Growing Service Revenues Through Captive Service
In today’s competitive service marketplace dealers need to continually grow and protect their valuable service business. The wide range of available service products provide dealerships with a choice of solutions that are designed to up-sell customers, reengage lost customers and retain existing customers, all in an effort to grow or maintain back end profits. While many of these “pay for play” solutions work for a period of time, one of the most effective, no-cost alternatives is to create a captive service environment.
Captive service is quickly becoming recognized as one of the most effective and profitable solutions for driving predictable, sustained service revenue, for extended periods of time.
So, what is Captive Service?
Captive Service is the condition wherein a retail customer must have specific service functions performed only at your store for a predetermined period of time. While there have been many, and sometimes costly, attempts in the past to accomplish this, with programs like Tires, Engines or Oil Changes for Life, they really do not address the ongoing base maintenance requirement of the vehicle in a form that the retail customer widely adopted or embraced.
We are all familiar with the old pre-paid maintenance programs, usually coupon books sold in F&I that generated low penetration and were usually only an afterthought by the F&I representative. Or maybe you were/are promoting an off-the-shelf OEM PPM program that encourages YOUR customers to go to any other like-brand dealer and have their maintenance work performed. The design and ROI of these age-old programs do not meet the needs of today’s tech savvy, progressive dealer.
So, let’s fast-forward to today. By combining one of the new dealer-owned PPM programs with the captive service concept, you are practically guaranteeing yourself a steady stream of future service for years to come.
- Start by taking the pre-paid plans out of F&I department and put them in the service lane where they belong (OK, if you must, you can still sell a few in F&I).
- Pre-package a few maintenance items along with a service discount in PPM with the caveat that it is only good only in your service department.
That’s where the captive service element comes in so you can sit back and watch your service retention and revenue grow every month. Just think for a moment about the volume of units that comes through your service lanes each day compared to what may go through F&I in an entire year.
- Offer a simple LOF, rotation, inspection, maybe wiper blades, and a 10% off service package for somewhere between $99 and $299 and have your service team sell them in the lane as part of the write up process.
The percentage off discount contained within the plan provides your service lane professionals with a new tool to help upsell the expensive brake, 30, 60 and 90K maintenance services. Upsell on these visits generally run in the $125 to $165-dollar range and can be even higher depending on your service advisors’ abilities. Now, you may be saying to yourself that your service guys have too much to sell already and they can’t possibly sell anything else. While that may be true in some cases, you should take a serious look at which products will generate the most ongoing retention and revenue and readjust your service menus accordingly. After reviewing your current product line-up, the old “one and done” products will almost always end up at the bottom or off the menu moving forward.
Dealers currently utilizing this approach see upwards of 70-75% retention from the customers who purchase their plans and many purchase subsequent ones because they like the value and convenience associated with them.
The new PPM plan providers deliver many other benefits that were simply not available six or seven years ago. Dealers can now hold 100% of the program revenue, providers integrate seamlessly with your DMS, and many offer new mobile customer engagement and contact tools to keep your local brand top-of-mind with your customers.