After years of rising demand and record-setting results, the U.S. sales momentum has come to a relative halt, as a recent in-depth article by WardsAuto notes.
At the same time, dealership inventories and incentives have increased, hindering profit margins for dealers and OEMs. This transformation has dealers scrambling to answer the critical question of how to drive profitable growth as vehicle sales plateau.
Given the customer is the focal point for profitable dealership growth, the simple answer is for dealers to find ways to increase retention rates. To do this, they need to prioritize the fixed-operations side of their business and look beyond the vehicle sale to the continuing ownership experience.
This is a critical growth opportunity. According to the National Automobile Dealers Assn.’s 2015 annual dealership profile report, fixed operations’ average gross profit of revenue is 46%, but fewer than one in three service visits take place at U.S. dealerships.
The service side of the customer journey is where dealers really can stand out and make a deep impression on vehicle owners. Today’s consumers want a great experience that includes easy scheduling, work completed when promised, good communications and fair and transparent pricing.
Dealers can provide a holistic environment via a connected ownership experience that brings customers’ online preferences to the in-store service bay through a streamlined and seamless journey.
If dealers can provide this, customers are more likely to use the dealership service shop, increasing retention rates and, ultimately, profit margins.
This has long-term implications for dealers. Consider the average car ownership lasts 11 years. During that time span, vehicles may require service between 15 to 20 times. Cox Automotive’s 2017 Car Buyer Journey report found more than half of buyers had maintenance/repair service performed after purchasing or leasing a vehicle – but nearly half of those did not return to the dealership for those services.
Among customers surveyed, scheduling difficulty and price were cited as main reasons dealerships were avoided. However, buyers who did return to their dealers for service left with higher satisfaction.
Despite customers registering higher satisfaction following dealership service, there are a few factors that often prevent dealers from fully capitalizing on the fixed-operations side of their business. First, dealers tend to hold fast to their current business practices, as they’ve been successful in the past. Additionally, dealers can delay adopting the new technologies that are driving today’s best-in-class customer experience.
The good news is that with the right investment and dedication, dealers can move the needle on their profitability and customer satisfaction.
With that in mind, here are actions individual dealerships can take to emphasize increased convenience for their customers to boost customer retention and profitability:
- Get equipped with the right technology that starts by inviting the customer online to the dealership for vehicle service, allows them to schedule appointments, provides flexibility and convenience and provides a great experience in the service lane.
- Communicate. The latest J.D. Power Service Satisfaction survey shows 67% of customers say they “definitely will” return for service when they receive text-message updates during the visit.
- Show them the money. Walk customers through the online service process and even book their first appointment at time of delivery. This will set the stage to keep the customer engaged throughout the entire service experience and underscore your commitment to convenience and providing a great experience.
- Use automated service-reminder notices that are personalized to both the owner and vehicle to increase customer awareness when critical vehicle maintenance and repairs are needed.
- Emphasize service right from the start by infusing the service department during the purchase/lease phase. The Cox Automotive 2017 Car Buying Journey report shows dealers could do a better job of showcasing the service element and technology at the time of purchase. Fewer than half of new-car buyers and only a fourth of used-car buyers are made aware of their dealership’s service capabilities.
With unfavorable buy-side market conditions looming, now is the perfect time for dealers to place even more emphasis on the service aspect of their business to drive profitable growth and deliver a superior customer experience. Ultimately, dealers who embrace the connected ownership experience can stay ahead of the sales plateau.
Jim Roche is senior vice president-Marketing and Managed Services for Xtime, a division of Cox Automotive.