Rescuing Service Profits Through Trust and Price Transparency
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This document summarizes key points from a presentation about opportunities for car dealerships to increase profits through their service departments. It notes that the average age of vehicles is over 11 years old, most dealer profits previously came from service/parts, and 86% of vehicles are now out of warranty. It recommends that dealers remind customers about certified technicians and OEM parts, provide price transparency, and utilize online reviews to build trust. The document also stresses the need for dealers to increase their digital presence and online service content to connect with customers performing online research.
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Rescuing Service Profits Through Trust and Price Transparency
- 1. April 16th, 2014 Grand Hyatt New York, NYC ~ Your Capital ~ Your People ~ ~ Your Brand ~ Presented by Rescuing Service Profits Through Trust and Price Transparency Jack Simmons
- 2. Average age of vehicle is 11.3 years old IHS Automotive research, “Cars On American Roads Are Older Than Ever,” December 2013
- 3. IHS Automotive research, “Cars On American Roads Are Older Than Ever,” December 2013 Majority of dealership profits came from Service and Parts between 2005 - 2011
- 4. IHS Automotive research, “Cars On American Roads Are Older Than Ever,” December 2013 86% Of vehicles are out of warranty
- 5. GREATER SERVICE DEPARTMENT REVENUE THE OPPORTUNITY FOR IS ONLY GETTING BIGGER The service market is expected to grow 15% over the next 3 years DME Automotive, “The Changing Service Loyalty Landscape,” February 2012
- 6. DEALERS ARE NOT SHOWING UP WITH DIGITAL SHOPPERS R.L. Polk Co., March 2013
- 8. DEALERS HAVE THE INITIAL ADVANTAGE
- 9. Importance 2% 2% 2% 8% 8% 8% 10% 15% 21% 25% Online Scheduling Loaners/Shuttles Flexible Hours Type of Service Provider Price Range Location Specials (Coupons/Discounts) Online Consumer Reviews Price Guarantee/Warranty Tech Certification Level IMPORTANT ATTRIBUTES FOR SERVICE SHOPPERS Gfk Service and Repair Price Report, October 2013
- 10. 29% 30% 30% 31% 35% 40% 41% 44% 50% 50% 57% 27% Flex Hours Online Scheduling Loaners/Shuttles 5% Off Discount 10% Off Discount Online Reviews 3+ Stars 20% Off Discount Price Guarantee Certified Tech Parts & Labor Warranty Price Guarantee/Warranty Base DEALER SHARE OF PREFERENCES Gfk Service and Repair Price Report, October 2013
- 11. MOST IMPORTANT ATTRIBUTES WHEN CHOOSING A SERVICE PROVIDER
- 12. Remind consumers of the dealer’s high quality services, including: • Factory certified technicians mean the job will get done right • OEM parts are the highest quality parts • Parts and labor warranties offer confidence consumers will only pay once Create confidence that dealership prices are reasonable relative to competitors: • Post actual prices on basic service • Offer price guarantees within an established range • Put prices in context to others in the marketplace • Utilize third party resources for credibility, such as review sites and price listings IMPLICATIONS FOR DEALERS
- 13. 97% Of Dealer Website is Sales Content Only 3% of Dealer Website is Service Content NADA data 2012 INCREASE VISIBILITY FOR SERVICE SHOPPERS
- 14. INCREASE VISIBILITY FOR SERVICE SHOPPERS
- 15. 2 in 3 new car shoppers indicate service reviews are a factor when choosing where to purchase a vehicle
- 16. • Intercept auto owners when and where they are investigating service and repair providers • Establish a digital presence and grow the visibility for of the service department to get considered and ultimately, selected versus competition • Using digital advertising and interacting with service and repair websites will enhance the service component of your dealership website and improve results in only searches • Grow service review volume and promote on dealership and popular review sites to increase consideration among both service and new car shoppers EMBRACE DIGITAL MARKETING TO PROMOTE ADVANTAGES OF DEALERSHIPS
- 17. April 16th, 2014 Grand Hyatt New York, NYC ~ Your Capital ~ Your People ~ ~ Your Brand ~ Thank You! Jack Simmons Dealer Trainer Cars.com
Editor's Notes
- Service department revenue has become increasingly important. In fact it’s the lifeblood for most dealerships. NADA reports that fixed ops represent the majority of dealer profits. While fixed ops has proven more profitable than their sales operations in recent years, market forces are colliding to squeeze dealer profitability…. For instance, cars are being built to last longer and require less frequent maintenance. The average age of a vehicle on the road today is at a record 11.3 years, up 14% since 2008. With so many older vehicles on the road, the composition of those out of warranty is on the rise. 86% of vehicles are out of warranty as of Q2 2011. (Experian Automotive’s Vehicles In Operation (VIO) database, 2011) And research shows that these out-of-warranty owners are more likely to explore repair shop options rather than return to directly to the dealership.
