The auto industry is changing more quickly than ever, with margin compression threatening profitability and rising customer expectations a constant challenge. When devising your strategy to deal with these challenges, fixed-operations may seem to hold great potential. In fact, “old reliable” fixed operations delivered 49% of dealership gross profits in 2017, according to NADA, and that had been increasing for several years before that. Add to that the Cox Automotive’s Service Industry Study showed that dealerships received only 33% of all service visits in the US, which would seem to be a huge growth opportunity.
However, counter-balancing the potential of fixed-operations are the following factors:
- Lengthening maintenance intervals mean fewer dealership visits
- Improving quality means fewer repairs and recalls
- OTA software updates don’t require a dealership visit
- Competition not sitting still
- Traditional competitors
- New players
What this means is that in the future, you won’t have as many servicing opportunities from your existing customers. So, to continue driving profitable growth in your dealership, your only option is to pull more of the 67% of service visits in the U.S. that don’t currently come to you.
How do you do that?
Most dealerships have been transaction-centric in their service departments, carrying over this practice from the sales department of maximizing a single transaction. To thrive in fixed-operations, dealers must adopt a different and more customer-centric approach by implementing strategies which create trust and long-term loyalty. In my new book, “Fast Break: Creating A Customer-Centric Operating Philosophy for Automotive Service,” I demonstrate through real case studies how adopting a customer-focused strategy in fixed operations is the key to profitable growth.
So, how can dealers build a customer-centric service department? They need a new operating model – one where all aspects of the business place the customer in the center to better understand vehicle owner needs. This begins with understanding and shaping the fundamental building blocks of fixed operations: leadership, people, culture, technology, capacity and facilities, then bringing this same focus to processes, scheduling, marketing and training.
Utilizing Technology to Improve Customer Loyalty
Technology is a fundamental building block to enhance the customer’s experience. Dealers must integrate technology into their lanes and bays as well as consumer-facing aspects of their website. Enabling online scheduling for service appointments is a logical first step. This function is sorely underused by vehicle owners because of a lack of awareness. According to a 2016 Cox Automotive Maintenance & Repair Study, 45% of consumers didn’t use online scheduling because they weren’t aware their dealerships offered the option to book a service appointment online.
Additionally, equipping customer-facing team members with mobile devices to digitally check-in customers can speed the process, minimize paperwork and capture customer data for targeted email marketing. Using new technology to assist with transportation to and from dealerships for service also can reduce customer inconvenience. Many dealers are cutting costs and improving customer service by eliminating slow and costly shuttle services, and instead enabling Uber or Lyft.
Reclaim Customers with Fair and Transparent Pricing
While very important, technology is only part of the answer. Once your dealership has created a truly customer-centric enterprise, you now need to find new and innovative ways to compel defected customers to return and give you a second chance. The best way to accomplish this will be to communicate your value to vehicle owners and to assure them that you’ll provide them their preferred technology enhanced experience and that you provide a fair and reasonably priced service in your market area.
4 of the top 5 reasons consumers don’t service with the dealer have to do with price anxiety:
• Total cost is NOT reasonable
• NOT a convenient location
• They will overcharge me
• Unreasonable labor charges
• Unreasonable parts charges
Most research shows that dealers are already price competitive for vehicle service, so this price anxiety appears to be an awareness problem. 35% of consumers used the Internet for service-related research, but this percentage climbed to 52% for Millennials and 57% for Gen Z. In fact, conducting pricing research is the only activity that appears in each generation’s list of top 5 vehicle ownership activities. So, overcoming this pricing anxiety will be necessary to bring customers back to your dealership.
By taking this approach, you can switch from defense to offense in confronting the challenges of today’s auto market and fast break into a new model that offers lifelong customer relationships that deliver an increased share of service visits and repeat vehicle sales.
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Jim Roche is Vice President and Fixed Operations Subject Matter Expert at Cox Automotive’s Kelley Blue Book, and the author of Fast Lane: How to Accelerate Service Loyalty and Unlock Its Profit-Making Potential and Fast Break: Creating A Customer-Centric Operating Philosophy for Automotive Service.