October Q&A: Are You Leaving Potential Fixed Ops Profits on the Table?
New-vehicle dealerships make up only a third of the $350 billion automotive service industry. Here’s how to start turning that around.
Data from the National Automobile Dealers Association (NADA) reveals that in 2016, new-vehicle dealerships wrote more than 300 million repair orders, and recorded service and parts sales of nearly $110 billion.
NADA data also reports that service, parts, and body shop profits make up 47.3% percent of an average dealership’s total gross profits.
But as Cavan Robinson of DealerSocket notes, in the U.S., automotive service is a $350 billion industry, of which new-vehicle dealerships make up only a third. That means a lot of potential profit dealers aren’t earning.
So in this month’s Q&A, three industry leaders tell how dealers can get their share of that fixed ops money being left on the table.
Cavan Robinson, OEM product manager at DealerSocket, leads a team of specialists in optimizing digital practices and developing innovative products for automotive OEMs, including Toyota and VW. Prior to this role, Robinson served in various digital marketing roles at DealerFire, the automotive web design and digital marketing firm recently acquired by DealerSocket. He began his career there as the very first website director of accounts, where he worked with some of the largest dealer groups in the country to enhance their digital presence through content marketing and digital advertising.
Will Mapes is the co-founder of Singlethread, the only service messaging platform helping dealerships generate more customer pay per visit. He has spent the majority of his career designing and implementing technology solutions for automobile dealerships, dealership service providers, and OEMs. With a passion for software and born into an automotive family, Mapes brings a unique perspective to automotive software and fixed ops. Singlethread’s patent-pending solutions create a fully integrated workflow that brings the entire service team together to service vehicles faster, communicate internally and with customers, and create the modern vehicle service experience today’s customers demand.
As partner of ELEAD1ONE, Mark Queen oversees the fixed ops retention suite, Service1One, which helps dealerships streamline operations to bring in more customers, improve shop productivity, and increase RO transactions. To learn how dealers are boosting profits and improving customer satisfaction, request a copy of our service department solutions study, Your Fixed Ops Stimulus Plan, by visiting our Your Fixed Ops Plan Stimulus resource page. For more information, you can reach Mark at email@example.com.
Q:Has the overall public perception of dealership service departments has improved since the advent of digital marketing, and why?
Robinson: Yes, public perception has improved; however, the ability to leverage that perception beyond dealers’ already-loyal customers has not.
Dealerships have done an outstanding job building in-store experiences with service amenities, but the problem lies with attracting prospective service customers via digital mediums. Franchise service visibility is extremely low in the digital landscape, and nondealer providers absolutely take advantage of that.
Franchise dealers have great value propositions: warranties, service technician certifications, flexible hours, access to OEM parts distributors, manufacturer service offers, and more.
But even with all of those benefits, they fall short in effectively communicating to in-market shoppers.
Mapes: Measuring the effect of digital marketing on perception at this point, positive or negative, is challenging. However, there are some best practices that will help the dealership improve perception, and less-optimal practices that will negatively affect perception.
Dealerships run a big risk of losing public perception right away if they don’t deliver a valuable message to the customer via their mobile device.
The best way to improve perception is to be respectful of the consumer’s limited time and attention by tailoring marketing to specific customer needs.
If the message is delivered when the customer needs it via their mobile device, perception is likely to improve. Generic “blasts” are irrelevant to many customers, and will likely negatively impact perception.
Queen: A little, but not enough. Awareness of the need to change is acknowledged by a lot of fixed operations directors and general managers. Actual change is another story.
As far as public perception itself, the numbers don’t lie. The independent service centers still own an unacceptable share of market. Many fixed ops directors feel it’s less about price, and I agree.
Negative perceptions have more to do with the failure to evolve on the process piece of the equation. You can market digitally all you want but, if the customer experience has not changed since the previous visit, then it’s tough to alter perception.
However, the data and toolsets available to dealership service centers are moving in the right direction to address perception-like factors, such as convenience, transparency, communication of factory-certified advantages, etc.
Q:What is the most common way dealers leave money on the table in terms of how they operate their fixed ops departments, and how can it be overcome?
Robinson: A digital budget is determined for all marketing activities at the dealership. Then, 99% of that budget is automatically dropped into paid search, content, social, display, and email marketing for prospecting car sales, leaving little budget for service marketing.
Service is a $350 billion market (per NADA, 2015), and yet dealers only account for approximately 30% of that profit. It’s somewhat shocking to me that a dealership’s service department can generate 76% of its profit and yet only be allocated a sliver of marketing dollars.
If dealers were to increase their service budget by just 10%, they would see a substantial gain in new service prospects.
Those prospects can then be nurtured and eventually converted into loyal customers, who are three times more likely to purchase a new vehicle from that dealer in the future.
Mapes: Poor communication is frustrating for consumers, and steals sales time from advisors. Advisors spend hours every day leaving voicemails for customers.
Conversely, if a customer tries to call the dealership, they are likely to get an advisor’s voicemail. By the time the two connect, the customer is frustrated (not ready to buy), and the advisor is ready to move on to the next customer.
Secondly, vehicle inspections aren’t presented to consumers in a timely manner, or [even] at all. Technicians perform vehicle inspections but due to the inefficiencies I mentioned, advisors don’t have time to present them to customers. This is frustrating for technicians, [who] believe they are wasting their time, and ultimately leads to inaccurate or incomplete inspections.
