"Rescuing Service Profits" | Jack Simmons presentas at the 2014 DrivingSales Executive Summit
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"Rescuing Service Profits" | Jack Simmons presentas at the 2014 DrivingSales Executive Summit
- 1. October 12th-14th, 2014 The Bellagio Hotel, Las Vegas Rescuing Service Profits Jack Simmons
- 2. Connect with Consumers Reach consumers throughout the ownership lifecycle
- 3. IHS Automotive research, “Cars On American Roads Are Older Than Ever,” December 2013 Majority of dealership profits come from Service and Parts Understanding the Space
- 4. IHS Automotive research, “Cars On American Roads Are Older Than Ever,” December 2013 86% Of vehicles are out of warranty Understanding the Space
- 5. Average age of vehicle is 11.3 years old Understanding the Space IHS Automotive research, “Cars On American Roads Are Older Than Ever,” December 2013
- 6. Consumer Loyalty to Service Providers is Eroding DME Automotive, “The Changing Service Loyalty Landscape,” February 2012
- 7. Opportunity is Growing The opportunity for greater service department revenue is only The service market is expected to grow 15% over the next 3 years DME Automotive, “The Changing Service Loyalty Landscape,” February 2012 getting bigger
- 8. Winning with the Digital Service Shopper
- 9. Dealer Disadvantages ? Price Perception Digital Marketing Void
- 10. Customer Perceptions C+R Research, April 2013
- 11. Consumers Go Digital When Searching for Service and Repair 1. Restaurants 2. Auto Parts 3. Building Contractors 4. Physicians & Surgeons 5. Legal Services 6. Auto Repair and Service 7. Pet and Animal Service 8. Real Estate 9. Automobile Sales 10. Financial Services YP.com Local Insights Digital Report July 2012
- 12. Dealers Aren’t Showing Up With Digital Shoppers R.L. Polk Co., March 2013
- 13. Dealers Have the Initial Advantage
- 14. What do Consumers Want? Top 3 qualities in service providers that consumers value:
- 15. Why Service Reviews Matter 2 in 3 new-car shoppers indicate service reviews are a factor when choosing where to purchase a vehicle
- 16. Service Reviews Build Reputation 90% of consumers who read online reviews claimed that positive ones influenced buying decisions, while 86% said buying decisions were influenced by negative ones. “The Customer Service and Business Results” by Dimensional Research for Zendesk, 2013
- 17. Implications for Dealers 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 Use third-party resources for credibility, such as review sites and price listings
- 18. Implications for Dealers Embrace digital marketing to promote the advantages of choosing dealerships 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
- 19. Action Items Be transparent with prices Build your service content on your website Be mobile optimized Put processes in place for service reviews Build your service reputation Work to stay current on industry insights
- 20. October 12th-14th, 2014 The Bellagio Hotel, Las Vegas Thank You! Please take a moment to rate my presentation in the DSES mobile app! Jack Simmons Cars.com Dealer Training Manager jasimmons@cars.com
Editor's Notes
- Cars.com is about the consumer. Following consumer behavior allows us to provide some exposure to your dealer- an area of opportunity
- Consumers want to know about the long term considerations of working with you but are you providing them with the tools/information they need in order to make a decision? We’re going to discuss the HUGE opportunities that you may be missing as it pertains to your service department as well as the industry trends. So we want to reach consumers throughout the ownership lifecycle. From car shopping, to maintenance, to re-purchase.
- It’s important to understand what is currently happening in your space in order to take the appropriate steps forward. 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 according to a study conducted by DME Automotive in 2012. 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. NOTE* Majority stat source = NADA Data, 2014; Average Age = IHS; Warranty = DME Auto (See next slide for proper sourcing for DME)
- It’s important to understand what is currently happening in your space in order to take the appropriate steps forward. 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 according to a study conducted by DME Automotive in 2012. 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. NOTE* Majority stat source = NADA Data, 2014; Average Age = IHS; Warranty = DME Auto (See next slide for proper sourcing for DME)
- It’s important to understand what is currently happening in your space in order to take the appropriate steps forward. 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 according to a study conducted by DME Automotive in 2012. 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. NOTE* Majority stat source = NADA Data, 2014; Average Age = IHS; Warranty = DME Auto (See next slide for proper sourcing for DME)
- In general, loyalty rates are low among service providers with only 23% of consumers tied to a provider according to DME Automotive, “The Changing Service Loyalty Landscape”’ 2012. Consumers seeking basic services tend to defect over time rather than return to the same dealership, leaving the most valuable revenue on the table. In the same study by DME, it was estimated that dealers will lose 60%-78% of revenue on 3-6 year old cars and 82%-92% on cars more than 7 years old.
