How to Grow and Maintain Dealership Service Center Profits
May 31, 2022
More Vehicle Use
Fact: the fixed operations portion of your dealership can likely be leveraged to increase existing dealership service center profits, especially now. Why? Because due to current inventory shortages, many people are holding onto their vehicles longer. More folks have been using their cars in the last 6 months — some of them gearing up for spring travel and vacations — and, consequently, more vehicle service is needed.
Service Market Share Matters
Jade Terreberry is the Senior Director of Business Development at Kelley Blue Book, with decades of experience in the automotive industry, and she points out that fixed ops typically account for 5-10% of a dealership’s marketing investment. And as long as this is wisely spent, that can be enough, Jade says, but market share matters. With capacity demands and technician shortages, dealers need to determine who they’re going to be, and how they’re going to play in this space because today’s focus will inform tomorrow’s profit — for many years to come.
The Online Shift
Consumers are shifting to online research. They’re using online tools to compare, take action, and schedule service. This means dealers must rethink how that 10% of their budget works. It doesn’t mean dealers necessarily have to spend more, but it does mean they have to be there to connect with their service consumers in a meaningful way — where they want to connect. If not, their market share will go the way of the Chevy Nova. And right now, dealers can grow service market share like crazy, or risk missing the boat on what’s coming.
What’s more, consumers expect online options to be available for all their needs, including service and parts. They’re looking for online scheduling, service pickup and delivery, and fair and transparent pricing.
Set. Measure. Drive.
How do you get to it all, you ask? We know the current demands and restraints on capacity are a real thing, which means you have to make every minute and every dollar as efficient as possible. This can only be achieved with accurate tracking, use of technology, awareness of return on investment, understanding of your customer segments (customer, warranty, used car department, etc,) and relentless commitment to setting goals, measuring everything, and driving toward improved efficiency. Keep top of mind the importance of “what customers want.” Consumer choice is everything these days — it’s truly the key to your success.
The New Calculus The industry is just minutes into this digital revolution, so dealerships can give themselves a competitive advantage by jumping in with both feet, adopting the right tools and strategies for the job, and creating sizable dealership service department profits. Ditch the mailers and mass email blasts, Jade says. Paid search and social campaigns can even create diminishing return on investment if not properly tracked and managed. Increase your service department’s reach by tapping into digital marketplace offerings to understand the role that your used car department plays, and don’t forget the value of your existing clientele and repeat and referral business.
Lifetime Value Remember: it’s not about the single oil change. It’s about the lifetime value potential of every service customer you gain. The current landscape is giving consumers an opportunity to look at the bigger picture of the vehicles sitting in their garage, and they’re asking themselves:
How much is my car worth?
Is it the right time for me to trade?
Is it the right time for me to hold onto it?
What are the tools and steps that are going to help me?
Tech-savvy, future-ready dealers that can answer these questions will be there to meet them.
The Bottom Line
The online transition is happening fast. In fact, it’s happening 10-20x faster than it did for digital retailers. And of course, COVID has only accelerated this.
As a dealer, if you don’t capture increased market share now, and you don’t have these consumers moving through your service drive, they’re not going to wait until you’re ready.
ATLANTA, Aug. 9, 2023 /PRNewswire/ — The average price Americans paid for a new vehicle in July 2023 was 0.4% higher than one year ago, the smallest year-over-year price increase in the last decade. […]