New Opportunities for Aftersales Profitability
The Aftersales Sales Cycle
Historically the dealership model has been driven by new car sales, used car sales and the profitability on financing. More recently changes in the UK market concerning EVs, direct to consumer sales and the agency model mean there is now even greater focus on aftersales profitability.
The good news is that the Aftersales sales cycle presents more frequent opportunities for customer touchpoints and to build a positive relationship with customers.
Aftersales is just as much about the future sales for the dealership, whether that’s a new car, used car or continued servicing and vehicle lifetime support.
Opportunities for Aftersales revenue
The quality of customer service and the customers’ perception of value needs to be really high. Any technology that improves the quality of this customer service and creates efficient processes is a win for aftersales. Most importantly, its about creating reasons to communicate with the customer or bring them, and their car, into the dealership.
Regular servicing, health checks, or tyres and alignment sales all represent opportunities for additional revenue and – with the right inspection technology – forward bookings. In the case of tyre and alignment sales, it may require investment in new technology and equipment, so how do you make the right decision about expenditure and investment?
Investing for Aftersales profitability
Facility utilisation is key to understanding aftersales profitability. Dealerships are rightly focused on what throughput is required to generate the revenue and overhead absorption available from aftersales. This influences the business focus and investment decisions. Capex decisions should also be influenced by the equipment ROI and its impact on Recovery per hour.
Recovery per hour of work is a measure of employee productivity and operational profitability. In simple terms, are technicians spending time on profitable work? How well are labour hours turning into billable hours?
Some work is more productive than others. Diagnostic work is often less productive, whilst basic servicing and pre-delivery inspections are more productive. Discounts, OEM fixed prices, and predefined times for specific work also affect profitability.
Why Recovery Per Hour is Important
Create ways to benchmark Performance
Comparing your technicians’ performance to industry standards or Dealership Group performance can reveal areas for improvement.
Build Incentive Programmes
Aftermarket managers can use this metric to design incentive programs. Higher recovery rates can lead to bonuses, motivating technicians to be more efficient.
Improve Cost Management
Tracking recovery per hour reveals where you might need to provide extra training for technicians.
Identify current Bottlenecks
Recovery per hour will reveal if outdated equipment is slowing down operations or if technicians are inefficient or if investment is needed to completely automate an operation. For example, a drive over tyre inspection system will present tyre wear and alignment condition within 10 seconds of automated inspection. The report can be shown on screen to any ‘while you wait’ customers, and emailed directly by a service advisor to those who have left their vehicle with you.
Equipment ROI and why it matters
ROI (Return on Investment) measures how well equipment investments perform. How much profit does equipment generate compared to its cost? A high ROI means your equipment is a smart investment, covering its cost and generating profit.
Investment decisions
High ROI shows you’re investing wisely in equipment that brings good returns. For expensive equipment, monitor ROI to ensure it’s a good investment.
A high ROI indicates when it’s time to replace old equipment with newer, more efficient options.
Justifying Budget
It helps prove to stakeholders that spending on equipment is worth it. High ROI can justify spending on upgrades or new equipment.
Financial Scrutiny
High ROI is useful when stakeholders or investors review your financial health.
Balancing Equipment ROI and Technician Productivity
Metrics needs to align with business goals. For expansion, focus on ways to boost productivity. For cost stability, emphasise ROI. It makes sense to regularly review both metrics. If one is high and the other low, it’s a sign of imbalance that needs attention.
The interesting point is this. Investing in the right equipment will provide a good ROI and create profitable work. In turn boosting technician recovery per hour. A win-win.
In the case of tyre inspection equipment, TyreSwift customer data has shown that for a workshop seeing 500 cars per month, 51% – 65%* cars entering a dealership workshop present with uneven tyre wear indicating wheel misalignment. And yet alignment equipment remains among the most underutilised equipment in the workshop. All too often just a handful of alignments are performed per week as part of larger suspension or ADAS jobs.
If a workshop seeing a typical 58% alignment occurence, with a profit per alignment of £65 were to convert just 1 in 5 of the alignment opportunities, the monthly margin is £3,770. That’s ROI on tyre inspection equipment of just 6 – 7 months.
The Importance of Sales Advisor training
Alignment is all too frequently not proactively sold as a service. We’ve seen that training for service advisors is key. Being able to talk knowledgeably about the inspection report and deal confidently with customer objections is what makes the difference.
It makes all the difference if customers understand the cost of not having the realignment done – measured in terms of accelerated tyre wear, increased fuel costs and poor driving experience.
Amber work detected by tyre inspection systems also presents valuable future sales opportunities for the Dealership. TyreSwift data shows that typically one third of all tyres inspected are within the 3-5mm tread depth range and represent amber work. This data provides a valuable metric for forward bookings performance.
Conclusion
The Aftersales sales cycle presents frequent opportunities for customer touchpoints and to build a positive relationship with customers. Making informed decisions about inspection equipment that creates more opportunities for customer conversations – in this case abour tyres and wheel alignment – is just one way to make a positive contribution to Aftersales profitability.
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