How Dealerships Can Increase Service Drive Profitability

How can your dealership increase its service drive profitability? As consumers wait longer than ever before between new vehicle purchases, refining your dealership’s service department process to generate more revenue can make a critical difference in your dealership’s bottom line. Let’s look at:

–  Why the service drive has become a key component in dealership revenue & the importance of service drive loyalty

– How to grow service revenue and loyalty with actionable tips

– How to dedicate a sales team member to the service drive – and equip them with the right tools

If your customers aren’t buying new vehicles, then they’re repairing old ones. American consumers are hanging onto their vehicles longer, to the point where the average car or light truck on the road today is 11.6 years old. Incredibly, that’s three years older than the average just two decades ago.

Why the Service Drive Has Become a Key Component in Dealership Revenue

As vehicles get older, they require more maintenance. This is one factor why new-car dealership service revenues across the industry have been growing strongly in recent years, increasing from slightly more than $80 billion in 2011 to $116 billion last year. According to NADA, last year the average new-car dealership netted 16.2 percent of its profit from service parts and labor, writing 18,544 orders per year for an average staff of 16 technicians (including body shop).

Service revenues are not only key to a dealership’s bottom line, but service loyalty also drives sales loyalty. For dealers who want to grow their share of both revenues and loyalty, below are some simple data-driven suggestions on how to run a dealership service department in today’s competitive landscape.

How to Grow Service Revenue and Loyalty:

Don’t Be Afraid to Compete on Cost

It’s no secret to anyone who manages a dealership service department that consumers believe it is the most expensive place to get their vehicle serviced. That’s one reason why far too many customers stop visiting the dealership service drive once their warranty expires. Dealerships that in the past have balked at putting pricing online or marketing based on price because of a fear of being comparison-shopped against lower-cost independents must meet this consumer concern head-on.

While industry data does show a price differential, it’s also usually less than customers expect – and that difference can be tied directly into the needs and desires of today’s consumer. For instance, dealers have long promoted the perceived quality benefits of dealership service technicians and genuine parts in their marketing outreach. But with the aging vehicle fleet on the road, it’s time for dealer service marketing campaigns to connect those perceived benefits to the customer’s desire to have their vehicle performing at a high level as long as possible. Consumers who hope to drive their existing car or truck for many years after their warranty has expired will be more open to quality messaging such as, “We have the expert technicians and factory-quality parts to keep your car or truck running great for years to come,” and more sensitive to suggestions that they would be sacrificing quality and long-term dependability by entrusting their vehicle to the low-cost competition.

Treat Service Business as a Local Business

Research regularly finds that consumers are unlikely to travel more than 20 miles for a car service, and almost three-quarters of vehicle service visits take place within 10 miles of a customer’s home. Rather than fighting this, focus on marketing to your existing local customers with proximity and convenience messaging to try to keep as much of their business as possible out of the hands of local independents, tire stores, quick lubes and other competitors.

That 10-mile radius should also be prime service drive conquest territory for your marketing campaigns, starting with local brand owners who purchased their vehicle from another dealership and expanding into other owners whose vehicles your technicians are prepared to repair.

Today’s social media and digital advertising platforms have powerful geographic capabilities, and your service drive marketing campaigns should be taking advantage of them to ensure you’re not spending marketing dollars trying to sell service visits to consumers who are outside your local market. Is the team managing your service department marketing campaign focusing tightly on the consumers who are most likely to visit your service drive, or are they spending your resources on unlikely audiences?

Dedicate a Drive to the Most Time-Sensitive Services

Many consumers believe independent mechanics or specialized franchise tire, lube, air conditioning or brake shops are much quicker than dealership service drives for standard maintenance services or state safety inspections. In order to keep your existing customers and effectively conquest that business back from those competitors, you need to address the speed/convenience concern head-on by reducing or eliminating their advantage.

Review how those kinds of orders are handled within your dealership service department process and consider setting up a dedicated service drive or repair bay for those kinds of repairs, and marketing it directly against local competitors on speed, cost and competence.

How to Integrate the Service Drive with Sales

Great service performance supports great sales performance and service loyalty drives sales loyalty. In fact, industry data suggests that after five service visits, a customer is three times more likely to purchase their next vehicle from your dealership. Service conversion, when done effectively, is a tremendously powerful and efficient method of sales prospect generation. It depends not only on ensuring that your service drive is providing an excellent customer experience, but also on ensuring you have the right people and processes in place to connect your service and sales departments so you’re taking advantage of that connection.

Does your dealership have someone dedicated to converting service customers into sales prospects, reaching out to high-quality sales prospects with service appointments to schedule a quick discussion while they’re in the dealership? What tools have you provided that dedicated person to identify the best prospects, and how much do they know about the people who will be showing up in your service drive that day? Do they have the right resources and authority to structure an offer and close a sale? If the prospect isn’t quite ready to close but still worth keeping as a prospect, how is that relationship handled and who is responsible for keeping it active and working it toward closure?

Dealerships that are doing the best at converting service customers into vehicle sales have answered those questions, and use processes and tools available through third parties to gain the upper hand.

This article originally appeared in Driving Sales.