Running a retail business is often about getting the little things right. Automotive News had a recent article looking at how a Kansas Ford dealership has successfully built its quick service business (Kansas Quick Lane operation is well-tuned, Apr 5). Many car manufacturers have set up programs for their dealerships that allow the dealerships to compete with the likes of Jiffy Lube in offering quick, convenient, basic services. Ford’s version is call Quick Lane. A Quick Lane shop offers oil changes, brake jobs and such with no appointment. They also sell tires. As auto work goes, this is small potatoes. While the immediate gain might be small, these programs aim to build customer loyalty so the customer will also come to the dealership when they need serious transmission work or (more importantly) when they are ready to buy a new car.
The Quick Lane operation in question is at Olathe Ford in Olathe, Kansas. Last year, their net profits on gross revenue were 35%. This year they are aiming for 70%. The industry average for such a business is 27%. So how do they do this? Part of their success is that they manage the Quick Lane as a separate business:
Dealerships typically roll any quick-service unit into the financial statements of the service department, said Paul Faletti, CEO of NCM [an Overland Park, Kan., consulting firm]. Olathe’s separate profit-and-loss statement for Quick Lane enables the operators to analyze the results better.
What do they do with that extra data? For one, they lay out customized incentives for workers:
His Quick Lane manager, Gary Coukoulis, runs daily statements tracking the unit’s sales of brakes, filters, wiper blades, shocks and other retail items. Advisers, who are charged with hitting an average revenue target per repair order, see daily statements showing their individual numbers. The process enables Romstedt and Coukoulis to give each adviser an opportunity to improve tire sales or whatever category could use a boost.
“I can tailor their individual bump where they need some help,” Romstedt said. “I can have every adviser chasing a separate goal each month. Why should I bonus the guys who are already good in that area in order to move the guy who’s not?”
Tailored incentives even run to the dealership’s receptionist. When a service adviser recommends a repair but the customer doesn’t get it done in the current visit, phone calls and letters follow up. The receptionist is responsible for the letters and gets a bonus when the customer comes back to get the work done. All of these sales incentives apparently don’t come across as overly pushy to customers. To date, customer satisfaction surveys are above Ford’s national average.
I find this an interesting story. On the one hand, it shows how effective incentives for front line workers can be in services. On the other, I wonder how easily it can be generalized. For example, having incentives tailored to each sales adviser works at an auto shop because one person’s name is tied to each piece of work flowing through the system. It would be a little harder at, say, a department store where some customers may not speak to any salesperson or many. Further, it matters that this is largely a diagnostic business. The real role of the sales adviser is to explain the pros and cons of doing some bit of work now or later. At a department store, most customers come in looking for one thing or another. A guy in the market for a sports jacket isn’t likely to be swayed by a pitch for shorts.