Top 5 Challenges to Grow Service Profits
Top 5 Challenges to Grow Service Profits
To grow profits in today’s automotive environment, many auto dealers are focusing on growing service department revenue. DealerClick Parts and Services program gives you the tools to achieve your goals. In addition, achieving this goal presents a number of challenges, including:
1) Declining new vehicle sales volumes
NADA predicts 2018 new-vehicle sales of 16.7 million units, down 2.3% from 2017. That’s not a huge decline, but new vehicle sales also face stiff competition from a glut of off-lease and used vehicles. Fewer new car sales means less future warranty work.
2) Higher quality vehicles
Available work per unit is declining as quality improves, service intervals lengthen and work shifts from repair to replace. Dealers can no longer count on substantial warranty work and in-warranty customer pay business from new vehicle sales as a way to feed steady business to their service departments.
3) Increased Competition
Independent aftermarket chains are entering a recession. Due to the recent spike in new vehicle sales, the volume of vehicles older than seven years and still in operation is declining.
This decline will continue until 2022, prompting chains to expand service offerings and launch aggressive marketing campaigns. Their prime target is customers with vehicles from four to six years old; the same customers that dealers like to target.
Dealers cannot afford to lose market share to independent chains. To maintain yield in this environment, dealers need to capture a greater percentage of their market service potential.
4) Shifting Customer Expectations
Today’s consumers expect a transparent and convenience-driven experience, which traditional dealer processes and systems are ill-equipped to deliver.
Your customers are baffled that they can track a pizza being made and delivered to them, but must call your dealership several times to check on the status of their car, then wait to pay at a cashier.
5) Lack of Service Growth Strategy
Growing service revenue doesn’t just happen. Growth requires the creation, execution and management of a strategic plan. Many dealers don’t have a strategic plan, unless you believe that doing more of the same counts as a plan.
What was it someone once said about doing the same thing over and over again, but expecting different results?
The good news is, it’s not all bad news. Our industry is exiting a period of unprecedented tailwinds that have created exciting opportunities for growth.
Since 2012, the combination of increased new vehicle sales and a 13 percent reduction in the number of auto dealerships has created the highest units-in-operation (UIO) to dealer ratio in history.
To take advantage of this opportunity, you need to accomplish two things:
Increase service yield from current customers/UIO
Increase market share
Do you know what your dealership’s current revenue-per-UIO is? Do you know what you have to do to increase market share?
To grow profits in nowadays’s car environment, many auto sellers are specializing in growing service branch sales. reaching this aim presents a number of demanding situations, which includes:
1) Declining new automobile sales volumes
NADA predicts 2018 new-vehicle sales of 16.7 million devices, down 2.3% from 2017. That’s now not a large decline, butnew vehicle income additionally face stiff opposition from a glut of off-rent and used automobiles. Fewer new car salesway less destiny assurance paintings.
2) higher high-quality automobiles
available work consistent with unit is declining as exceptional improves, provider durations lengthen and work shifts from restore to replace. sellers can not expect huge guarantee work and in-warranty consumer pay commercial enterprise from new automobile income as a manner to feed constant commercial enterprise to their servicedepartments.
three) extended competition
independent aftermarket chains are coming into a recession. because of the recent spike in new car income, the volume of motors older than seven years and nevertheless in operation is declining.
This decline will hold until 2022, prompting chains to enlarge carrier offerings and launch competitive advertisingcampaigns. Their top goal is customers with cars from 4 to six years antique; the same customers that sellers like to goal.
sellers cannot find the money for to lose marketplace proportion to independent chains. To maintain yield on thissurroundings, sellers need to capture a extra percent of their marketplace carrier capacity.
4) Moving patron expectations
Nowadays’s clients assume a transparent transaction, which conventional dealer techniques and systems are unwell–equipped to deliver.
Your customers are baffled that they can song a pizza being made and brought to them, but ought to call your dealership numerous instances to check at the popularity of their automobile, then wait to pay at a cashier.
5) Loss of provider increase strategy
Growing provider sales doesn’t simply take place. Increase requires the advent, execution and management of a strategic plan. Many dealers don’t have a strategic plan, unless you accept as true with that doing more of the same counts as a plan.
What became it a person once stated about doing the same issue time and again once more, however anticipatingdistinct consequences?
The best news is, it’s not all bad information. Our enterprise is exiting a period of unheard of tailwinds which have created exciting possibilities for growth.
Considering the fact that 2012, the mixture of elevated new automobile income and a 13 percent discount within the number of car dealerships has created the best units-in-operation (UIO) to dealer ratio in history.
To take benefit of this opportunity, you want to accomplish two matters:
- Growth provider yields from current customers/UIO
- Increase market share
Do what your dealership’s modern-day revenue–according to-UIO is? Do you know what you need to do to boom marketshare?
In case you’re not positive, the first element you have to do is ditch the provider absorption metric. I’ve written before how I agree with that provider absorption is a risky range and is an outdated metric for present day times.
One predominant trouble with this metric is that you could have 100 percent carrier absorption, but still be losing marketplace percentage. You could’t manage what you may’t degree.
sales in line with UIO allows you to measure both service yield and marketplace share, so that you can set up a baseline from which to develop.
How to boom service Yield
Most car dealerships capture less than half of the paintings needed on cars that enter their provider lanes. To growthservice yield, attention on providing whole vehicle care in your present day customers.
To do this you need to become aware of, talk and seize all provider needs. This can require adjustments on your write-up, multi-factor inspection (MPI) and service advice methods.
Technologies which include cellular capsules can assist, but incentives might also want to be installed place so advisors and techs are recommended to spend the suitable quantity of time with each purchaser. Additionally, information should be leveraged so your group of workers can without difficulty discover endorsed repairs.
While clients arrive within the provider lane, an advisor wishes to check the subsequent, each time:
- Is there an open keep in mind?
- Are there declined services from final time?
- What are encouraged services/upkeep on a vehicle like yours?
The closing query is prime to creating upsells and taking pictures greater service commercial enterprise. also, put together your customers for the next go to with a list of service tips for the following 10,000 miles.
How to growth marketplace proportion
Most dealers’ provider advertising efforts make use of mail and electronic mail channels to remind customersapproximately factory scheduled maintenance and pick seasonal campaigns. Many conquest campaigns rely upon “oil change” gives to deliver new clients in.
This advertising approach plays appreciably under capability effect. To pressure extra responses, an integratedadvertising campaign ought to update the “fireplace and forget about” mentality.
Omni-channel marketing leverages the subsequent channels and promises highly applicable offers to every customer:
- Direct Mail
- Facebook/ Instagram
- Service PPC
- Display ads
- IP-based retargeting
With each patron interplay, records is gathered and used to create a message or offer that drives the patron to the following degree. The client is guided via needs notification to scheduling, to the appointment, to in-service notifications and post–service observe up.
This marketing strategy is designed to construct relationships, rather than a one-and-performed carrier revel in. creating tactics and marketing programs that target the relationship, in preference to the right here and now, is a crucial part of any provider growth plan.
Get a free trial of DealerClick Parts and Services program today to start maximizing service profits for your dealership!