Draw Back Product Support Business with an EPMBy Steve Uible and George Wacaser
Article Date: 08-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.
A step-by-step outline for developing and implementing a genuine game-changer in your market.
Editor's Note: The authors of this article will co-present an AED Foundation seminar on this subject, Sept 24-25, in Baltimore, Md. Visit AED University for details about: "Plan for Profit: How to Build and Sustain Enhanced Planned Maintenance Programs"
Planned Maintenance programs in one form or another have had a rather spotty existence. How many dealerships do you know that have a well designed program that ensures their customers’ equipment is always being serviced according to manufacturer recommendations? Not very many, right? Auto dealerships lost this business a long time ago, and there is a reason for that, we might add. Jiffy Lube and its myriad brethren have listened to what car owners wanted, and they developed a plan to get that business. And their plan was so good that they became successful and even attracted many competitors; plus the fact that most dealers were not proactive with a plan of their own. They did not just lose this business; they gave it away.Could it happen to our industry? You bet it could! There are enough signs that today’s dealers could lose that valuable part of their business if they don’t have a plan to meet their customer’s needs. There is a definite need and demand for this niche in our industry, even in today’s struggling economy. A few dealers put EPM plans together years ago and have worked out all the details and problems – they are reaping the benefits today.
What’s an EPM Again?
Before we go any further let’s define an Enhanced Planned Maintenance Program. In last month’s CED, we discussed how technology has changed the equipment we sell, how differently we maintain it and all the new telematics tools that are now available to us. Planned Maintenance programs used to mean oil and filter changes performed on an hourly interval determined by the operators manual that came with the machine. But today, an Enhanced Planned Maintenance Program (EPM) often involves oil analysis with particle counts, GPS analysis and diagnosis, bypass filtration, extended oil change intervals and even guaranteed cost repair contracts. These types of items, along with our oil and filter changes, have evolved into today’s EPM.Don’t put this idea off any longer.The upsides are huge: happier customers, increased service revenues, increased parts sales, more whole goods sales, and better communication. And what are the downsides? Nothing but a total commitment from you, the dealer, and, well, a lot of hard work.We have been involved with PMs and now EPMs for many years, even back when the recommended oil changes interval was often 100 hours. But now we are putting together EPMs for dealers who want to take advantage of this beautiful opportunity that is before us.There are a number of pieces that have to come together for a successful EPM. We are going to briefly discuss them and hopefully show how interrelated they are.
Determine the Focused Objective For Your EPM
There are many reasons why you may want an EPM – here are just a few for different dealers we have worked with. (1.) Improve service profitability; (2.) Grow market share; (3.) Protect an already high market share; (4.) Sell more competitive parts; (5.) Win back unhappy customers; (6.) Protect eroding sales margins; and (7.) Better maintain your customers’ equipment for improved performance.These are just a few ideas that some dealers have determined to be their EPM objective. Give this one a lot of thought before you proceed. What are you trying to accomplish? What is your main problem? What do your customers see as your main weakness? What are your strengths you can build on? The answers to these types of questions will determine the elements of your EPM. No two dealers are exactly the same, and no two EPMs will be the same. Be very clear of your objective.
Building Your Quote Model
Once you truly know your objective, the next step is to start building a foundation for your EPM. At the most basic level you will probably want to at least fulfill all the manufacturer recommended guidelines; the old oil and filter changes, so to speak. Start with just one popular model, and by using standardized parts and labor determine your standard charges for these basics. Typically this will be for a 250-, a 500-, a 750- and a 1,000-hour service, but this totally depends on the equipment and manufacturer you are dealing with. Jiffy Lube does not care what kind of car you bring in (unless it is a truck) – their cost is always $39.95 or something to that effect. We have to become comfortable with that concept.Along with this, you may consider things like a safety inspection or an operational or downtime inspection. Many dealers have found value in making inspections a part of their EPM. How about travel time? How about after-hours services? These are all questions that will need to be answered before you proceed. Consider what your customers tell you they want. Equally important is what your main competitors are offering. You want to differentiate your dealership from them and have a unique product for your marketplace.You now have the foundation to start building on. So let’s go on to the really fun parts.
How are you going to get paid for all the services you are going to be providing? We know of at least six different ways for you to consider. There are pluses and minuses for each, but we know of dealers who have successfully been paid using at least one method or some combination of them.
(1.) Pay as you go. Charge the customer a guaranteed fee each time you service his machine.
(2.) Pay in advance, as part of the lease or the sales contract – maybe for a 1,000 hours or more of operating hours.
(3.) “Free” to the customer by including the EPM cost in the sales price. Some high-end car manufacturers are now doing this.
(4.) Included in rental rates, either for rental customers or dealer-owned rental fleets.
(5.) Using GPS usage data charge the customer a set amount for each hour he has used the equipment. If the customer is slow or if it is in the off-season, he has few maintenance costs until his usage and cash flow improve.
(6.) So-called “Power By The Hour.” This ultimate system includes a repair contract and can cover all the operating expenses a customer will have for a piece of equipment. Typically, the only other maintenance costs for him will be the operator, fuel and daily maintenance. This makes it very easy for the contractor when bidding work, because his costs are all known and fixed.While designing your EPM you will want to balance out what your dealership is capable of, what your customers have told you they want, and what helps you meet your EPM objectives.
