Overhead Absorption slides towards 50% - Business Lunch

03 September 2012

Is your investment in Electronic Visual Health Check (EVHC) technology giving you the result you were promised?

Overhead Absorption slides towards 50% - Business Lunch

Growing retail work in the service department is the key to reversing the worrying trend in absorption. Focusing on the sale of service plans will help retain service customers, but once the vehicle is in the workshop, repairers must ensure that the EVHC does its job in fulfilling the duty of care to the customer and optimising retail hours per job card.

Having the EVHC technology itself does not guarantee success in delivering results, but it can be an accelerator for good people who adopt a consistent approach to the process.

Electronic VHC is often  sold as a panacea for growing repair revenues in the workshop but unless it is used effectively, it can be just another expense that needn’t have been incurred.

Using the VHC effectively is about delivering a consistent approach in order to maximise the opportunity in aftersales. This is achieved in three stages:-

1. The VHC should be positioned with the customer at each of the key stages in the selling process:-
• Booking / Reception / Mid Repair / Hand Over.
This will positively establish the concept and value of the VHC in the customer’s mind

2. EVERY car should be given a Visual Health Check, not just 60 or 70 percent of them, with a minimum benchmark of 95% in order to get close to fulfilling the duty of care and peace of mind for the customer.
An incomplete set of VHCs means repairers could be missing out on revenue or even miss a safety related problem with the customer’s vehicle.

3. The VHC should be carried out following the 45 minute rule:-
• The VHC must be completed within the first 15 minutes
• Parts availability must be checked and the job costed within the next  15 minutes
• Any identified work must be explained to the customer within a further 15 minutes

Identifying items quickly and having them approved within a short timescale improves the likelihood that identified work will be authorised and hence completed the same day.

The current franchise model in the UK relies heavily on maximising aftersales revenue in order to absorb the overhead that operating a franchised outlet requires. The competitiveness of the new car market makes it such that very few franchises are able to support a shortfall in absorption levels out of vehicle sales direct profit. If absorption continue to slide towards 50%, the likely consequence will be that the current franchise model will become continuously less viable and more franchised dealers will fall by the wayside either through insolvency or takeover.

Take the challenge! Look at the VHC process in your business with a critical eye and ask whether it is delivering what you and the customer expect.

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