In the automotive dealership industry, there is an increasing concern around compressed vehicle sales profit margins due to reduced volume of sales and increased transparency of vehicle cost and selling prices. This is the result of numerous automotive research sites on the internet and new online purchase channels. While the parts and service business provides only 20 percent of a dealership’s revenue, it accounts for approximately 50 percent its gross profit. More importantly, the dealership’s share of this $200B a year business is only 22 percent with the balance going to aftermarket competitors and more recently emerging mobile service operations. This makes the parts and service business a very attractive growth opportunity, particularly when things are difficult in the vehicle sales side of the business. According to Les Silver, the chairman and CEO of The KEEPS Corporation, who has been in the industry for the last 38 years, a dealership’s customer retention depends on a quality service experience for the customer as well as the adoption of market driven service pricing practices. In a recent interview with him and Leigh Silver, the president and COO of The KEEPS Corporation, they explained to us how the foundation of dealership’s service business requires striving for “Perfect Pricing”—that is setting their service prices at a level that is optimum for both customer retention and gross profit generation. Dealerships that adopt this approach will be in the ideal position to prosper in these difficult times.
Tell us about the inception of the company.
KEEPS was founded by Vernon “Ray” Branch in 1993. The company specialized in repair order analytics and training. In 2013, when my company Service Repair Solutions was sold, my sons and I partnered with Mr. Branch to help grow the business. Since that time, our customer base has grown from 400 dealerships to over 2,000.
Can you explain the feature set of your software and your consulting services?
Our Dynatron Software product is a SaaS solution that is accessible by any device through the internet. The solution interfaces with the dealership’s business system every day and captures all of their service sales transactions for labor and parts and feeds that into a database of over 288M repairs and services. Out of this database we provide automotive service and parts data analytics, business intelligence, and pricing optimization with our software. We are currently adding approximately seven million transactions to our database every month. The “secret sauce” is our main algorithm that takes the raw data, and transforms it into standardized structured data regardless of the data source, dealership and employee that created the transaction. One of the dealership’s most important customers is the auto manufacturer (OEM).
By strengthening the dealership parts and service business, we provide our customers with the “shipload of money” needed to fund the transformation of the technology, personnel, facilities and training needed for the dealership of the future
This is because a significant amount of the service and repairs the dealership performs is covered by the OEM warranty and is paid for by the manufacturer. The rules for the rate the OEM pays for warranty labor and parts are complex and differ by OEM and the state the dealership operates in. Our program includes analyzing the appropriate sample of repair orders based on the applicable rules and filing for rate adjustments when they are due. Performing this task on the dealership’s behalf eliminates unwanted administrative workload and ensures that this task is performed accurately and on a timely basis. This can have a significant impact on the “bottom line” profitability of the dealership service and parts operation.
In addition to being able to analyze and compare jobs from transactions in the database, we supplement our local market intelligence through a “mystery shopping” program. This is called “Intelligent Service Pricing”. The dealership selects the specific competitors they are interested in monitoring and we provide pricing information across a range of services. The application then allows the pricing information to be easily translated into a “dare to compare” marketing piece as well as the analytics engine for the comparison pricing optimization.
There is also a consulting service offered with the data tool to be able to assist the dealership in interpreting the data and develop ongoing action plans. Our consulting staff works with our customers to understand their operation and determine opportunities Left On The Table (LOTT). We help our customers understand their profit gaps, develop plans to address those gaps, and work on the training of their staff to assist them in implementing their action plans. So our program is not just about providing information but about making meaningful business improvement.
What differentiates KEEPS from similar organizations and keeps you ahead of the competition?
Our mission is quite simple—it is to provide our customers with a “shipload of money” as a result of utilizing our products and services. The ability to generate significant results for our customers makes us different. The automotive business is going through a massive transformation that will affect the fundamental processes utilized within the industry. This will require an investment in technology, personnel, facilities and training that is unprecedented. Through utilization of our program we will strengthen that parts and service part of the business in order to provide the dealership with the capital needed for this transformation.
Can you provide a case study that highlights the benefits of your solution?
Earlier this year, we had a client who was not satisfied with the labor rate that they were receiving from their OEM for the warranty work they were performing. For the previous 5 years they had accepted an annual 3 percent cost of living increase without fully understanding their reimbursement options. We stepped in and conducted our analysis, and showed them that we would be able to increase their rate by 40 percent this year. We were able to handle that project for them, and they received the increase precisely as we had predicted - this translated into a $680,000 a year net profit improvement.
What does the future look like for KEEPS?
We are currently providing our services to just over 2,000 dealers in the U.S. and Canada. There are 20,000 dealers in this market. Our goal is to significantly increase our market penetration over the next few years. We are also focused on adding new products to our offering and increasing the number of products that our customers utilize. We will be unveiling our revamped product line at the NADA convention in San Francisco in January 2019.