5 Trends Impacting Your Fixed Ops Profits — and Strategies to Address Them
Sep 24, 2021 Jade Terreberry (Cox Automotive Director Analytics)
Estimated reading time: 5 minutes
Spoiler alert: the stable and long-term revenue opportunity in fixed operations isn’t going anywhere. In fact, the opportunity only continues to grow, especially as our industry continues to experience inventory and supply chain challenges.
As I’ve said before, we’re not just talking about the single oil change here; we’re talking about lifetime service customer value. In our recent Dealer User Summit, I outlined five trends affecting your fixed ops profits:
There’s pent-up demand for vehicle service right now.
There were 22 million vehicles recalled in 20201. 1 in 3 people say they’re putting more miles on their car in 2021 compared to last year and people are getting back into their maintenance routines after a pandemic hiatus from service.2
What you can do: Focus on your marketing strategies! Customers are on the hunt for vehicle service centers, and they are looking at trusted resources like KBB.com’s Service & Repair Guide. In 2021 alone, we’ve seen over 12 million visits to the guide.3 Make sure you’re marketing where your customers are, so they find you and not your competitor.
The number of off-warranty vehicles is rising.
People are holding onto their vehicles longer, and the average age of vehicles on the road is at an all-time high of 12.1 years.4 And while people are hanging on to their cars for a decade (or more), they’re not hanging on to their car dealership service center for quite as long. 71% of car owners defect from their dealership’s service center by the fifth year of car ownership.
What you can do: Use your CRM data to reach out to your loyal customers. Connect with them as they’re approaching the five-year mark of car ownership to offer them incentives, promotions and specials to stay with you. Don’t lose these loyal customers!
Dealerships have a shortage of qualified service technicians.
According to the most recent Cox Automotive Service Industry Study, more than half of dealers say their service department isn’t fully staffed — and 45% report difficulty finding and hiring the right technicians. Whether they’re losing employees that want to do something else or losing them to better paying jobs, staffing is a primary challenge right now and most expect staffing challenges to worsen in the near future.
What you can do: Invest in growing skills of your existing employees and develop clear career paths for potential new employees. The need for electrical skills is growing; work with your techs to find programs or offer on-the-job training to help them advance their career skills. One thriving dealership we spoke with developed a two-year program with a local college for training and apprenticing young service technicians. You can lay out a career path for them to increase their training—resulting in growing income and stability for you both.
Customer loyalty is eroding.
Service bays are full thanks to that pent-up demand I mentioned earlier. That’s great for today’s fixed ops profits, but if you’re booking five weeks out, you’re going to lose the customer who is taking a road trip next week and needs service ASAP. These customers are going online and finding dealerships or service centers that fit their schedule—and you may have lost that customer for life because of it.
What you can do: Staffing is challenging — we know this. But you can meet customer demand by getting creative with extending hours on the early and late side, paying your current employees overtime. Consider opening a third shift. If you’re truly strapped, consider looking to a local college and trying out some of the career development tactics we mentioned in the above point.
Your competition is getting smarter.
If you’re not connecting with customers where they want to connect, your competitor is. They’re getting creative about how to meet growing need, connect with customers online and provide convenience options like drop-off and pickup. Service shoppers today expect transparency, options and convenience, so it’s in your best interest to step back, pivot your approach and make virtual connections with service customers.
What you can do: KBB.com launched the Service & Repair Guide to meet customers where they are. Our marketplace gives consumers access to the fair market pricing and research tools they expect and trust from Kelley Blue Book. If you’re not listing your service center in KBB.com’s Service & Repair Guide experience, you can learn more about it here.
Capture service market share, gain fixed ops profits.
Remember, market share matters now more than ever because it translates to long-term revenue and fixed ops profits. $266 billion is lost in revenue every year by franchise dealerships; that’s $16 million in revenue per franchise dealership each year.5Dealerships are still only capturing one-third of service visits, but if you shift your focus and strategy to address these trends, you could gain that market share now and that lifetime customer.
Watch my service marketing session from the 2021 Dealer User Summit where I cover the 5 trends affecting fixed ops profits and more:
12020 NTSHA Recall Annual Report
22021 Cox Automotive COVID-19 Consumer Impact Study