The CSI Retention Paradox

Going live and a mixed month of May 0:00

Steve Shaw: Dave Rogers, welcome back. What's happening? How you doing, sir?

Dave Rogers: I'm doing fantastic, man. How are you, Steve?

Steve Shaw: Dave, I'm excited. Today's Thursday, and we've got a big deal coming up tomorrow.

Dave Rogers: Yeah, our first live Fixed Ops Focus.

Steve Shaw: Can you believe it? We've made it almost half a year. We started in January, so we did pretty good, in just about six months.

Dave Rogers: That is pretty good. It's a lot more than we thought we'd make, right?

Steve Shaw: We thought they'd drum us off the air after an episode or two, but somehow we've got nearly four thousand subscribers on YouTube, plus a few thousand here and there. I think we've overcome the naysayers, all the haters. So that's pretty exciting. In case everybody's still here: tomorrow, Friday at 4 p.m. Eastern, Dave Rogers and I will be streaming live. Join us at 4 p.m. You can chat with us on Facebook, LinkedIn, X and YouTube. Ask questions, and we look forward to chatting with you live tomorrow at 4 p.m. Eastern. So what's going on in the real world, Dave?

Dave Rogers: Well, we're just getting done with May, looking at some of the numbers, and it looks like it was a spotty month, to say the least. I haven't really picked anybody else's brain out there in the real world. I'd love to hear what other folks are saying about the month of May. It looks like a mixed bag. Some stores did pretty good, and other stores fell flat on their face. You're out in the real world talking to people at different stores. What's your read?

Steve Shaw: That's funny, because we have a mixed bag as well. A couple of days ago I got off a call with a group of four or five stores. Four of them were up and one was down. A big group with fourteen, fifteen stores, similar thing: a couple of them down, most of them up. The biggest thing I'm hearing around is foot traffic. RO count is way down. And the funny thing is, I hear, "Foot traffic's down, so my metrics are down," and I can't make the correlation in my brain, other than that people have just got their wallets closed. What do you think about that?

Dave Rogers: Well, foot traffic being down... people are still raising labor rates, raising parts prices, going for retail rate reimbursement. I've seen it in some stores: the RO count down, the closing rates down and the dollars per RO down. I'm not going to blame it all on the individuals in the store. Depending on the brand and the location, there might be some reluctance to buy, people putting off what they could pay for today. I think sometimes we're chasing people away with some of the markups. Parts pricing keeps going up. I've talked to my people before about going aftermarket and getting something cheaper if that's what they need to do. But last month was a mixed bag. I've seen RO counts up and dollars per RO up too. It's just hard to get a read on it, which is crazy.

Steve Shaw: When I was a kid, I was a service advisor at a Pontiac store in southern Illinois, outside of St. Louis. We weren't that big. We had about 10 technicians. I thought it was a big store because I was a kid and a brand-new advisor. But it was tough, outside East St. Louis, Illinois. It wasn't the greatest area. My general manager was a character of all characters, Mello Giannino, and Mello would say, "Steve, when the volume is down, the gross has got to be higher." I'd say, "All right, Mello." I always remember that. But I'd think to myself, at what point is the gross high enough? At what point do you have to stop raising prices? And that's kind of how I feel we are right now. We've raised our prices so much, and the customer is getting squeezed everywhere, and we're still raising prices, trying to get more and more. It's like squeezing a turnip. At some point it's going to dry up.

Dave Rogers: Well, in all fairness, you're being squeezed from the bottom too. Techs are asking for more money. Costs are going up for everything. So we try to be fair about it. We go for retail rate reimbursement and try to do our annual increases. The factories are the guardrail there. They never let you get too much money. With customer pay you have to be careful. You can raise your repair rates, which is one thing, but you can't be crazy with your maintenance. You can't just raise your labor across the board and start getting two hundred dollars for an oil change in a Hyundai store. It's a balance.

