Success in the Fixed Ops department is essential for dealerships. According to the 2020 NADA Data Financial Profile, dealers rely on their Service departments for 30% of their net profits. But for customers of new cars, dealerships are seldom their first choice for service options: it’s commonly estimated that more than 70% of new-car purchasers take their service needs to a third-party mechanic.
That’s an enormous gulf between dealership goals and customer behavior. What actions can dealers take to close that gap? Examining recent data for the reason customers seek other options may provide the answers.
Research shows that new-car purchasers take their service elsewhere because of three major factors. The first of these is convenience. Customers have busy lives, and choose their service based on how easily it fits into their schedules. According to CDK Global Research, dealers rank below both independent and chain service providers when it comes to providing a convenient location and a streamlined way to schedule an appointment.
Making appointment scheduling more convenient is an attainable goal for any dealership. By evaluating their current process and applying available technology, dealers can:
While moving to a more convenient location is probably not an option, there are other solutions that could make even the most off-the-beaten-path dealership equally or even more accessible than its competitors:
The second factor is price — or at least the customer perception that they will get a better price elsewhere. According to some estimates, 58% of service shoppers feel they would be overcharged at a dealership.
But despite appearances, this isn’t primarily about the consumer’s hunt for a bargain. It’s about their fear of being taken advantage of. This ladders up to our third factor, which carries the greatest emotional weight of all. And it’s where things get a bit more complicated.
A 2020 study conducted by the CDK Research and Insights Team found that 74% of customers who opted to go outside of a dealership for service would consider visiting a dealership in the future. This is encouraging news for dealers, as it suggests there’s potential for customer behavior to change.
But what would it take to move shoppers to not only put dealerships into their consideration set, but to choose one for service? When asked about this, shoppers expressed hesitance — specifically about dealers’ ability to:
These factors are closely tied. 55% of shoppers say they don’t trust dealers, and give as their reasons their own beliefs that (1) dealers frequently upsell unrequired services, and (2) don’t keep shoppers informed or updated during the service process.
Such a high percentage of customers with strong feelings of distrust is a sizable concern. But now that we have identified specific reasons for this perception, dealers can begin to address them.
Are shoppers right — do dealers upsell unrequired services? To be fair, some probably do. But more often, dealers upsell without adequately communicating and gaining the understanding of their customers. In both cases, it leads to confusion, unsatisfying customer experiences and loss of trust.
Dealers hoping to rebuild shopper trust around this concern should keep these points in mind:
Exactly what makes a price feel fair can be difficult pin down, as it varies from customer to customer. Even within a single customer it’s a shifting target — changing according to whether the service is major or a minor repair.
When major services are required, customers take into account the dealership’s level of expertise, quality of work, and the expectation that OEM-certified parts will be used. This may incline them to be flexible on price.
Minor repairs, however, are treated with less flexibility on price. This is because customers don’t feel as great a need for expertise in managing minor repairs, and are more aware of standard prices for these services.
To make pricing more trustworthy to shoppers, dealers should consider:
Explain why a price may be higher at a dealership vs. other providers
Clarify why the service is necessary
Show dealership prices in the context of all providers in the local market
Detail component-level prices like parts and labor costs
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There’s one more way to help repair the trust concerns of shoppers. And it goes far beyond upsells and price transparency.
Customers need to feel dealers value them as more than just providers of income. Of course, they know they’re performing a monetary function. But trust isn’t rational, it’s deeply emotional. So dealers should make these a priority:
With this knowledge, dealers can provide each customer with the personal attention that leads to trust — resulting in Service experiences that meet their individual needs.
Let’s say a dealership has successfully overcome concerns of trust, fair pricing and convenience — and won back customers that had been previously lost to other providers. How easy is it to keep them coming back for service?
The numbers suggest it will take some work: shopper loyalty, according to a 2020 study conducted by the CDK Research and Insights Team, ranked dealerships (at 47 NPS) significantly behind independent service providers (at 63 NPS).
One strategy may be leveraging customer perceptions. Research shows that customers tend to prioritize different providers based on perceived strengths. Dealerships are the front-runner when shoppers feel knowledge is needed (44%). But when speed is primary, chain service providers take the lead (59%).
In light of this, dealerships can play to their strengths by:
Another way dealerships can increase retention is by delivering the features that matter most to their customers. Here are several identified as particularly worthy of consideration:
Real-Time Service Updates
54% of customers would love if this were available, and 72% of dealers are either interested (43%) or have already added it (29%). Among the latter group, this has already proven a success: 97% of dealers who have this feature are satisfied.
Price Estimate at Booking
49% of shoppers would love if this were available, and 59% of dealers are either interested (24%) or have already added it (35%). Of the dealers currently using it, 84% are satisfied.
Market Price Information
The ability to show customers the transparency of market pricing is proving itself as a powerful tool. 57% of dealers are either interested (36%) or have already added it (21%). Of the dealers currently using it, 84% are satisfied.
Mobile Check-In and Check-Out
38% of shoppers would love if this were available, and 63% of dealers are either interested (41%) or have already added it (22%). Of the dealers currently using it, 79% are satisfied.
Remote Vehicle Pickup and Delivery
60% of shoppers would love if this feature were available. 63% of dealers are either interested (16%) or have already added it (47%).
Since technology is constantly moving forward, it would be impossible to predict every possible upcoming feature. But there are two questions dealers will always be able to ask of potential features for their Service business, whether tomorrow or ten years from now:
Remember: about 70% of new-car purchasers take their service needs elsewhere. But dealers responding to the latest data could significantly reduce this outflow of business — and make their dealerships far more profitable.
Contact us and let’s look at ways to increase your Service business.
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