Prepaid Maintenance Programs—Providing Everyone the “Win”
Everyone loves to get more value out of an investment than they originally put in. It’s not very often, however, that both the dealer and the customer feel the same way when the customer leaves the dealership; one party or the other usually feels that they could have—or should have—gotten “more”.
Imagine a scenario where, when the customer drives off in their new car, they know they received the best value for their money, and is anticipating a great relationship with their dealership over the coming years as their car is well cared for; and the dealer leaves the sale knowing their customer will come back again and again for future maintenance, service, and vehicle purchases. A “Win-Win” scenario, where the dealer and the customer each come away feeling like they got the better end of the deal.
Indeed, these scenarios describe the functionality and outcomes produced by today’s technology-driven prepaid maintenance programs (PMP). These software-driven, dealer-controlled programs are the best “Win-Win” business tools available today—with no industry gimmicks and real, tangible results.
PMPs keep customers returning to your service department. That’s good news. Even better news is that each PMP visit also creates upsell opportunity. The statistics speak for themselves: customers who use a dealer’s repair facilities are 17 times more likely to purchase their next car from that dealer, and keeping a greater percentage of customers returning to your service department can bring huge increases to your service bottom line too!
Given the price and administration structures of most traditional plans, regardless of the return promised on their sale to customers, many PMPs challenged all but the most advanced dealerships to afford and manage profitably. Technology removes these barriers by putting the administration, management, and reserve functions at the controlling hands of the dealer.
In other words, key functions and processes, including redemption management as well as plan registration, service claim, and premium submission, are carried out in-house through the dealership management system (DMS) and web-based software, making the PMPs not only more affordable, but more effective as well.
Thus, software-driven PMP programs are a great leveler. Their fees to the dealership are three to four times less than traditional third-party-based PMPs. They eliminate traditional “seeding fees” charged for setting up and maintaining the PMP reserve account. These fees average $10,000 to $14,000 collected by the third-party plans for every $1 million in reserve.
The hands-off freedom afforded by today’s PMPs give the dealer complete control, on a daily basis, over how money is reported, tracked, and used. Earned reserve or plan forfeiture amounts are realized immediately—no sharing with an outside administration company.
Every plan will experience forfeiture. It results when a customer terminates the plan early or for whatever reason does not use the plan. For most traditional PMPs, the third-party administrator holds this dealer-funded reserve. It is from this reserve that the administrator would often take up to 60 percent of the value of the cancelled services as part of its fee structure. Today’s technology-driven plans enable the dealer to processes forfeiture through the general accounting ledger in the DMS.
The other side of win is…win
Today’s self-administered, self-managed plans also are more appealing to customers, particularly those buying mainline domestic and import brands who seek value in all they buy, whether automobile services or groceries.
Today’s technology-driven plans make it very easy for dealers to customize what is offered in the dealership’s PMP offering. Often this will result in a plan made up of products other than, or including, discounted prepaid LOF, tire rotation, and fluid services. Plans that provide the product (value) important to the local market will appeal more to buyers, making their presentation and sale in the F&I office or service lane more profitable and successful for the dealership.
It is these plans’ ability to retain a customer’s service business and then create upsell opportunities for additional customer-pay repair order business at each plan service visit that make them like a money tree. These programs can triple the likelihood of the customer continually returning for service—a big growth over the 18 to 20 percent of customers who do traditionally return with a PMP’s incentive.
By converting PMP owners’ prepaid maintenance work to additional legitimate service needs (Your shop does insist on giving every vehicle that enters the store a free, no-obligation vehicle inspection, right?) the additional retail parts and labor can produce healthy additional business.
Some dealers report ability to glean another $150 to $350 of additional up-sold retail customer-pay business per RO as a result.
When both sides win, what’s to lose? Technology-driven PMPs that you manage and control simply make it too attractive not to give prepaid maintenance programs a second look.
Michael Gorun is the managing partner of MediaTrac, a technology based owner retention and loyalty company. Mike has over 25 years in operational service management positions for Ford, Nissan, and General Motors. He can be reached at firstname.lastname@example.org.
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