Fewer new cars and a 1.6-hour oil change 5:38

Dave Rogers: We have fewer new cars on the road. We've talked about this before. If you look at it from the top of the annual new car and light truck market, at seventeen million, to last year, there are about 17 million fewer new cars on the road coming in for service. We generally get most of our customers in the first three years, when they come into the service department at the dealership. Those cars are not coming into the store because they don't exist. And then there are the normal defection rates we get in service at the dealership. I'm not saying it's right, it's just normal, and there are a lot of reasons for it.

When you start weighing this stuff out, you don't have the fresh meat coming in the door that probably artificially kept your RO counts up, so you felt like you were gaining and getting better. Now, without those cars coming into the market, you're starting to feel some of the pain from the defection. Then add some price increases, do some stupid stuff, make a customer wait two hours for an oil change, and you're just not going to keep the business.

Steve Shaw: I think you nailed it on a couple of those points. Speaking of that, I just did some research when people were talking to me about this. The average wait for an oil change now is over an hour and a half, 1.6 hours, just on domestic and import cars. Luxury cars are two and a half, three hours now. So I think the convenience factor has been lost on our customers as well. We do a class on building value. Value must exceed cost for a transaction to be successful. Everybody knows the value proposition, but I think sometimes we forget it. Maybe we got used to what the salespeople got used to during COVID: selling cars over cost, and people just coming in and buying. We didn't have to be salespeople during COVID. We were order takers, and we were making tons of money.

And I think over time it trickled down to service. We've had these discussions. I can see my clients with cars lined up down the street and around the corner again, so our service advisors didn't necessarily have to be salespeople. They got used to taking orders again. So I think part of the impact is that we've lost the skill. We've been focusing so much on volume that we've lost our edge. I think it's time our advisors really get back to focusing on the things that made them successful before that: really being a service advisor, a salesperson, again. You talked about that in the beginning, with Chrissy selling in the lane. So I think there's a mixture. As Claude said once, it's a three-legged stool. There could be many legs to this crisis. Well, maybe we're not at a crisis, but we're getting there in service if we keep losing our customers.

Closing ratios down 5% 9:09

Dave Rogers: I'm just looking at one store, one of my hottest stores, and they're down year over year. The closing ratio in service is down five percent last month from their yearly average. They were averaging thirty-five, thirty-six percent, and in May they were at a thirty percent closing ratio. They're doing a ninety-three, ninety-four percent multi-point rate and sixty percent ASRs. The average customer-pay car coming into the store had almost seventy thousand miles, and the average for all ROs coming in was 65,000 miles. So they're getting more nos. They're definitely getting turned down. And that's where I had talked the other day about a T.O. closing ratio.

Steve Shaw: I agree with you. I think there's a lot of merit to a T.O. process. We have to look at every repair order. And this drives me batty: someone says, "The RO count is down, so my dollars per RO is down." I don't see that correlation. You can make other arguments for why your RO dollars or hours are down, but volume is not the catalyst for dollars or hours per repair order. So I'm going to attribute it back to skill, talent and the sales process. And if that's really true, then you're even more correct that there should be some sort of T.O. process.

We live under this philosophy: need plus value equals a sale. A customer chose you to come in for service. They have a need. They're going to buy from you if you explain the need and the value is reasonable. I know I have an issue, and I'm in your store. And if it's not sold, I think you're right that there has to be some management intervention in that T.O. process, so we can pick up the hours and dollars that are in front of us right now.

Dave Rogers: And I think the challenge is having the right person in the management role. A lot of these guys and gals, mostly guys, are former techs. They're not necessarily natural salespeople. They're not closers. They don't live and die by the sale. "The customer said no, then we'll get it next time," that type of mentality. Whereas some people, like Chrissy, and Brad is another one, I've got a few of them who are definitely closers. When you look at their stores, they creep up to a fifty percent closing ratio. They're not letting the money leave the store, and they're doing a better job.

The thing that drives me crazy is a store that's got more managers than you can throw a stick at, all this volume, and they're running in the low thirties too, and there's no T.O. process. And it's personality. Some people just don't like to sell. They came up in this business thinking it was take it or leave it, "We'll get it next time." Unfortunately, that's not true. When that customer leaves after saying no, you've got very little chance of getting them back in to get that work done. I think the number is maybe fifty percent.