Consumers are increasingly demanding, and advisors have a very challenging job to manage sometimes-unrealistic expectations in a very time-constrained environment. Advisors need modern tools that help them communicate effectively, and present services quickly to mobile-first customers to drive revenue in the service department.
Queen: One of the most common profit leaks is the failure to use mobile technology to inform customers of legitimate safety-related work. Customers opt to address additional service repair work much more often if they can see the reason for the additional investment visually, as opposed to only hearing it.
The solution is to text the customer a video of failed inspection components in a quote format that allows them to tap “Yes, Fix It Now.”
With today’s technology, it’s easy for a technician to shoot the video, then auto-alert the advisor to add a simple voice-over pitch, then quickly send.
A common complaint from technicians is that advisors don’t actually try to sell additional service requests that are logged. If technicians know their videos are reaching customers, they are more likely to dedicate time to shoot videos, as long as the process is fast and simple.
Q:Compared to past years, how widespread is the use of mobile marketing and technology in service departments, and why do you think dealerships that don’t embrace this trend resist?
Robinson: I don’t necessarily think dealers are resistant to mobile technology, I just think that there is a lack of cooperation between dealership stakeholders.
In most cases, a dealership’s marketing team (or person) might have extremely beneficial knowledge when it comes to mobile marketing, but if there is no coordination between service and marketing, then nothing gets communicated.
The “need it now” mentality of service shoppers has definitely perpetuated the need for optimized mobile marketing. Search networks provide great tools for connecting shoppers with dealerships now, like call, location, or sitelink extensions and local search ads.
Utilizing this type of technology allows dealerships to reach mobile users as they go through their natural progression of researching services.
Mapes: Mobile technology (tablets, texting, etc.) adoption in the service department is continuing to accelerate. With most OEMs pushing some sort of mobile technology initiative, a significant percentage of dealers will have some form of mobile technology in the service drive in 2018.
Dealers have been slow to adopt these technologies because the full scope of the investment is larger than just the platform or service being purchased. Wi-Fi upgrades, new computers, etc., may all be required for mobile technologies to be successful.
Dealers have also been focused on branding updates and managing growth over the past few years. Also, early mobile technology was not mature enough to fully deliver on its promises, and may have made dealers hesitant.
Mobile marketing is still maturing in the service department. Text messaging, specifically, is valuable to consumers because it is not used for marketing. Consumers have been bombarded with app-based marketing notifications for years, and are now quick to disable upon installation. The industry will need to tread very carefully in this space to not ruin this valuable communication channel.
Queen: I don’t think it’s a failure to embrace as much as not having access to, or awareness of, the same mobile strategies that are being implemented on the sales side.
Most dealerships consistently focus on mobile marketing in the sales department to create a strategy that is trackable, and understand the ROI impact for the department. The service department typically has a much smaller budget and limited marketing resources to execute a newer marketing strategy.
In some cases, dealers have completely outsourced their mobile marketing strategy to an automated system with limited visibility or understanding of the financial impact. When this happens, there is little effort to include the service department, which is then viewed as resistance.
In reality, it is an overall strategy issue for the entire dealership. The same reality applies to the CRM processes in sales versus service.
Q:What is a lesser-known or underutilized technique you recommend for dealerships to build retention and customer loyalty through fixed operations?
Robinson: Video. Google has been doing everything in its power to explain the benefits of video to dealerships, but most departments lack the bandwidth to take on the work.
Recently, however, new technology has been introduced into the market that helps dealers curate video content with existing tools, like iPhones and iPads. YouTube’s Director for Business app is a great interface for shooting short, effective video on mobile devices.
When dealers ask me what they should shoot for service videos, I always tell them to go directly to their service advisors and ask, “What are the 10 most frequent questions you get from customers?” Would you believe that some of the most popular content pieces I’ve seen involved explaining what all the warning lights on the dashboard mean?
Not only will video marketing help dealerships build retention and customer loyalty, but videos often reach external customers as well, and broaden overall brand awareness.
Mapes: Customer retention seems to always be built upon effective communication. Being without your vehicle is stressful, and timely progress updates help to reduce customers’ anxiety and put them in a purchasing, rather than defensive, mindset.
Communication and effective presentation of the vehicle inspection is another critical component to customer retention. Customers appreciate the opportunity to make a decision today on something that may be “in the yellow,” rather than putting it off until a later time when it is “in the red.”
Service advisors need to understand that the Inspection is both a customer service opportunity and a selling opportunity that needs to be completed 100% of the time.
Finally, communicating with the customer [in the way] they prefer is critical, regardless of whether they want text, email, or phone.
Queen: One technique leverages the concept that the auto industry is a commodity-based market. Customers do not spend money with the dealership outside of vehicle purchasing and ownership, and service to a VIN is the only way the service department can make a profit.
Dealers need a marketing strategy that follows and markets to every applicable VIN. Having the data and toolsets required to execute this approach is necessary, in addition to traditional customer-centric strategies.
Unfortunately, dealers will not be able to retain every customer. Customers trade their vehicles and purchase a different brand or sell their vehicle privately.
Dealership marketing needs to be able to track transactions, movement in and out of a market area, and identify the owners to create a proper communication strategy around a commodity-based industry to retain the vehicle for the service drive.