Not too long after the first auto dealer sold a new car to a customer, the dealership service department became “Ol’ Reliable” as a source of revenue and return business.
In the history of automotive retail, dealers have gone through many up and down cycles of new-vehicle sales because of the economy, world and national events, fuel shortages, shifting consumer confidence levels, and more. But the need to service the vehicles already on the road is a constant that, if anything, increases during the times when fewer new vehicles are being sold.
Of course, dealers have a lot of competition when it comes to automotive service—there’s no guarantee their own buyers will ever come back to them for maintenance and repairs.
More than ever, in this online age, consumers will seek out sources (competing dealerships of the same make or independent garages) other than the dealerships they bought from—unless those dealerships give them a reason to return by specifically targeting them with consistent and compelling marketing.
What does it take to best market your dealership service department in today’s world of well-informed buyers, who have many options? We asked industry authorities with extensive automotive marketing and fixed operations knowledge to share the five steps they recommend for a dealership to optimize and fine-tune its service marketing efforts.
One final thought on dealership service departments before we get to the advice from our experts: Stellar service marketing is a must for dealerships to maximize their revenue potential and weather sales slumps caused by the economy and other factors—but it alone isn’t a guarantee of success.
Dealers need to ensure—and constantly monitor—that the quality of the service work being done on customers’ vehicles is first-rate, and that their service advisors and technicians are providing a consistently excellent customer experience.
Remember, the best marketing in the world won’t overcome the harm done in the customer’s mind by service that is performed incorrectly or sloppily, or that results in cosmetic or mechanical damage to a vehicle.
Scot Eisenfelder is CEO of Affinitiv, a leading marketing technology company serving a dozen automotive manufacturers (OEMs) and more than 5,500 franchise dealers. Eisenfelder is a 25-plus year auto industry veteran who has driven innovation across multiple sectors. Prior to Affinitiv, Eisenfelder held positions as senior VP strategy and acting CMO at AutoNation, where he realigned marketing spending and led major change initiatives in e-commerce, pricing, and IT. Eisenfelder was also senior VP, product management, strategy and marketing at Reynolds and Reynolds. He has an MBA from Wharton School, attended Mannheim University in Germany as a Fulbright Scholar, and graduated summa cum laude in economics from Princeton.
Dennis McGinn is founder and CEO of rapid reconditioning workflow software company Rapid Recon, and is the author of the leading text on reconditioning management time to line practices, RECON T2L – The Starting Line for Reversing Margin Compression. He leveraged a 21-year management career with Hewlett-Packard, where he specialized in applying continuous process improvement while working on advanced manufacturing software for major auto OEMs. He founded Rapid Recon in 2010. For more information, contact www.rapidrecon.com.
Eisenfelder: The key to successful service marketing lies in customer data. Blanketing your primary market area (PMA) with oil change coupons is ineffective and does nothing to differentiate your dealership from independent repair shops. With the right data, you can identify profitable customers and what their needs are, then deliver them the right offer at the right time.
Your customer database is the most valuable strategic asset you own, more than your inventory or real estate. Set a goal to know a means of contact for every single household in your PMA. Invest in your database the same way you invest in your people and in your stores.
Seek every opportunity to grow the breadth and depth of your data with vigorous data collection efforts: participate in local events, buy third-party leads, and hold staff accountable for collecting customer data.
With good data, you can dominate your PMA.
McGinn: Tips [about service marketing] offered by others will be sound, practical, and proven means for pulling service traffic into the dealership.
I want to address another side of service marketing, an internal marketing focus that many service departments won’t have considered.
For instance, as used cars sales have gained momentum over new car sales, at least in the short term, getting those cars retail-ready in two to five days of acquisition is critical. More units in operation raise the service department’s pool of potential ongoing service business.
When sales use reconditioning service reports to demonstrate the quality of its used cars, confidence in the deal and in service goes up—and that should translate into a service customer.
Eisenfelder: Service is responsible for 47% of dealership gross profits, but in most dealerships, service marketing comprises less than 10% of the marketing budget.
This is a huge misalignment. Dealers believe this is justified because vehicle marketing indirectly drives service profits by setting up future warranty and customer pay opportunities. In today’s climate, this argument doesn’t hold water.
The average franchise dealership captures just 20% to 25% of revenue potential from its units in operations (UIO). That’s a 75% to 80% leakage rate to the competition, which means only 20% to 25% of service customers come from sales. At the very least, business flows equally in both directions. Loyal service customers are prime candidates for sales.
