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Peugeot Express Fit All the Elements for Success - Providing Dealers Use Them
Jacking up Labour Rates Disguised the Real Problems Research back in 1995 showed Peugeot dealerships still heavily reliant on profit from aftersales, and whilst there had been a steady increase in turnover, actual hours sold had remained flat or even declined. On the surface it appeared the rising turnover must have resulted from increases in labour and parts prices well ahead of inflation. In a fiercely competitive market this was obviously a questionable long-term strategy. Furthermore the Peugeot vehicle parc had increased considerably during the late eighties and early nineties and the market for wear parts has grown in tandem with this increase, and despite the gradual erosion of parts use per vehicle due to that longer component life. In fact the current parc of 309s, and 205s is around 600,000 units. On top of that there are over 180,000 306s and over 300,000 405s. However, apart from a few exceptions dealerships have proved inefficient at capitalising on this parts opportunity. Wear parts sales during this period were almost static. So the increase in turnover must have come from increases in labour rates. This basic story is the same for most vehicle marques. It is a feature of the system. Recent Market Share Successes There can be no doubt that Peugeot is very good at marketing new cars. As far as the total all-makes parc is concerned, there has been a slow climb back after the crash in new vehicle registrations at the beginning of this decade. But it is clear that within this there have been winners and losers. The losers have been the established volume marques who have continued to lose market share year on year since the recession of the early 1990s. Amongst the winners we find the French marques. Both Renault and Peugeot have produced new car registration performances that put them well above the all-makes average over recent years. But the Peugeot success started back in 1991 – hence the parts sales potential with older vehicles goes fairly deep into the parc compared to recent vehicle registration success stories with other marques. Pressure on Dealership Capacity However, this vehicle sales success puts pressure on network servicing capacity unless it too keeps pace with parc growth. Particularly in Peugeot’s case because reduced servicing requirements on the modern breed of cars has been counteracted by the increased number of vehicles the network is required to look after – especially those within warranty or on some form of purchase contract. And Peugeot’s higher than average proportion of diesels still requires more frequent service attention than petrol engined vehicles and this adds to the pressure on capacity. So it is no surprise that most Peugeot dealership workshops are busy and profitable despite these general trends of fewer parts and less labour required per vehicle. An ever higher proportion of the Peugeot <3 year parc consists of 1 and 2 year old cars. Few will be missing out on their first and second service contacts. Dealers need to satisfy more car owners – but each one is worth less in revenue and profit than it was in the past – unless prices are continuously revised upwards. With this situation it’s easy to fall into the trap of just treading water. Trying to satisfy owners of younger cars as best you can. To do that, dealers have to work ever harder to derive sensible profits. But they can’t keep jacking up the rates. It’s now questionable whether simply handling the aftersales needs of owners of younger cars is viable any longer - in parts sales potential terms or dealer viability terms. Their busy workshops are preventing dealers from addressing the real issues. They are living on borrowed time. The practice has a big effect on customer satisfaction and customer retention, which showed a dramatic decline after a vehicle reached three years old. In fact the average age of vehicles visiting Peugeot franchised dealers for service was identified as 2.8 years old a few years back. Customers were obviously moving to the competition in droves and saying that the dealership aftersales offer was not good enough to keep them as loyal customers. Clearly, something had to be done. Researching Customer Demands Before designing a new approach to the aftersales Peugeot commissioned Harris Research to survey customer demands. They found they fell into three areas – value, convenience and trust.
