The revenue importance of service after the sale

Whether you’re a Dealer, GM, Principle / Owner, Service Department Leader, Technician, New or Used Car Sales Specialist, or Acquisition / Appraisal Manager; it’s a consistent conversation, and an ever shifting one lately, on the difference and value of how to maximize new consumer opportunities vs an existing one. Especially when it comes to your service center. 

More specifically, how to get more new clients, retain them, as well as how to retain the existing clients you have in order to gain and keep a lifetime value client. When you are able to decode this, it can pave the way to a more profitable future when it comes to revenue at your dealership. 

Times have changed, and so must some of the ways we conduct business and where the strategy and focus lies within your dealership.  

Changed Consumer Behaviors Calls for Changed Dealer Focus 

We all know there is a big focus at dealerships around the initial sale of a vehicle… But what about after the sale? Especially in today’s times with inventory shortages?  

With recent studies showing that over 50% of a dealership’s profits are coming from their service centers, focus should also be on service after the sale at dealerships. It’s just as big of an importance to revenue, if not bigger, especially with so many macro-trends and challenges dealerships face, as well as navigating changed consumer behaviors.  

Consumer behaviors have not only evolved over the last few years, but show a shifted level of expectations as well as set of preferences. Preferences that all point to convenience and ease. If dealers don’t change behaviors to match that of today’s consumer demands, not only is a current or future sale at risk, but there’s a risk for their service departments as well as profits. The lifetime value of a customer extends well beyond the initial sale and drives straight into the service lane, and that is also where dealers should be looking for revenue opportunities. 

Stability in the Service Drive 

Data we have from a recent 2021 Cox Automotive Study really speaks for itself when it comes to the important role that service after the sale plays.  

• 71% of consumers have defected from dealership service by the 5th year of vehicle ownership.?

That’s a staggering number and it’s important to look at the “why” behind it. With the supply and demand imbalance and consumers pushing purchases out, consumers purchasing further from home creating less direct loyalty to their purchase location, and the extended wait times to get into the service lanes where they have been before, opportunity is wide open. The strong possibility exists to gain new clients, and now is the time to ensure you are doing everything you can to retain your existing ones. 

By increasing the overall dealer focus and strategy, marketing, and training within your service center, you’ll help keep and convert the consumers who move through your service drive into a lifetime client and not end up as part of that 71% statistic.  

Next, let’s look at another promising statistic when it comes to opportunities for revenue at your dealership.  

• 74% of consumers are likely to purchase their next vehicle from the same dealer if they returned for service.?  

This is an equally staggering number. When it comes to revenue, this statistic demonstrates there is a large amount of opportunity in the service drive. It’s important to re-evaluate how your service leaders, techs, and staff are taking advantage of those opportunities when they present themselves. Do you have a protocol for when a repair is higher than expected and the customer asks if they are better off buying new? What experiences and advantages are you offering at your dealership if someone has their car serviced with you to stand out from the competition? How easy is it to book a service appointment with your dealership and do you connect with customers in their preferred method; ex. text, apps? Are you outsourcing some common services when your appointment availability is stretched thin or offering pick-up and delivery services? 

These are just a few of the important things to look at so that your dealership can begin to laser in on just how important service is to revenue. 

 

We mentioned this before, but now let’s take a deeper look at the most important statistic of them all we uncovered in a recent Cox Automotive study.  

• Dealers depend on service for 50% or more of their overall profit.?  

It probably is no surprise to dealers that fixed ops profitability is over half of their gross profit. However, it generally only represents a small percentage of their spend, and is an even smaller area of focus when it comes to ROI and optimization of consumer acquisition cost and market share.  

It’s time to take the actions required to turn your service center into a profit center. A fixed ops focus in your service department at your dealership offers stability in revenue as the automotive industry experiences challenges on the sale side. Additionally, with a strategy of acquiring and retaining lifetime customers through your service drive, no matter what bumps happen within the industry, you will have planted seeds that will continue to grow. 

Now that we know service contributes quite a bit to the dealership’s overall revenue, we highly suggest you closely examine those different types of service revenue streams.  

Retention Drives Revenue 

There’s a big difference between acquiring a new customer vs. retaining an existing one, especially in and for your service center.  

Retaining your service customer can result in many positive things for your dealership. It can lead to not only increased service profit, but also to the best and most accessible inventory you can acquire.  

You know these customers and you know their cars. By maintaining that relationship, it keeps your dealership top of mind not only when making service appointments, but they will also always be your best advertisement when asked for a recommendation or discussing their most recent experience.   

A new customer is more expensive and harder to acquire than retaining an existing one and involves a great many more people in the process.   

The top two reasons consumers take their car to dealerships for service is because the dealer knows their car and they have had prior experiences at the dealership – highlighting the need to focus on existing customer relationships and ensuring you provide the best possible experience when you acquire a new customer. The goal is and should be to keep them coming back.   

The Road Ahead 

Even with today’s challenges in the industry on the sales side, your service center offers many possibilities to gain and retain lifetime clients. Now that we know the difference in acquiring a new customer vs. retaining an existing customer, as well as decoding the importance of service after the sale, you understand the impact it has, and could have, on your dealership’s revenue for a more secure road ahead. 

Want access to our on-demand webinar outlining these findings as well as several other solutions on how to gain lifetime clients and increase your service revenue? Get the replay of “Service After the sale – Lifetime Value of Customers.”