Value: from 2008 to COVID and back again 12:57

Steve Shaw: That's so true. They're not coming back. I forget who it was, and we might have said this once before, but car dealers do such a bad job of taking care of the customer while they're there. We think we'll follow up, send them an email, offer them a discount, and the customer will come back. It's so important to handle it on site, in the service drive or the service lane, on the multi-point before the customer leaves, because once they leave, you're right, they're not coming back. I liken it to 2008, when we had the mass exodus and everybody fled the dealership. As a dealer body, we went after those people in 2008 to get them back. It was all about proving our value. That's how I got into the business, teaching people how to build value in their store, and I think a lot of people did that.

Then fast-forward to COVID, 2020, 2021, and we fell off of that. We're not providing the value we had. Our customers are forgiving. They'll allow you one time, maybe two, or if they've been coming to you for five or ten years, a lifetime customer, they'll allow you some grace. But at some point, when your prices get so high, the value proposition just doesn't work for them any longer. That's a key thing. We've got to start circling back. In the last couple of years I've seen it on surveys. I've had people write specifically, "I'm not getting the value I'm used to." So we know the performance, the offering, what people have come to expect, is starting to wane. I could share plenty of examples, but people are tired of my Jeep Wagoneer stories.

Dave Rogers: We talked about it at the beginning of the year. I've talked to a bunch of people and to my managers about doubling down on training, making sure we're doing the training we need to sell, close and build value, from cradle to grave, to treat the customer the right way. And I don't usually like to make excuses, but when I look at the stores' year-over-year numbers for whatever reason last month, we're down in closing ratio, almost five percent, in every store I've looked at. So we're seeing the cracks. I know Sunbit usage is up. And I'm just looking at core stores, the volume-based stores. I haven't looked at the premiums yet.

But when I look at these things, it seems to me there's something more at play. Gas prices are spooking people, they're watching the news too much, they're nervous about tariffs. I think tariffs have impacted sales. There are some supply issues again, and they're raising prices on new cars. When the average price is over fifty grand, it's getting a little ridiculous. I read that the average car payment is almost eight hundred dollars now, and that for one in five people, the car payment is over a thousand dollars a month. And people coming out of COVID, with the lack of supply, were getting clubbed like baby seals. They were paying over market, over sticker. Those people are in negative equity.

I've heard that a lot of reinsurance plans and insurers have stopped covering GAP, because the losses went up two hundred percent. Sometimes the only way out of these cars is if they get stolen or have an accident. People aren't stupid. That's what happens. So I think there's a lot to it. It's not just the individuals in the store. We do suck in a lot of ways, don't get me wrong. But maybe people are nervous. Maybe if gas comes back down to three-fifty a gallon, they won't be sitting home watching CNN getting all spooked. I just don't know what it is, but it seems like something's out of the norm.

Anybody can manage in the good times 17:48

Steve Shaw: One of my first mentors was Jim Floodman. I'll never forget Jim. He taught me how to manage a dealership, back in my Saturn days, when Saturn was booming. We could do no wrong. And this is what he beat into my head: "Steve, anybody can be a manager in the good times. It's when times are tough..." He'd always say, "Hear me now and believe me later. When times get tough, the superstars are going to rise to the top. The cream's going to rise. And you're either going to know how to manage a dealership or you're not." And it always goes back to the fundamentals. You said Brad and Chrissy. What are they doing? They're doing the fundamentals.

And this really begs the question: if my RO count is down, I have less traffic and fewer cars coming into the shop. That must mean I have more time on my hands as an advisor to focus on the customer. I have more time as a manager to make sure the fundamentals are being executed properly. That's where I'd hang my hat. People can yell at me and tell me I'm snarky or that I don't know what it's like, but I think we've got to go back to the basics again and operate under those fundamentals.

