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More than half of average dealership gross profit comes from service department
<p><strong>More than half of average dealership gross profit comes from service department. </strong></p>

Repair Shops ‘Crushing’ Dealerships in Service Game

&ldquo;Dealers must establish the value of their store&rsquo;s service department early,&rdquo; says DealerSocket&rsquo;s Marylou Hastert.&nbsp;

When a customer purchases a vehicle is a bad time for a dealership to tout its dealership service department, right? Wrong.

A study says it’s a great time, and much future business rides on it, such as whether customers will return to the dealership or go elsewhere for future service work. Currently, the elsewheres of the repair world are winning.       

“Third-party repair shops own about 75% of the market and are crushing dealerships in the service game,” says Marylou Hastert, director-product marketing for DealerSocket, a customer-relationship software provider.

Its Dealership Action Report indicates 53% of the average dealership’s gross profit comes from the service department, but only 30% of sales customers bring their vehicle in for service within the first year of ownership.

That number drops to 13% after three years and to 2% after five years, according to the report based on data drawn from DealerSocket’s client base of 6,500 dealerships.

“Dealers must establish the value of their store’s service department early to protect their customers from the endless competitive options available to them,” Hastert says.

Introducing customers to the service manager and scheduling a first oil change before customers drive off in their newly purchased cars are effective ways to build a long and profitable relationship, she says, adding that using CRM systems to keep in touch also helps.

Some top performers offer cash-back bonuses on service purchases that apply to the purchase of future vehicles.

Integrating sales and service like that nearly doubles customer loyalty and retention rates – 44% compared with 20% of a dealer’s business usually attributed to repeat customers, according to DealerSocket data.

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