To improve the perceived value of franchised dealership service, research and consulting firm Carlisle & Co. says OEMs and dealerships should:
- Increase no-extra-charge planned maintenance offers and add more prepaid maintenance options and customer loyalty awards.
- Beef up training for service writers and technicians aimed at customer handling and customer communication, not just the technical aspects of the job.
- Train dealership staff to handle electric vehicles and vehicles with increasing levels of autonomy before high-tech competitors, who are now largely outside the auto industry, beat them to it.
“We think there’s a problem here,” especially for premium brands, Eliza Johnson, a director for Carlisle, based in Concord, MA, says during a “State of the Industry” webinar for the Automotive News Fixed Ops Journal.
It’s a truism in the service and parts industry that service retention for franchised new-car dealerships falls off as length of ownership increases, especially once vehicles are out of warranty.
For example, dealership service retention of premium brands is about 80% for the first two years of ownership, but it’s half that at about eight years, Carlisle says. That’s in terms of at least one customer-pay service visit in the last 12 months. Service retention is lower for non-premium brands but follows a similar pattern.
Those numbers are consistent over time, but there are indications the situation could be worse than it appears, in part because of rising hourly rates for dealership labor.
From 2015 to 2019, the average repair order value on customer-pay work has increased for both premium and non-premium brands, to an overall average of more than $300, according to Carlisle data.
That sounds positive, but Johnson says that’s partly because of rising customer-pay hourly rates for premium brands. The average rate for premium brands was about $130 in 2019 compared with less than $120 five years earlier, Carlisle says. Rates also have inched higher in the past couple of years for non-premium brands, to just over $100.
At the same time, the average number of customer-pay hours per customer-pay repair order fell to 2 hours, from about 2.25 hours for premium brands. Non-premium brands showed a small increase, to just over 1 hour on average.
The problem is, the higher rates for premium dealerships may disguise a long-term trend toward fewer average hours per repair order, Johnson says. Not to mention, she says, that higher labor rates also contribute to “the customer perception of being overcharged.”