Additionally, conquesting sales customers is expensive, ranging from $1,200 to $1,600 per customer. Service conquest campaigns are 20 times more cost effective, ranging from $40 to $80 per new service customer.
McGinn: This may seem out of place here or not relevant, but it is. Dealers selling more used cars are generally more profitable than a dealer whose sweet spot is new cars.
Service marketing increases retail parts and labor hours, but internal mechanical work for vehicle reconditioning is higher volume, and a constant.
The service department’s biggest customer per contribution to dealership profitability is the used car department. By reconditioning more cars in less time, a dealer will increase inventory turn, meaning more cars sold in the same year.
This increased volume also grows labor and parts sales—and creates upticks in F&I sales for service retention products such as service contracts and prepaid maintenance, which stimulate customer retention and propel service upsells.
Eisenfelder: Multichannel marketing pushes messages out across multiple channels to increase audience reach. But reach is just one part of the marketing equation—you must also have frequency to make an impact. Unfortunately, increasing frequency across many channels can be prohibitively expensive.
One way to address this is to ask the customer what their preferred method of communication is, but the problem is they might give you a junk email address, or their preferred channel might not be where they actually spend their time.
When it comes to information, we are omnivores, processing messages on different channels at different times. For this reason, an omnichannel strategy delivers a more cost-effective ROI.
Omnichannel marketing leverages predictive analytics to know where your customers’ attention is at any given time. Instead of pushing messages out at random times, messages are delivered to the customer at a time and place convenient for them.
McGinn: What I mean here is not a focus on selling cars, but on retail service.
We know from our studies that a service department that separates its retail and internal service work does better on both. The goal here is more production out of both, and improved fixed-right-first-time and customer service satisfaction.
You can invest heavily in service marketing programs, and if the shop misses on these metrics, it shoots itself in the foot.
Whether you separate internal (including recon) physically from retail or in principle under the same roof, doing so will streamline shop output, eliminate friction, and improve the efficiency of both.
Eisenfelder: If you still believe the main reason your dealership needs to be on social media is to increase “likes,” think again. Social media marketing has evolved in leaps and bounds in recent years.
Currently Facebook has 207 million users in the U.S., and the average session is 20 minutes. Instagram has 96 million users and 80% of users follow at least one business. The reason your dealership needs to have a presence on these platforms is because that’s where your customers and prospects are spending their time.
Advances in marketing automation make it possible to match the customers in your DMS with their social media profiles. It’s now possible to deliver service reminders, overdue maintenance reminders, appointment reminders, and relevant coupons right into your customers’ news feeds.
When you cross-reference Facebook and Instagram users with your own customer data, these two platforms become highly influential channels that deliver incredible results.
McGinn: With 12% to 18% of dealers’ inventory having open safety recalls—and inventory changing daily—it is essential to get a handle on managing the information.
If you don’t know if a vehicle has an open safety recall, you can’t fix or disclose it.
Marketing your service department’s ability to identify for customers any outstanding or new safety recalls shows your commitment to their safety and care of their vehicle—and that concern builds their confidence in the integrity of your department.
Using an automated system with recall information available during the recon process will provide recall status and specific information within the system on each car, and deliver an accurate and timely listing of what is new for each day.
Eisenfelder: Service absorption is a frequently cited fixed ops metric, but it’s very outdated. The problem with service absorption is that it’s composed of two unrelated measures.
Service profits are not driven by store fixed costs; in fact, you can have 100% service absorption yet be losing market share.
Today’s dealers capture just 20% to 25% of the revenue potential from their UIO. The focus on service absorption contributes to these results because dealers are only focused on covering fixed costs, rather than competing on each revenue opportunity.
A better metric to measure service marketing success is dollars per UIO ($/UIO). This metric better represents a store’s true service potential. With only 25% service revenue capture, dealers have the opportunity to dramatically expand store profitability, no matter what happens to new vehicle profits, but only if they are willing to look beyond service absorption.
McGinn: When customers go through the sales process with a dealership salesperson, they are also evaluating the personality of the dealership itself.
If your store sells 100 used cars a month, most of those buyers are potential new service customers. By using mobile apps that alert sales staff where cars are in their reconditioning process on their way to being show-ready, the sales presentation can begin about the vehicle, and not the buyer.
This approach builds trust, which reflects positively on service.
Of course, a correct and professional service handoff is critical here too, but [it’s] a process that begins in recon, flows to sales, and gives service marketing a qualified new customer opportunity.
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