As vehicle sales remain flat and margins continue to shrink, dealers will find the need to refocus their efforts on other departments, namely service, to generate profitability. Successful dealerships typically generate margins in the range of 65 to 70%. This may mean rethinking the way the service department interacts with customers to increase overall store profitability.
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It is estimated that less than one in three service visits take place at a dealership. The majority of those dealership visits are from customers who have purchased a vehicle within the last three years. Typically, the service on these vehicles is limited to routine maintenance, such as oil changes, tire rotations, etc. It is during these visits that it is crucial to create a positive experience for the customer so he/she will return to the dealership for repairs and maintenance when the vehicle is out of warranty.
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The reasons for such a low number of dealership service visits can include:
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- Dissatisfaction with the dealership either from the buying experience or a previous service performed.
- Lack of loyalty to the brand.
- Perception that dealership services are overpriced or the customer is being sold services that are not needed.
- Lack of awareness of the services provided or the process to make an appointment
There are ways to entice customers to utilize the dealership’s service department:
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- As part of the delivery process, the salesperson should provide a tour of the service area, and possibly offer the first routine maintenance services for free or at a discount.
- Educate the customer as to the benefits of having service work performed at the dealership, such as expertise, convenience, transportation provided, waiting areas, etc.
- Customer should be introduced to the service staff, preferably the service manager.
- Salesperson should demonstrate the online process of scheduling appointments and perhaps assist in setting up the first one.
- Ensure that online scheduling is easy and available across multiple platforms (desktop, tablet, smartphone, etc.)
- Customers have become less resistant to receiving text messages. Explore the opportunity to engage customers via this medium for customer convenience.
The environment in which dealers operate continues to change and evolve. The successful dealer will be the one that can adapt to these changes in order to retain existing customers and attract new customers. The service department can be the key to increasing overall store profitability.
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If you have any questions regarding this article, please contact Charlie Paolino at 800-849-6022 or at CPaolino@DowneyCoCPA.com.