Nothing radically new here and clearly the traditional fast-fit offer covers many of these apparent demands. The openness and visibility of the workshop environment helps create that trust and confidence. However, customers did recognise that the expertise and quality of parts was usually higher at franchised dealerships. Defining Objectives Xpress Fit was the original name given to the new approach at Peugeot dealers with the objectives defined as:-
Xpress-Fit to Express-Fit At five years, the gestation period for the Peugeot Xpress Fit concept proved to be much longer than anticipated for several reasons. The first was because Peugeot decided to analyse different approaches to breaking into the older car parts and service market - from the straightforward bolt-on branded fast-fit bay through to it being the total workshop offer. The five pilot dealerships grew to ten before the pilot period was completed. Another major reason for the delay between piloting and roll-out was related to international ramifications because Peugeot was looking to similar and compatible programmes for other European countries. The UK pilots proved the concept worked. Franchised dealerships with Xpress Fits were generating high levels of customer satisfaction with well over 90% of customers saying that they would use Xpress Fit again. Gross margins were proving to be good at between 47-52% and net profit 25%. The business generated was incremental rather than substitutional. By mid 1997 the UK XpressFit pilots had become the Express Fit programme and in Europe Peugeot had 50 Peugeot Rapide outlets, which were much more prescriptive than the UK model. Express-Fit Criteria Ideally Express Fit bays should be visible from the main road to create the greatest impact. It’s a front of house offer with bold signage. Pricing for retail servicing should be competitive with the competition in the area and there are national fitted prices for wear parts. This will be the aftersales offer increasingly used by Peugeot dealership for used car customers; although nearly new car buyers will still be within normal schedule servicing regimes linked to contracts of one kind or another – PCPs, etc. The minimum facility requirements for an Express Fit centre are:-
Tyre insurance has been added to the list of Express Fit branded products. Policies are available with 3 month or 12-month cover with up to £250 per tyre cover. The 3-month cover is seen as a promotional item. The provision of on-the-spot quotations is an important feature of the fast-fit industry and Peugeot appointed Cam Systems to solve this problem at Peugeot Express Fit outlets. Their Cameo programme not only provides fast, efficient and accurate quotes that include labour; it also links in with the stock system to ensure the relevant parts are in stock. The Peugeot fitted price list for wear parts is part of the system, as is on-line tyre fitting data and stock management functions. The Express Fit product line-up includes tyres, exhausts, batteries, brakes, clutches, servicing and MOTs. But one of the reasons behind the success is the people and the people management systems. All Express Fit staff, including technicians, have direct contact with customers so they have a combination of technical and customer handling skills. Although the same Manager is responsible for the effectiveness and profitability of the total aftersales offer – Express Fit and the main workshop - Express Fit has its own dedicated working supervisor or manager to act as a team leader. The Express Fit Culture and Training With the Express Fit proactive selling culture being so different to the traditional reactive and prescriptive solutions dealership service and parts departments are used to, training plays a crucial role. It is considered a mandatory requirement and an integral part of the implementation procedures. The official implementation and training manual lists the training courses available, which cover retailing and technical skills. Retailing Standards Selling standards Telephone procedures Meeting and greeting customers Gaining more of the customers time Code of customer standards Four points to the sale Company standards check Technical Skills Exhaust diagnosis, repair and replacement Tyre inspection Tubeless tyre replacement Wheel balancing Tyre repair Wheel alignment Charging system diagnosis and battery replacement Lubrication service Telescopic shock absorber inspection and replacement Semi-strut inspection and replacement Braking system diagnosis and replacement Clutches MOT Express-Fit Consultants Special Express Fit consultants control the implementation process – liasing with Peugeot field staff and keeping them informed of progress. The consultant’s role is very comprehensive and covers recruitment of the right staff right through training, the launch and monitoring performance after the launch. In fact it commences with an initial dealership visit to gain an insight into existing aftersales practices and cultures, and what needs to be done to adapt them to a fast-fit business. It reveals any pre-conceived views about what makes a successful fast-fit, along with other opinions about Express Fit – informed or otherwise. This discussion allows any negative mind-sets to be addressed before laying down the firm foundations necessary for building a successful Express-Fit – in cultural terms and in bricks and mortar. So the process of culture building usually starts during this initial meeting. It has to be handled carefully because most Dealer Principals and Aftersales Managers believe that they are doing a good job and want Peugeot to see them in that light. Although labour sales mentality is typically in place – which limits a true fast-fit approach – any sign of a criticism at this stage can be seen as a threat and be a turn-off. This is where the consultant’s fast-fit background and experience comes into play. The conversation can be anecdotal – leading on to stories about successful Express Fits. Visiting these outlets is a logical suggestion. The consultants go armed to this first meeting with a full analysis of the competitors in the dealers area – plus a detailed post code breakdown of the 3-8 year vehicle parc. Peugeots are identified by model and other makes by marque. The business potential can be identified and compared to existing performances, and some form of local buy-in to the programme is usually achieved at the first meeting. More about the Express-Fit Culture In essence, Express Fit is designed to challenge the belief that franchised dealers are more expensive than fast-fits by taking this competition head-on and looking after owners of Peugeots better than anyone else. The Express Fit Operations Manual is also very comprehensive covering all the procedures and systems necessary to follow if the Express-Fit offer is truly to be deliverable. The culture introduces some basic changes to the traditional franchised dealership approach.
