CommentaryJul 30th, 2018

How Bundling Retention Incentives Benefits Dealers and Consumers


Does customer retention have a place in a market shaped by ridesharing, subscriber services, pod cars, autonomous vehicles, Carvana and DriveTime, and ride-hail services such as Uber and Lyft?

And as the retail auto landscape continues to morph into sales and distribution models that would have been science fiction just a few years ago, is the pursuit of customer retention more or less important?

The goal is to achieve a winning outcome for all parties. We’re currently witnessing several dramatic transitions of what was a very stable, predictable automotive retail model, which means many ideas and methods are becoming obsolete, or facing urgent pressure to change.

So if the dealer’s connection to buyers is diffused or in any way less direct, how do they retain a share of customers’ future transportation dollar? By bundling retention incentives, dealers can put more valuable services in customers’ hands, often at no additional cost to either party.

This strategy helps dealers sell more cars, and customers who buy them experience greater ownership value and convenience. If you’re a franchise dealer looking for an edge, something different — something uniquely convenient for your customers — then consider how bundled retention services might benefit you.

And if you’re an independent dealer, you’ll benefit from bundling as well. Companies bundle related products and services to make the overall package more valuable to the consumer than the individual parts.

Bundling has been popular in F&I for some time as a means of presenting and selling aftermarket products.

Management practice publication Ivy Business Journal calls bundling “the new super solution that gives companies an edge,” saying companies that practice bundling differentiate themselves from competitors — or even eliminate their competitors altogether.

Bundling examples

Aftermarket protection company Vero recently partnered with financial services provider Allied Solutions to bundle vehicle protection and appearance products with a vehicle service contract structured to appeal to independent dealers and their customers.

Vero chief executive officer Joe Annoreno notes that today’s market pressure on used car operators is considerable. Competition for quality inventory at the right price ranges is brisk, but dealers utilizing bundled products set themselves apart and help keep customers connected to them.

For instance, bundled appearance packages with prepaid maintenance plans require that the care and upkeep of the covered appearance aspects of the vehicle be done at the selling dealership.

The advent of PPM plans

Car buyers value free or prepaid maintenance programs. OEMs began offering them more than a decade ago. Their purpose was to encourage repeat service visits and brand loyalty. Consumers could redeem plan services at any of the OEM’s franchises. T

his was healthy for OEM relations and revenue, but not necessarily for the dealerships. Third-party innovators picked up on this opportunity, offering prepaid maintenance programs with a twist. Their dealer-branded prepaid maintenance plans could be used only at the issuing dealership.

Dealers sold or preloaded these PPM plans, which typically included oil and filter changes, wiper services, and tire rotation — common consumable maintenance items. These plans stimulated more frequent service visits, which built the habit of servicing at the selling dealership.

Bundling pushes convenience

Increasingly, bundled benefits are being used as marketing tools, which leaves buyers impressed. For instance, vehicle subscription companies that source customer inventory from dealers bundle prepaid maintenance packages into their solutions.

The programs link the maintenance of these vehicles back to the providing dealership, from which the dealership gains service revenue. Subscribers appreciate the convenience and budget benefits, resulting in goodwill and retention that links back to the subscription service.

For example, one PPM teams up with mobile vehicle maintenance services to give dealers an extra competitive advantage in their markets. The added prepaid maintenance benefit is a no-charge upgrade for dealers and their customers. Dealers can either preload or sell these plans.

Customers appreciate the plan’s savings and convenience, so they remember the dealership’s special touch. Customers schedule with using its app, website, or phone, and expert mobile technicians arrive at their home or place of business fully equipped to deliver excellent results, further strengthening positive impressions about their dealer.

Bundling fluid services

Fixed ops packages that provide fluid services are another example of bundling designed to drive retention and revenue for dealers.

There’s a great deal of opportunity from this type of plan for dealers and customers. The AAA notes the following facts to support this:

  • 56% of Americans skip or delay recommended vehicle maintenance or repair.
  • 80% of brake and transmission fluid maintenance needs are missed by motorists.

More than $80 billion in unrealized revenue drove out of automotive service departments last year because dealers did not check customer vehicles’ brake, power steering, and differential fluids.

Age, heat, humidity, moisture, and other conditions cause these fluids to lose their vital performance additives.

Fluid services, when bundled with prepaid maintenance plans, encourage customers to get the work done regularly, which helps dealers capture that additional business.

Dealers report that 70% of customers using PPM plans want to add this fluid service when it’s available.

Customer upsell when this additional benefit is presented is, on average, more than $130 per repair order, compared to about $70 per RO with a PPM that doesn’t include this extra.

These examples show how bundling retention incentives is a win for both customers, who enjoy greater convenience and peace of mind with their vehicle, and dealers, who experience significant boosts in sales and customer loyalty.

Ryan Williams is president of Fidelis PPM, and is a 20-plus year veteran of the auto industry, having served in multiple dealerships as sales manager, F&I manager, and GM. You can reach him at [email protected].

Authored by

Ryan Williams

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