be an unbelievable
source of new revenue.

In order to unlock
the full potential for a service department to generate profit for the company,
it needs to be restructured around three key concepts. These keys are: research
by the dispatchers, training of technicians, and a compensation program for the
entire department.

Research by the

Most dispatchers only take the complaint and send out a service technician. They
do not even take a meter reading number when a service call is placed. This is
like closing the gate after the horse is out of the pasture.

The proper procedure
should be to take down the information concerning the problem and get a meter
reading number. Now, before the call is dispatched, the dispatcher should go
through a 16-point research checklist looking for profits. When the dispatcher
does the research, they will find hidden profits.

For example, a copy
quality call comes in on a chargeable (time and materials) account and the meter
reading number is 125,000. Point number one on the dispatcher's checklist is to
always check the drum meter reading expiration number, (DMRXN). If the drum went
into the machine at 50,000 copies and is good for 50,000 copies, then the DMRXN
is 100,000. The call she just took has identified that the customer is 25,000
copies over the manufacturer's drum replacement number. The customer needs a new
drum…not just service for copy quality. There's one untapped profit. Now the
dispatcher should continue looking for missed profits by completing the rest of
the research process.

You may be saying to
yourself, "most of my customers are on a maintenance agreement (MA) and
drums are included." If that's what you're thinking, you have missed the
point. Approximately 20 percent of your accounts are on time and materials, and
you are not getting all the profits that you can. Besides, there is a checklist
that is a major moneymaker for MA customers as well. What matters is to
understand that research is the first crucial key toward having an unbelievably
profitable service department.

Training Service
Department Technicians

Given new tools and insights, technicians are taught how to use the research
provided by the dispatcher. To continue with our previous example, the
dispatcher tells the technician, "this is a copy quality call and he is
25,000 over the drum replacement number." Now, with proper training, the
technician walks in, installs a new drum, and thus does the job right the first

If the customer does
not want the part that is needed, a new tool, the liability waiver (December
2002 imageSource feature) is taken out for the customer to sign. A liability
waiver is worded to the effect of, "I hereby understand the ramifications
of not performing factory specified service on my machine, and it may void my
…" The customer will seldom sign the waiver as it places the
responsibility for problems on them. Rather, they let the technician install the
billable parts that are needed. The technician does not have to "sell"
anything and yet billable parts are being "sold" which means more
profits for your company.

A different
philosophy must be applied to the service technicians. Don't just ask the
technicians to run in and do the job as fast as they can and get to the next
call. Rather, they need to be trained to take the time to thoroughly examine the
machine. If it needs a transport roller, chances are it needs a transport roller
kit. Is the machine over 3.5 years old? Does the machine really need a complete
overhaul or is it a candidate for replacement? Overhauls usually net an average
of $1000 profit; replacing a machine for an existing customer is an easy sale.
Proper training of the technical staff is the key to get the customer to do what
really needs to be done.


So the question is: How can you motivate a dispatcher to do this research and
get the "non-selling" technicians to want to find hidden profits? The
answer is the third key - Pay them! People work their pay programs. It's that
simple. A compensation program must be put into place that is fair and equitable
to all service department personnel. Making a comp program where one individual
gets paid when they sell something or turn in a lead or has less callbacks is
totally wrong! Your sales manager gets an override on the sales department, why
doesn't your service manager get an override on the service revenues?

A properly designed
compensation program can cost the company nothing and has three major
advantages. First, it will make your technicians the highest paid in the area,
virtually stopping the expensive problem of personnel turnover. Second, when the
service department employees realize that they can "out-produce" just
about anyone, there is a great sense of pride and enthusiasm in their work.
Lastly, and of primary benefit and concern to the owner, the compensation
program makes the goal of the service department personnel the same as that of
the business owner: TO MAKE MORE MONEY.

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