- Service department revenue has become increasingly important. In fact it’s the lifeblood for most dealerships. NADA reports that fixed ops represent the majority of dealer profits. While fixed ops has proven more profitable than their sales operations in recent years, market forces are colliding to squeeze dealer profitability…. For instance, cars are being built to last longer and require less frequent maintenance. The average age of a vehicle on the road today is at a record 11.3 years, up 14% since 2008. With so many older vehicles on the road, the composition of those out of warranty is on the rise. 86% of vehicles are out of warranty as of Q2 2011. (Experian Automotive’s Vehicles In Operation (VIO) database, 2011) And research shows that these out-of-warranty owners are more likely to explore repair shop options rather than return to directly to the dealership.
- Service department revenue has become increasingly important. In fact it’s the lifeblood for most dealerships. NADA reports that fixed ops represent the majority of dealer profits. While fixed ops has proven more profitable than their sales operations in recent years, market forces are colliding to squeeze dealer profitability…. For instance, cars are being built to last longer and require less frequent maintenance. The average age of a vehicle on the road today is at a record 11.3 years, up 14% since 2008. With so many older vehicles on the road, the composition of those out of warranty is on the rise. 86% of vehicles are out of warranty as of Q2 2011. (Experian Automotive’s Vehicles In Operation (VIO) database, 2011) And research shows that these out-of-warranty owners are more likely to explore repair shop options rather than return to directly to the dealership.
- This is a big deal because. Our friends at DME have been talking about the service opportunity and we recognize the growth. The $215B service market is projected to continue to grow 15%+ over the next 3 years. But despite increases in service spending, dealer service revenue is actually down 0.7%. According to a 2012 DME automotive study, dealer service dollars are currently being lost to national repair chains, especially among younger car owners.And loyalty rates among service providers is low with only 23% of consumer tied to a provider (also DME automotive, The changing Service Loyalty Landscape 2012)These industry stats demonstrate that the revenue opportunity is great and the stakes are high. Competition will intensify and dealerships must up their game to stand out amongst the competition.
- However, today, dealerships are not showing up with service shoppers. They are being out-marketed by the competition. This is partly because the sole focus of the competition is on service and repair, while dealership must focus on sales as well. A quick internet search will show dealers are lagging behind. In fact, I challenge each of you to search for service in your own area on your mobile device. Does your dealership show up?This analysis of Google Search Results for service and repair shows dealers come up in less than 5% of searches vs. 60% - 95% of searches for each of the leading national chains.As consumers are turning more frequently to digital resources to make buying decisions, digital marketing offers dealerships a huge opportunity to alert consumer on the benefits on choosing a dealership for service.Proof points:43% of all drivers conduct an online search to decide where to service their car (Google+ Sterling Driving Insight Study, June 2013)Google searches for fixed ops increased 400% in five years from 2007 to 2012. (R.L. Polk Co., March 2013)
- Because service shoppers are not finding information about dealer’s service offerings and prices they are making decisions based on perceptions. What we know from our past research from C + R, is that customers have some big misconceptions related to price and that’s costing you. The primary reason customer cited for avoiding dealership service departments was the perception that dealers have higher pricesDespite the fact that dealers offer fair and competitive prices, high price is #1 reason among those who will not consider a dealership for serviceIn general, there is a real lack of transparency in the Service market. And because consumers have limited knowledge of what actual service prices are, they are fearful of being taken advantage of. To combat this, it’s imperative that dealers address these misperceptions through additional transparency into service pricing structures. We know that dealership pricing isn’t that much higher than those chains and that there is more value behind what a dealership can provide.
