The word “innovation” gets thrown around a lot when we talk about dealers who manage to stay ahead of the curve year after year, even as the industry continues to change around them. But it gets repeated so often that I fear we might be losing sight of what innovation actually is and why it has value for the dealership in the first place.
What innovation is not is simply incorporating any shiny new technological solution that comes your way just to seem like your operation is on the cutting edge. Better terms for that practice, in fact, would be waste, bloat, and inefficiency. Really, innovation is simply identifying new sources of profit for your business, then taking steps to realize that profit.
Take the service department, for example. There’s a particular missed opportunity that’s been plaguing service departments forever now: following up with customers who have declined recommended service. That might seem like a strange issue to zero in on but think of your customers in terms of how much profit they might generate for your business over the full lifetime of your relationship ─ not just the initial vehicle sale or service job. When you consider long-term value, effective and consistent follow-up in service becomes a tremendous opportunity.
Turning Declined Service into an Opportunity
Unfortunately, if you’re like most dealers, your follow-up process for declined service is probably manual, inconsistently executed, and not returning the results you need it to. That’s not a knock on your service advisors. They often have more on their plates than they know what to do with as it is. When there are several different fires to put out across the department at any given moment, who can blame them for not prioritizing pushing service work the customer has already said they don’t want? Still, the end result of this inconsistency has a real and negative impact on your profitability. You can chalk that up to the cost of running a service department, or you can choose to see it as an opportunity for improvement.
If you’re reading this, I suspect you fall into the second group. Good! As it has so many times in the past, the answer lies in innovation. In this case, the best solution to inconsistent declined service follow-up is a process to automatically and dynamically follow up with customers who decline recommended services for their vehicles.
An automatic system immediately gets you that missing consistency, as you remove the burden of ensuring follow-up with every customer from your advisors while creating a standardized process. It also softens the sell itself, as your customers will probably respond more favorably to a soft, personalized message from an automated system rather than feeling pressured (justified or not) in the service department.
Ultimately, though, what we really care about here is profit opportunity. With a dynamic, personalized response to every customer’s individual needs, you in effect turn every instance of declined service into an event-based targeted marketing opportunity.
Think of it this way: if every declined service becomes a triggering event for an automated, tailored response to that customer based on clean dealership data, then you could leverage both email and direct mail (both of which convert at exceptional rates) to nudge those customers with just the right messaging at just the right time. It’s not hard to see why this approach bears more fruit over the long run than a one-off phone call from a distracted service advisor. In fact, let’s play with some numbers to see exactly what kind of impact automating follow-up in service could have on your bottom line.
Let’s say your service department processes an average of 1,650 repair orders per month, and you have 50 percent email penetration or about 825 reliable customer email addresses. Now, let’s say 33 percent of your customers who are reachable by email, 272 people, are declining service. We can safely estimate a 4 percent conversion on targeted email follow-up. That translates to 11 additional repair orders per month based on your automated service follow-up. Assuming a nice round number for your average gross profit per repair order — say, $150 — you will net $1,650 in additional gross profit per month from automatically triggered follow-up emails alone.
Remember that email is only half of your targeted marketing equation. Using the same numbers, we can add direct mail to the mix (still using a safe 4 percent conversion rate) to get 11 more repair orders for an additional $1,650 in gross profit. Sadly, tangible mail delivery isn’t free. Assuming you sent 272 pieces at a cost of $0.89 per postcard, we’ll deduct $242.08 from that $1,650 to end up with $1,407.92 of profit from direct mail. Add your email and direct mail results together, and you’ve got over $3,000 in additional gross profit from service per month — all with fairly conservative estimates.
There’s no doubt in my mind that inconsistent follow-up with customers who’ve declined recommended service at your dealership represents a significant and ongoing missed opportunity. Whether it’s to cut costs or boost gross profit, automating your process for declined service follow-up just makes sense. Are you ready to take action and turn this liability into an opportunity for your business?
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