In the world of retail automotive, there are seemly endless amount of metrics for dealers to look at in their DMS. While this information can give dealers excellent insight into how their business is performing in minute detail, I constantly see dealers chasing down flawed or outdated metrics. If you recall, we already covered dealers chasing Used Vehicle Gross per unit in Part 1. If interested, you can see why I feel this is an Old School metric here.
Today however, I want to cover a new metric that I see dealers obsessing over, Hours per RO.
Hours per RO: How Should You Be Using This Metric?
For years I’ve heard dealers talk about Hours per RO. At NCM we heard about this metric so much we have it as a page sorting metric in our composites. Before you go and call me crazy in the comments below, I should clarify that Hours per RO is something we need to pay attention to. The issue dealers seem to fail to understand however, is that we need to be very careful as to how we compensate our service advisors and service managers with this metric.
For example, if you were to put too much emphasis on Hours per RO, and the people you are compensating for it also make and set appointments, you may have some unintended circumstances. We are all a product of our pay plans, and the average employee will do what they get paid for and avoid what we don’t, right? That’s just common sense. How eager is your service advisor going to be to set an appointment to replace wiper blades, batteries, burned out bulbs, or any other low hour work? Based on this premise, do you believe your service advisors want all the customers to come in or just big payers?
As dealers, GM’s, and service managers, we want all the gross we can possibly get out of our business. Don’t we want the customer to come to us for ALL their automotive? Of course we do! That’s why the big focus on selling tires. We don’t want anything to prevent the customer from coming to us for their automotive service needs. I even know of a dealership that has a body shop appraiser on the drive, and they don’t even have a body shop. Why? Because we want to handle all the customer’s needs, every single time they arrive at our store.
How to Check If Hours per RO May Be Hurting Your Dealership
So, now that we are aware of the different mindsets within your dealership, we can now begin to check if Hours per RO might be over emphasized in your store. First, look at your YOY Customer Pay RO count. Is it growing, stagnant or decreasing?
If you see this number declining, ask yourself, why in the world would it be declining? The variable departments are constantly adding units in operation for the service department, right? If the CP RO’s are declining, then your service department not only didn’t capture one single customer that was sold over the past 12 months, they chased away some of those that were already coming into your store. How can we tolerate this? Besides the Hours per RO issue we also need to look at customer friction points in our department:
- How easy are we to do business with?
- What’s your online appointment system? Is it effective?
- Do customers have to wait to pay a cashier or do your writers cashier their own clients?
- Can customers see their invoice online and can they pay online as well?
- Are your hours conducive to your clients’ needs, or do you run your department at the convenience of the employees?
What should you do with the Customer Pay Hours per RO metric?
Look at the Hours per RO spent on Used Vehicle reconditioning and see how it relates to Customer Pay Hours per RO. Shouldn’t they be close to the same? Aren’t they the same vehicles in most stores? If they are off, then we are either over-reconditioning our Used Vehicles or maybe we don’t have a viable Customer Pay MPVI (Multi Point Vehicle Inspection) process. Both of these scenarios are fixable and can be turned around. Try looking at the MPVI process as you would F&I. Both are menu driven. We actively coach and train how to improve penetration in F&I, maybe you could do the same with MPVI penetration of items found. When you first look at it, and track it, you’ll most likely be around 25% penetration of items found that were sold. Pay attention to it, coach it, and odds are you can improve it to 40% or more.
The associates of NCM can help your dealership improve processes, performance, and gross. To learn more about the key metrics of your dealership, Manage Your Sales Staff Through CRM Metric, How to Track ROI on Digital Advertising, And the Most Important Service Metric is… are some additional articles from the automotive experts at NCM.
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