Dave Rogers: That's been the mantra all year: getting back to basics, making sure we maximize it and dig in. I've got Dan over in Willow Grove at the JLR store, and he's had two record-breaking months so far this year. When everyone else is down, this guy's been up. We've got to get him on the show. "Dan, what'd you do?" "Well, I went back to basics. I made everybody take the training. I made everybody go back to the university. I started monitoring the technicians' productivity." All the things you and I have talked about, and that I've talked to my managers about, he did, and he had two record months in a row. Last month he was up, though it wasn't a record. Seventy-one percent of the cars coming through the door had an ASR, and they closed fifty-seven percent of them.

Steve Shaw: That's amazing. Fifty-seven percent. That's huge.

Dave Rogers: And the average car coming into the JLR store now has fifty-three thousand miles. That's pretty good. But again, there are fewer younger cars on the road. Whether you did a good job selling after COVID or not, there was less supply. We sold sixteen, seventeen million fewer vehicles because there weren't any cars. There were chip shortages, whatever.

Pass or fail, not the yellow zone 20:25

Steve Shaw: Well, I'm not a person who makes excuses. My book was called The Art of Pass or Fail. We either pass or we fail. We either make our numbers or we don't. If our technicians make their objective, they pass. If they don't, they fail. If I sell the job, I pass. If I don't sell the job, I fail. And that leads us into the multi-point. Does it pass, it's green, and the customer keeps driving? Or does it fail, it's red, and it needs to be replaced right now? It's a failed item on the car.

That yellow zone... I think so many people right now are playing in the yellow. "Well, I've got an excuse right now, and I'm going to ride that excuse, that gray area, as long as I can. We're not bad, Dave. It's not like I had the worst month ever. I didn't set a record, but I'm good. I'm in the middle." It's a matter of: did we execute what we said we were going to do? Did we make our production objective every day? Did we make our sales numbers every day? Getting back to basics so we actually pass the standards we set. One of the stores we're calling on right now does a great job of looking at numbers, well, they should do it every day, but they're doing it every two or three days. But nobody knows what the goal is. They're talking about numbers, but what's the goal? Is it eight hours a day, twelve, fifteen? Or am I just looking at your numbers to make sure you have numbers?

Dave Rogers: Well, it gets back to management versus leadership, doesn't it? Seriously, if no one's setting the goal and no one is measuring progress toward the goal, you've got a lack of management in that store. I'm not going to spill all the secrets, but some of the craziest people who ever lived on this planet were great leaders. People followed them, and not for good things. But if you don't have that goal written down and that process buttoned up, you're going to have a problem. You're going to lose your way.

Multi-points back in fifteen minutes 22:48

Steve Shaw: With an oil change taking an hour and a half and luxury cars taking three hours, I'm just going to say we lost our way. As a consumer, I'm not coming in and spending an hour and a half of my life. We are proponents of quarter time. We live by quarter time. If that multi-point isn't back in 15 minutes... I don't know many dealerships that can actually bring a multi-point back in 15 minutes. I'd say it's 10%. If you can do it, I'd love to hear from you, and if you can't, I'd love to hear from you. I'd bet my paycheck that a preponderance, 75 to 90% of dealers, cannot get a multi-point back in 15 minutes.

I used to go into a store as a consultant and say, "You don't have enough techs." I don't ever say that anymore. I simply say, "You're not able to meet certain criteria your customer is requiring from you." One of those criteria is getting a multi-point back in 15 minutes. If not, I'm not going to buy from you. A while ago you could have made the argument that they might come back. But today, it's 2008 all over again. If they roll out, they're defecting and going to the independent shop right now, all over again. And the retention numbers show it.

Dave Rogers: I agree a hundred percent. If they leave, they're not coming back. And if you do get lucky enough that they come back, and you don't recommend the same work because they didn't have it done somewhere else, you lose your credibility. That's where I hate the yellow. We used to call that the cop-out zone.

Steve Shaw: It is the cop-out.

