There is no doubt there has been a dramatic increase in the number of vehicle recalls announced in the last few years. According to NTHSA, we are approaching 60 million open recalls on vehicles currently in service. That number continues to grow as OEM’s recall more and more vehicles, mostly due to faulty components. While dealerships continue to service and repair these vehicles, the number of newly issued recalls is outpacing the repair rate and thus the number of affected vehicles continues to grow.
While recalls are a necessary burden to OEM’s, they can be a significant source of revenue for dealerships that have a sound recall strategy in place. Savvy dealers know that performing the actual recall may not be the main revenue generator; the service up-sell opportunity is where the real gold is. Research by Recall Connect (a recall facilitator) indicates that the average RO for a recall-initiated service visit is $461.00 – which, for many stores, is not much different than a CPRO generated by internal advertising, special offers or your CRM system.
Further research indicates that a typical metro dealership may have over 1,400 vehicles with open recalls just sitting in its DMS service database. That represents over $600K of available service dollars just waiting to be mined. Now, it may not be realistic to expect that every one of those customers will come in, but it does represent significant service revenue just waiting for the taking.
Do you have a strategy in place to take advantage of this built-in revenue opportunity?
For most dealers, identifying, contacting and procuring the parts for those thousand plus customers could overwhelm their service department. Fortunately, there are now third-party services that will do all the identifying, contacting, parts coordination and appointment scheduling for you with only minimal dealership administration.
As with any other third-party services, there are important elements to look for when selecting a recall facilitator.
My list of must haves, are:
- NTHSA and OEM Compliant – There are strict guidelines for customer facing recall communications
- DMS Integrated – Effectiveness greatly increases with DMS access. It reduces dealer administration and allows tracking of service up-sell.
- Flat Rate Pricing – Pricing by appointments set or customers contacted can become very costly and difficult to verify. A flat rate is the way to go – at least initially until you can determine your ROI.
- Integration with Appointment Scheduler – The administrator should interface with X-Time, etc.
- Multiple Contacts – Once and done is not enough; there needs to be multiple contacts facilitated over different communication channels.
- Parts Department Interfacing – Having the required parts ahead of time decreases repair delays.
- Detailed Reporting – The administrator should have a detailed reporting mechanism highlighting recall completion, up-sell and ROI.
- Email Campaigns – In order to keep your costs down, the ability to send recall notifications via email or text message is crucial. Postcards can be effective too, but they are typically a lot more expensive ($3-6 each).
- Conquest Customers – Ability to garner conquest recalls from non-DMS sources.
While your own DMS data alone will provide you with a reasonable number of vehicles with open recalls many dealers are taking it a step further and actively pursuing those units that are on other lots and independent repair facilities. While it may seem a bit strange, “partnering” with your local independent repair facilities, but actually, it is a win for you, the repair facility and the retail customer. Several recall facilitators will do the leg work for you in building the independent relationships and in identifying those vehicle owners in your DMA. Many of those customers have purchased their vehicle from a like brand competitor or choose to service elsewhere.
Finally, let’s not overlook the obvious. Many of these recalled vehicles are older models with higher mileage. That fact alone is something that will drive increased service up-sell and will surely encourage the opportunity to sell the customer a new vehicle.