Happy New Year! As we turn the page to 2017, I would like to suggest three New Year’s resolutions for you to consider in fixed operations:
- Hold on to the customers you have.
- Pursue new customers (that drive older cars).
- Sell preventive maintenance services to all of the above.
Sounds so simple, doesn’t it? Actually it is a simple plan, it isn’t hard to understand, and it will produce predictable results. Granted, you have to be firm in your resolve, intentional with your action plan, and consistent with your accountability structure.
Hold On to What You’ve Got
During the first year of vehicle ownership, the loyalty your customers have to your service department is the highest. By the second year, half have said goodbye, and by the third year, most have left you never to return again (see attached graphic). A study by IMR, Inc. showed dealership market share to be 57.6% the first year after purchase, 51.2% the second year, and 43.7% the third year.
Time out. I’ve always known that the longer someone owns a car the less likely they are to return to the dealer for service, but I had no idea 42.4% of car buyers defected to the aftermarket in the first year! Wow! What a slap in the face to dealerships. (Let this serve as a reminder of the importance of a sales to service “hand-off” at the time of new and used vehicle delivery. If you don’t do this with consistency, every time you sell a car, realize that 42.4% of the time you won’t get a second chance. They’ll buy the car and then you’ll never see them again!
“Over 42% of vehicle buyers defect to the after marked in the first year of ownership… never to return to the dealership again.”
Reach Out to Get More
There are two types of “lost souls” that have defected to the aftermarket.
- The first group are those with vehicles less than three years old. Their car buying experience at your dealership is still fresh in their mind, even if they have never returned to your dealership for service. Many of them will return if you simply reach out to them.
- The second group are the folks who have older vehicles. They often pose a greater challenge because they have long ago forgotten how great it was to do business with your service department. I’m going to use the rest of the article to focus on this group of consumers with vehicles 3-11 years old.
Myths About Older Cars
Myth: People who drive older cars don’t have any money. I know a cardiologist with a 2017 sporty two-door Lexus and a 2010 Jeep Cherokee. I can assure you that he has the resources to keep the 7-year-old Jeep in peak operating condition. There are millions of households like this across America, with an older car sitting in the garage right next to a brand new one.
Myth: No one wants to spend any money on an old car. The IMR, Inc. study totally debunks this myth by showing that owners of older vehicles spend an average of $863 annually on vehicle maintenance and repair (see graphic). If you just attract ten of these customers per month back to your dealership, it will produce $8,630 monthly and over $100,000 annually in fresh revenue.
Myth: My techs won’t work on older cars. Yes they will; however, if you have a couple of prima donna techs who think it would be beneath them to do so, I would suggest that you leave them alone and give the labor hours to those who are willing. Most techs are hungry for more and would welcome the extra work.
Myth: Owners of old cars won’t come to the dealership; they’ve already moved on. They certainly won’t return if you don’t ask, but if you reach out to them and show them a little love, you might be surprised by how many respond. The VIO (vehicles in operation) in your market is huge. If only one out of twenty responds, it would represent a great victory.
ACTION POINTS TO GET MORE
Let me leave you with five quick action steps to take back what has been lost and pursue fresh sources of revenue. This isn’t rocket science, nor is it a sprint to victory; it’s just consistent execution of tried and true practices. You can do this:
- Ask every customer that visits your service drive if they have another car at home—other vehicles in their family. Tell them you’d love to have an opportunity to service those vehicles also.
- Be intentional on working on all makes and models of vehicles— any vehicle, any age. Bring it on, we’ll get it done.
- Use one of your vendor partners who specializes in emails, postal mail, phone calls, etc. to reach out to lost souls and owners of older vehicles. Invite them in for a free oil change or some type of Saturday car care clinic (with hotdogs, burgers, and those giant blow up play areas for the kids). The intent is to remind them how great it is to be back in a professional automotive dealership again.
- Don’t lose your customers to the aftermarket in the first place. The best way to do that is by proactively offering preventive maintenance services so they know you are more than just a warranty center or a place to get an oil change.
- Keep “beating the drum” and constantly reminding your customers that you have the best technicians in town. Make the point every time they come in for service. Modern automobiles are computer-controlled marvels with variable valve timing, low-tension piston rings, direct injection, and new technology synthetic fluids. Keep reminding vehicle owners that these precision machines require highly specialized, factory-trained technicians only found at your dealership.
Are you resolved to hold on to what you’ve got and reach out to get more? Good! Then you’ve taken the first step toward the happiest new year ever.
(My personal thanks to Phil Thompson and his staff at IMR, Inc. for giving me permission to use their research information: www.automotiveresearch.com.)
Author: Charlie Polston
Charlie Polston is an Automotive Customer Retention and Profitability Consultant with BG Products, Inc. Charlie has been with BG’s Fixed Operations Division for over 34 years.