- Toenhance understanding of how auto owners choose service and repair providers and help dealerships stand apart from the competition, Cars.com partnered with acclaimed research firm GfK Automotive on an in-depth analysis of 822 auto owners. This research reveals important insights for dealers with clear opportunities for dealership service departments to improve their share of service revenue.The research showed that dealers have the initial advantage with service shoppers. Although most shoppers would prefer to have all the information, when little is known consumers have a preference for dealerships. But they could enhance consideration.Given this, dealers should take advantage of their reputation for quality and leverage it across all communications to retain off-warranty customers and win new business.
- We also learned that Tech Certification, Price Guarantee/Warranty and Consumer Reviews were the top three most important factors to shoppers when choosing a service provider.So dealerships have the initial advantage and you are already doing the things service shoppers value most. But you can increase consideration by ensuring shoppers know it. Shoppers aren’t choosing dealerships because they don’t have enough information
- When dealers offer these features, preference increases substantially. Reminding consumers of dealer quality advantages and offering price guarantees greatly reduces price concerns.
- Remember, online consumer reviews, technician certification level and warranty are the three most important components in choosing a vehicle service provider – gfk search and price estimator research, 2013Dealers can leverage this by communicating their strengths in these areas where shoppers are making service decisions. Today many shoppers go online to read reviews, check prices and confirm buying decisions.
- Dealers have the tools at their disposal to reverse declines in revenue and ensure future profitability.Dealers certainly have no control of factors like increased vehicle quality and reducing time between maintenance visits but they can combat other forces impacting profitability. The Gfk research revealed two key qualities service shoppers seek in a provider…Quality service and confidence they are getting a fair price. Dealerships can easily deliver on both by building their brand through service reviews and reassuring shoppers that you are a trustworthy, quality service provider and by providing shoppers with visibility into pricing structure so they have confidence they are paying a fair price.Dealerships have the advantage to lead the service marketplace, but they must adjust service and repair consumers’ perceptions of their price and added value. Digital marketing provides an effective platform to reach service customers who are out of warranty and to provide the price transparency which in turn builds trust and confidence.
- Possible Solutions to increasing visibility for service shoppers:Dedicating a larger share of your site to service related content is one way to optimize organic search results and provide additional visibility for service shoppers. NADA 2012 data shows on average only 3% of dealership website content is dedicated to parts and service.
- Another way to increase visibility with Service shoppers is to grow and promote your service reviews. Today when it comes to online service reviews, independents and chains rise to the top of search results and average more customer reviews. This is clear when we look at review sites like Yelp or Angie’s List or Google+ Local. When potential service customers are seeking reviews, they’re more likely to find your competition. Your dealership has the ability to differentiate it’s brand through online reviews and show service shoppers what they want to know most – that your service department is a trustworthy, quality service provider and that they’ll pay a fair price and have a great experience.And service reviews influence both service shoppers and new vehicle shoppers alike. 2 in 3 new car shoppers indicate service reviews are a factor when choosing where to purchase a vehicle. Source: Harris Poll for Cars.com, April 2014
- Consumers are increasingly using digital resources to make more informed decisions about service and repair providers. Consequently, digital marketing may offer an opportunity for dealers to clarify and promote their actual prices and services, contributing to consumer trust.