Dave Rogers: I think I saw it in one of your workbooks you were showing me. The whole yellow was blacked out. It didn't exist on the multi-point. I like it. Tires and brakes are the only place that should be yellow, and even then you have to base it on the maintenance of the car and when I'm going to see that car again. But to go back to what you were saying, if you see fewer people, you should be able to spend more time with the ones you see and do a better presentation. You should probably have a better closing ratio, not a lower one.

That's as long as everybody keeps their cool and doesn't pull the fire alarm and the panic button, with their heads up their ass going, "Woe is me." Because that happens too, and that's where your leadership comes in. You've got to get everyone's head out of their ass, because when you get slow and you have all the whining going on, you've got to do something to change that. I think I have pretty good managers and pretty good leaders in my stores. There might be a handful who could use a foot up their ass as well. But we have some good, experienced GMs. Like I said, it's a mixed bag across the board. The stores that are doing well, it's not necessarily the brand or even the town they're in. It's kind of odd. I didn't know if you were having any amazing Kreskin moments where you could tell everybody what's going on for the next seven months of the year.

CSI is up, retention is down 26:31

Steve Shaw: I don't do very well at prognosticating. I do like looking at numbers, and I do like doing research. I've used them all, but Claude is my buddy right now, and when it says CSI scores are up and retention is down, well, we're manipulating CSI. We all know that. They begged me to give a good score for my Wagoneer. I gave it to them. Am I going back? No. So our retention is down, and that's the only grade. It's pass or fail, and we are failing right now as an industry because of all of these things.

The other fact I saw was unanswered digital touch points. We use AI to answer the phone, we use text messages, we do this, we do that, and we get some information to the customer. And then when the customer wants a response, we ignore them. So it goes back to your point, manager versus leader. Maybe that should be the episode we finally do, and have a live conversation to get people's input on manager versus leader. These management tasks are following up and ensuring things get done, and I think we have plenty of time to make that happen. And you said it too: there are enough managers in some of these stores. We're very top-heavy in a lot of stores with assistants. There are probably people out there who don't have assistant managers, but in a lot of cases we're top-heavy in management, and our focus is not in the right place.

Dave Rogers: And it goes back to: do you want it bad enough? Is selling a priority of yours? A lot of folks on the service and parts side of the business just don't see the urgency in closing the deal. They don't have the same mentality sales has, for whatever reason. I understand: we're a technical-based business. But you need some salespeople on the back end of the business to make things happen. It is all about closing the deal. It really is.

GM tip: get out there and hold your teams accountable 28:49

Steve Shaw: I'm going to add something, and then I'll have you give us a GM tip of the day. All of the stores I'm working with that are performing well have high engagement from executive management, whether it's the owner or the GM. We're at one right now out on the West Coast, and since engaging with this organization, I get more emails in one day from the dealer than I get from my whole entire client base in a year. So I know this man is active in the organization, and I believe that's a huge component of this. It's got to start with the executive manager and move on down.

We lost Dave. His camera is gone. So I'm going to take it as a sign and give the GM tip of the day. GMs, dealer principals, anybody in an executive role: get out there, support your team, be there and hold them accountable. They want your support. They're looking for your support. If we're going to be successful in this particular time in the car business, get out there and hold your teams accountable.

Everybody, it is my pleasure to be with you. Tomorrow, Friday at 4 p.m., Dave Rogers and I will be streaming live. Tune in on YouTube, chat with us and let us know your thoughts. And Dave, you're back. I told everybody we're going to have that discussion on Friday: management versus leadership. I gave the GM tip of the day, since you so irreverently decided to get booted off. Got any parting thoughts, or are we getting the heck out of here?

Dave Rogers: Yeah, that was stupid. All of a sudden I'm disconnected. What the hell? I apologize about that. I'm sure I did something I wasn't supposed to do. I'll have to watch the show and see what kind of GM tip of the day you gave.

Steve Shaw: It's all good, man. You can tell me on the live stream on Friday if I passed or failed. It's good to see everybody. Please tune in. We look forward to catching up with you on Friday at 4 p.m. for Fixed Ops Focus Streaming Live on Fridays.

Dave Rogers: Have a great day, everyone.

Steve Shaw: Later.