Marketing and Selling Your EPM
A plan on paper and a flow chart are great, but until it goes to market your objectives will not be met. Once you have the basics established you have to determine who at your dealership will be selling and promoting it. Take a hard look at your strengths and weaknesses in this area. Will it be sold by the whole goods salesmen? Service manager? Outside product support sales reps? Parts manager? Parts counter? Everyone at the dealership? How are you going to pay someone who sells an EPM? A flat fee? A commission? A percentage of the parts and labor it generates?All the above are possibilities, but we have seen the greatest success when the whole goods salesmen are the main drivers of selling EPMs. They are typically the people who have the greatest closing skills, because a maintenance program is definitely a product that your dealership must sell and support.But whoever sells it for you, an extended training is necessary. Customers will have many questions and objections initially. Your people must have the answers ready and be able to relay that information in a very professional way. Don’t underestimate the need for education, both for your employees and your customers.
At this point, we recommend giving your new program a snazzy name and logo. Your EPM should have a life of its own and become a core value of your dealership. To help you distinguish it from a typical planned maintenance or oil change program you will want to name this plan. Your new logo for your EPM will start to show up on all your materials – letterheads, decals, stickers, brochures, mailers, etc.The next step is to develop some very professional materials that you can put in your customers’ hands. These should give just enough information that the customer will ask for the details and pricing. Include your features and the benefits of your program.And keep your pricing schedule simple. We know of one dealer who had a book of over 100 pages for all his pricing options. It was so complicated no one except the service manager could understand it. We know of another dealer who had his entire EPM pricing on one sheet of paper that everyone understood. The simpler the better, in our opinion.You will also need contracts, agreements, contact information sheets, inspection forms, etc., to make your EPM a complete package.
The days of Interval-Based Maintenance are fading away and some day will probably be gone. Interval-based services state that if you have 500 hours on a machine, here is a list of what needs to be done for that particular service. No questions asked. That has been the standard since the beginning.But research has found that those intervals are only averages and do not accurately reflect the varying environments and conditions in which equipment works. Condition-based maintenance is individual machine-specific; it says if your oil analysis reaches a predetermined level then your oil needs to be changed regardless of how many hours are on it. We have seen loaders that are safely running on 1,000-hour oil intervals based on the condition of the oil. Others, in a very dirty environment, may need the change at 200 hours. Another method that is showing signs of real possibility is a condition-based program based on the amount of fuel being consumed. This has signs of interest in some areas.Consider the current level of expertise of your technicians, the sophistication of your customers and the tools available from your manufacturer. Super-clean systems, oil filtration kidney machines, bypass filtration, high-efficiency filters, improved ultra low sulphur fuel, and improved oils are all game-changers in today’s market. They should all at least be considered when designing your EPM. These factors can come together to make an exciting program for your employees and your customers – if your dealership and customers are ready for them.
The Dealership Process
To some this is the boring part, but without good backoffice support and well defined processes at the dealership the entire EPM will surely fail.Spend a lot of time on this one. Get your teams and departments working together to make sure that each step is completed.(1.) How is notification given to the customer of an upcoming service? (2.) If GPS is used, who is monitoring the data? (3.) Who opens up the work order? (4.) Who schedules the work? (5.) Who has the correct parts ready? (6.) Who does the inspections and work orders? (7.) Who follows up with the customer when the work has been completed? (8.) How? (9.) Who invoices the work? (10.) Who reviews the process?There are many more, and each dealership will be different, but make sure that every step has been considered and assigned to the proper person. If the customer sees any flaws in these steps he will question your entire program. This is where professionalism pays dividends. There can be no mistakes and nothing can slip between the cracks. No exceptions.
Your “Champion” To Drive Your EPM
The last and final element of your EPM design lies internally within your dealership. It is important that the program has full upper management support and that someone with much authority is driving your EPM every step of the way. This person’s energy and passion will be needed to help you through the difficult times.Be prepared for the nay-sayers and the objections that will challenge your program. They happen at every dealership we have observed.Objections such as: (1.) We can do it cheaper ourselves. (2.) My operator does our maintenance when it rains and we can’t work. (3.) We have a big shop and our own mechanics. (4.) Our dealership service department cannot do good inspections. (5.) Our salesmen have no interest in product support. We have heard all these comments and many more. But the “champion” can make sure that these kinds of comments and attitudes do not kill your new EPM.We were both in a service manager’s office one time when he was telling us about a maintenance program he had written himself. He had obviously put a lot of time in it because it included a thorough list of all the quoted labor and standard parts for every model that the dealership sold. It was all contained in a big, three-ring binder, and he was obviously very proud of his work. He thought there were opportunities for them, but so far had only been able to sell two maintenance agreements.Upon some research and talking to the other departments, we found that the sales department knew nothing about the plan or the book. The parts department was not happy about it because they were the ones who had to look up all the parts and the dealer principal could not understand why the service manager hadn’t sold any contracts. Their program was not well suited to their company or their market, and they had absolutely no internal support or training.
The point is, an effective and successful EPM has to involve the entire dealership and be aggressively driven by the “champion.” Training sessions should be conducted for every single individual at the dealership, from the president to the receptionist, from the janitor to the delivery person, and from the salesmen to the counter people. Everyone should understand the program and be able to extol its benefits.EPMs can be the most exciting change you have ever made at the dealership, and the rewards can be immense. Enhanced Planned Maintenance is truly a game changer!
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