- And low loyalty rates for service providers put revenue dollars in flux. And this is a big deal as 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. 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.
- In order for dealerships to be well-positioned to gain their fair share of the service revenue market, they must understand that, as consumers have gone digital, they are making buying decisions differently. They turn to digital sources (both wired and mobile) to find providers, check reviews and validate purchase decisions. They have come to expect transparency and turn to the internet to build trust. Catering to these expectations may hold the key to continued service profitability.
- Today, dealers face two major disadvantages that may prevent them from being competitive. - A perception that dealership prices are much higher than competitors regardless of service - A lack of digital support for dealership service departments Because consumers have limited knowledge of what actual service prices are they are fearful of being taken advantage of, making it important that dealers address these misconceptions It’s clear that gaps between the amount of time service shoppers spend researching online and efforts to reach digital service shopper by dealers vs. competitive service providers have negatively impacted shopper perception
- PRICE PERCEPTION: The primary reason customer cited for avoiding dealership service departments was the perception that dealers have higher prices More than half of consumers believe dealers are the most expensive option regardless of type of repair (gfk) Despite the fact that dealers offer fair and competitive prices, high price is #1 reason among those who will not consider a dealership for service In 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. The Gfk research revealed that when consumers are more knowledgeable about actual prices ranges, consumers recognize dealerships are only a little bit more expensive, and many are willing to pay the difference.
- Fixed ops (also known as the service department) out of the top local traffic categories, fixed ops is 2 of the 6 highest. Notice how also auto is 3 of the 10 highest. Keyword searches. Note that Fixed Ops OUTRANKS auto sales… which we are all leveraging digital for. Isn’t it time we apply digital strategies to reach service customers too? Consumer behavior is very much online, all digital. Look at the old ways vs the new way slide that we went over. Consumers are aggressively out there looking for this information.
- DIGITAL MARKETING VOID: As consumers are using digital resources to make more informed decision about service and repair. Digital marketing offers an opportunity for dealers to clarify and promote their actual prices and services to build consumer trust and loyalty. To enhance understanding of how auto owners choose service and repair providers, 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. 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) In fact, I challenge each of you to search for service in your own area on your mobile device. Does your dealership show up? Today, dealerships are being out-marketed by the competition on digital platforms. 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. Proof point: An 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. Possible Solutions to increasing ranking in organic search results: Dedicating a larger share of your site to service related content is one way to optimize organic search results. NADA 2012 data shows on average only 3% of dealership website content is dedicated to parts and service.
- The Gfk research showed that dealers have the initial advantage with service shoppers Although most shoppers would prefer to have all the information, when little is information is known and therefore all things are equal, consumers have a preference for dealerships.
- 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, 2013 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 Market your dealership. Reviews help explain tech certification. Price Guarantee – Show that you aren’t THAT much more expensive. GfK shows consumers willing to pay between 10-15% more for repairs at a dealer vs. chain… They understand the quality advantage you bring to the table. 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. Another way to positively impact organic search results is by building up review volume and ratings.
- 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
- Service reviews plays a key role in that. 90% of consumers who read online reviews claimed that positive ones influenced buying decisions, while 86% said buying decisions were influenced by negative ones. Consumers are looking for you but you’re not there in front of consumers when they need this information. On Cars.com alone out of all the reviews over 21% are based on service. Reading this actual review from Cars.com, would you trust this dealer to take your car in for work? Notes for Trainers: When writing reviews also, it is good for us to teach dealers that when they are talking to consumers who they have serviced their vehicles, educate them to what kinds of words to use such as “certified technicians, certified OEM parts, warranty”. This will help dealers also to show consumers saying these things to resonate with them better, to give more exposure, set them apart.
- 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.
- 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.