Expresss-Fit in Practice The business effect of introducing an Express Fit is clearly demonstrated by the following graph based on the composites of an actual dealership. Of course seasonal activity will be included in these results, but there can be no doubt that gross profit and turnover both increase. Effect of Express Fit
Source; Peugeot Express-Fit in practice Another Express-Fit operator is Willoughby Garages in Nottingham. It has been a Peugeot dealer since 1991 and is a family owned business with Caroline Wainer –daughter of the founder – Dealer Principal at the Peugeot site. The current premises for the Peugeot site were originally used to house a Rover franchise. However, the Peugeot franchise within the group was outgrowing its existing premises, so in 1994 they moved it to replace the Rover franchise, which they decided to part company with. The old Peugeot site is now a SEAT franchise. The roll-out of Express–Fit was available at the same time as they were re-developing the premises for the new Peugeot franchise, so two road-facing bays were designed to incorporate the concept – separated from the main Peugeot showroom by an Esso filling station, shop and car wash as far as drive-by motorists are concerned. Caroline has always been a supporter of the Express-Fit programme. Even so, when they first opened they suffered from a few problems. She says, "The idea of running a fast-fit operation was completely new to us and getting hold of operational information about competitive best practice and business indicators to measure our performance against was difficult at first. We also found it tricky to find the right staff to suit this new environment". The Express-Fit site has two double bays – plus an MOT facility and extra workshop capacity behind the Express – Fit operation. The capacity is in addition to the main Peugeot dealership workshop, but alongside it. The Express –Fit staff consists of a Manager – Malcolm Casey - two MOT testers (qualified technicians) and two Express-Fit apprentices. The opening hours include Saturday mornings. The Express-Fit offer includes the usual fast-fit items plus MOT work and promotional menu services for older Peugeots. They also take on more extensive repair work on older vehicles, which they carry out in the overflow workshop behind the operational Express-Fit bays. This is why the staff capabilities are higher than a typical fast-fit. It also provides more flexibility in total dealership terms. On a good month they process around 140 customers each month which is up on the 120 they processed some 18 months ago when the Express-Fit site was first opened. But value per invoice has increased substantially as the next chart shows.
Jobs per month in Express-Fit bays
Source; Willoughbys Express-Fit This is down to more MOT rectification work and the increasing numbers of promotional services carried out. But the average age of customers’ cars has changed over the years as well. The next graph breaks this down into vehicle age group proportions via the same time scale as the previous graph. Customer Age Profile Trends
Source; Willougbys Express-Fit The increase in the younger car age group is due to a better performance with tyres whereas the decrease in the 6 year+ age group is down to a gradual decline in the number of customers with old Rovers that remained loyal after the switch in franchise. Many ex Rover drivers are now driving newer Peugeots. The average age of customers visiting the Express-Fit site is 6.3 years and the marque split is shown in the following graph. Express-Fit Marque Split
Source; Willoughbys Express-Fit Caroline believes focus to be the important aspect of running a successful Express-Fit. It must be separated from the main workshop with its own budget and profit targets. Beware of a Trap It is common knowledge that tyres present the biggest aftermarket opportunity in total revenue terms and the ability to attract owners of older cars. Yet they are not always the most profitable per invoice measured by direct or gross margin. Neither do they present the highest average invoice value. But they are certainly crucial to the success of any fast-fit operation wishing to retain the loyalty of customers for other work. This highlights a very important trap that operators of all dealership fast-fits need to be aware of. In Peugeot dealer terms, they must give Express-Fit the necessary marketing and staffing resources to really get involved in retailing to owners of older Peugeots in higher volumes of lower value products, i.e. more customers per site. If they don’t, they run the danger of concentrating too much on higher invoice value or jobs producing the highest profit per job to hit their profit targets. This will slow down the processing of customers, which in turn will prevent the site operating as a Peugeot fast-fit. In fact they will become an independent garage specialising in older Peugeots rather than a modern fast-fit retail operation to satisfy a higher number of Peugeot owners and hopefully get them into newer models. If the site is small, this may appear to be the best strategy in producing quick profitability in broad terms. But it will not draw in those extra customers. It is something that needs deep consideration by Dealer Principals. They need to get actively involved in developing Express-Fit. An Express-Fit Manager can only be as good as the system and support allows – however good he or she is. If short-term profit is the main judgement of success the Manager will use resources to achieve that the most cost-effective way. That might be at the expense of volume of customers and customer satisfaction. Look underneath the figures and discover what really is going on to deliver that profitability. Express-Fit has all the elements for success – providing dealers use them. They also have a parc big enough and old enough to produce the level of business that will result in profitable fast-fit operations without a high proportion of other-makes. But with all that new vehicle sales success going on it will take lot of effort to get the necessary focus on aftersales. You can lead a horse to water but……. The other side of this is that if the horse doesn’t drink it will die. (9/99) |
Like
all vehicle assemblers, the ever increasing reliability of new Peugeots
and consequently the decline in the necessity to replace wear parts
in the early years of a car’s life is well understood now. This,
coupled with the introduction of extended service intervals (20,000
miles for Peugeot petrol engines now), means that it has become more
difficult than ever for Peugeot dealers to maintain regular contact
with all their customers. Yet it is more important to do so if they
are to maximise the aftersales profit opportunities and ensure repeat
Peugeot vehicle sales.
