Why do people pay thousands of dollars for their vehicles and then allow untrained technicians to work on them? This question has baffled dealers for years. Typically, consumers will say they can get repairs done cheaper by taking their vehicle to a third-party repair facility. What they may not understand is the technology equipping today’s vehicles requires the expertise of certified technicians and the use of factory replacement parts. Regardless, dealers have made changes and are better poised today to capture more of the almost $200 billion service business.
Changing consumer perceptions about the expense of choosing dealer service departments will always be a work in progress, but there are several realizations that are guiding dealers and their strategies for capturing more service work. Larger dealer groups, for instance, understand that they are seven times more likely to sell a customer his next vehicle if they capture his service work. When that happens, advertising costs are significantly reduced. And as we all know, service retention begins in finance. So to help you prime the service pump, here are some best practices to ensure your F&I department is driving customers into the service lane:
1. Sell Prepaid Maintenance Packages: When customers buy a vehicle without prepaid maintenance, they’ve basically opted for a variable payment vs. a fixed one. So aside from making their monthly payment, they’ll have to shell out an additional $40 every three months for an oil change. That’s the simplest way to explain to a customer the main benefit of a prepaid maintenance plan. Also make sure your customers are aware that their service records will be kept at the dealership, which will help increase their vehicle’s resale value.
2. Sell Service Contracts With Disappearing Deductibles: Customers will appreciate the news that they won’t have to pay a deductible to take advantage of their vehicle service contract if they return to the selling dealer. Hey, large dealer groups have seen their out-of-warranty customer retention rise from 30%-35% to 70%-75% by selling disappearing deductibles exclusively. And customers will drive an extra 20 to 30 minutes to save that $100.
3. Sell Tire-and-Wheel Policies: The rough winter that struck much of the Midwest and Northeast left the roads in shambles, making it impossible to miss a pot hole on any given surface street. And with replacement costs surpassing $1,000 per tire and wheel, a road hazard program can definitely help customers deal with the sticker shock.
Improving Product Penetrations
Now that we’ve covered those service-driving products, let’s delve into a few strategies to help you move more F&I products:
1. Guarantee Oil Changes in 20 Minutes or Less: A common complaint among service customers is that it takes too long to get an oil change. Better coordination and a little preparation can go a long way toward solving that issue. And wouldn’t it be nice if your F&I manager could tell potential buyers of prepaid maintenance plans that oil changes will be completed in 20 minutes or less?
2. Product-Focused F&I Pay Plans: All F&I pay plans should incentivize F&I managers to sell products. And since service contracts and prepaid maintenance plans are great drivers of service business, F&I pay plans should weigh them more heavily.
3. Remove All Deductible Options: It is proven that you can double your out-of-warranty service retention by switching to service contracts with disappearing deductibles exclusively.
4. Pay Service Advisors to Sell Service Contracts and Prepaid Maintenance Plans: Service advisors care about two things: fixing problems right the first time and customer satisfaction. So to get service advisors to sell service contracts in the service lane, offer a $100 incentive for every service contract sold and $50 for every prepaid maintenance plan sold.
5. Pay Salespeople for F&I Endorsements: Not every salesperson can do it, but a well-scripted endorsement can go a long way toward a successful customer interaction in the F&I office. Keep in mind that job No. 1 for salespeople is to move the metal, so make sure you offer a nice incentive to get their buy-in.
6. Market to Customers Who Opted Against a Service Contract: Customers in their second year of ownership are prime candidates for an inexpensive email marketing campaign. But make sure you include an incentive, such as a two free oil changes with the purchase of a service contract.
7. Hire a Dedicated Person to Sell Service Contracts and Prepaid Maintenance on the Service Drive: This individual would pay for himself or herself by simply selling 10 service contracts per month at $500 a program. That amounts to one service contract every three days.
The average repair order at a third-party repair facility is $86. These outlets will first lure customers in with $20 oil-change coupons, then try to upsell them on another $66 worth of work. Keep in mind that most third-party facilities don’t use factory parts, something your customers need to be aware of. Additionally, prepaid maintenance and service contracts with disappearing deductibles are great drivers of parts sales, so make sure your customer doesn’t leave your office without them.
Hey, there’s a nice chunk of that $200 billion service business for the taking. All it takes is a little effort and some planning. Not only will you increase your store’s service business, you’ll also help cut down on advertising costs while increasing customer retention.
John Lovin serves as vice president of Chrysler Capital Consulting. Email him at [email protected]