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Drive sold-to-service converts.

Almost half of a dealership’s sales customers never return for their first service appointment – that’s a hefty chunk of a dealer’s lifetime service potential! What causes this pattern in car buyers, and how can you channel more of them from your showroom to your service lane? AutoLoop surveyed our subscribed dealers and their customers, and we discovered vital insights that will enable you to establish a long-term relationship with your customers – and generate more consistent revenue.

Why Customers Go Elsewhere for Service

Studying a large sample of dealers and finding that nearly half of sales customers don’t return for their first service visit prompted the need to dig deeper. So we surveyed customers who purchased a vehicle in the last 12 months at a dealership and discovered that the biggest reasons they bolted for the aftermarket service providers was due to comfort and cost-related factors. The primary reason customers did not return to the dealer for service was due to an inconvenient location to their home or workplace. Other reasons include:

  • Competitive prices
  • Speed of service
  • No appointments required
  • Price options

Address Pain Points to Win Them Back – and Keep Them

In addition to marketing to your dealership and informing customers of Service Department amenities and specials, target the pain points listed above to overcome customer perceptions. If a new car buyer misses their first scheduled maintenance appointment, offer deeper discounts or savings on bundled maintenance packages to overcome the inconvenience of your location and compel them to choose your dealership over the competition. Emphasize the acceptance of walk-ins and the availability of loaner vehicles or shuttle service, if available, to solve the comfort factor. And promote your factory-trained technicians and genuine OEM parts selection. That way, your customers will know that in your service lane, their vehicle will receive the utmost care – something the other guys can’t guarantee.

 

Doug Van Sach

VP of Strategy & Analytics

AutoLoop

A better service experience starts with transparency

Your customers have a wealth of options when it comes time for vehicle maintenance—and many of those options don’t include visiting a dealership. Although aftermarket service centers may offer the perks customers want, such as lower prices and convenient locations, over 80% say they’re willing to spend more for a better customer experience.

With so many customers prioritizing the experience they receive, your service center has the perfect opportunity to gain a competitive edge—and one of the simplest ways is by adding transparency to your service communications and processes.

Adding Transparency Before the Service Appointment

Did you know that over 25% of customers are not confident in their knowledge of their vehicle’s recommended service schedule? Assure your customers that your team knows their vehicle best by sending informative service tips and maintenance reminders before their next interval. This way every communication serves a multifaceted purpose:

  • Raise customer awareness and educate customers on needed maintenance intervals
  • Drive in loyal customers with timely, targeted messages and offers
  • Stay top-of-mind with less loyal customers who may be considering a competitor

Adding Transparency During the Service Appointment

From the moment customers pull into your service drive, it’s crucial to be open and up-front. So establish a more trusting—and profitable—relationship by adding transparency to every step of the service process.

  1. Display pricing during online scheduling

Our digital personalization study found the second most popular recommendation by customers to dealers was for the online appointment process to tell them the price. And it makes sense—how is a customer to align vehicle maintenance with their budget if they don’t know the cost that comes with it ahead of time? But if you display at least a general cost of the services or packages you offer when a customer is scheduling, you’ll increase trust and avoid uncomfortable conversations about pricing later on.

  1. Provide an easy-to-understand MPI report

Customers that understand their inspection report are 2x more likely to refer someone to their servicing dealership. So include your customers in the process: complete the walk-around with the customer and explain what you’re capturing, ensure they understand the details of their full MPI once completed, and show them photos or videos taken to further build trust and validate recommended repairs.

  1. Deliver real-time updates

Keeping your customers in the loop with real-time updates not only gives them a greater sense of control but also eases the anxiety of waiting. Give your customers a direct line to their service advisor so they can ask questions, receive updates, and approve repairs with a simple text message.

  1. Offer online invoice payment

When it comes time to pay, provide a more personalized service experience by allowing customers to interact with advisors during the billing process. Whether that means texting customers an invoice, or enabling them to pay their bill through a mobile app, an interactive payment process gives your customers the opportunity to ask quick questions and make payments before picking up their vehicle.

Transparency is key to boosting your service retention rate and taking your customer experience efforts to the next level. A timely and knowledgeable communication strategy and consistent, open contact between service advisors and customers are just a few ways to see higher profitability and happier customers.

 

Stephen Coambes

Director of Professional Services

AutoLoop

Do you know your customers’ “service share of visits”? Here’s why you should

In the automotive industry, the ability to earn a greater share of a customer’s spend is the key to driving higher customer lifetime value. To that end, many dealers utilize flawed retention strategies designed to achieve a minimum number of service visits rather than maximize the revenue potential from every customer.

Unfortunately, today’s automotive retention measurement and marketing programs are often severely limited, and most only tell a partial story about a dealer’s retention performance. For example: a typical retention program used by dealers will identify which customers have exhibited some minimum level of activity in the last 12 to 18 months––e.g., made a service visit––vs. those who have shown no activity. The typical reaction is to invest more in the no-activity customers with the hope of converting them to a loyal customer.

However, this strategy has two key risks: first, inactive customers are often defecting for reasons outside of a dealer’s control––a factor corresponding directly to the frequent disconnect between a customer’s wants and a dealer’s value proposition. Second, and perhaps more surprising, if you are lucky enough to reactivate a customer, they are significantly less likely to return again for the next visit. We analyzed a national sample of over 2M dealer customers and discovered customers who were once inactive and recently visited a dealer are 50% less likely to be retained than a customer who was always active.

The predictable result: over-investing in inactive customers may eventually lead to a downward spiral of performance, where high-potential customers are replaced with lower-value customers over time. Dealers are then forced to find even more low-value customers in order to replace the lost revenue of their best customers, and the unproductive cycle continues.

What should dealers focus on instead?

Dealers can offset the limitations of retention management programs by shifting some of the focus (and marketing dollars) to capturing a greater share from their active customers. Identifying the untapped potential for each customer is a crucial first step. This is determined by evaluating an owner’s complete transaction history over the lifetime of their current vehicle. From there, dealers can determine a service share of visits, which compares a customer’s actual lifetime visits to the number of expected service appointments based on the manufacturer’s maintenance requirements. The service share of visits score is one of the most important metrics available for measuring a customer’s potential.

To provide a specific frame of reference and determine the real percentage of expected maintenance visits that dealers are currently capturing from vehicle owners, AutoLoop analyzed the service transactions from over 1,000 dealers. We found the average share of actual service visits was just 50%. Translation: dealers are only netting half of the existing service opportunity from their active customers.

By employing the service share of visits metric, dealers can identify which customers in their database offer the best potential (such as customers with a score below 50%), along with which services they’re missing. Although they may have had just one service visit in the last 12 months, the low-share customers are still active and receptive to marketing messages, and they provide the greatest possibility for service growth. In other words, since these owners are currently splitting their service spend between dealers and aftermarket service centers, dealers who can successfully recoup all the revenue potential instead of simply a small portion stand to see the most profit increase.

As well, dealers can further maximize their retention initiatives by pinpointing the particular service(s) a customer is missing. We analyzed the service history of consumers from a national sample of dealers who purchased new vehicles and discovered that in the first 5 years of ownership, only 25% bought tires from a dealer and only 13% bought brakes. Knowing and using the full history of each customer enables dealers to strategically target their marketing with messaging geared toward every individual’s specific service opportunity.

The automotive service industry’s existing retention measurement and marketing programs, while useful to a point, only solve part of the problem. A more comprehensive approach would empower dealers with the information needed to make the most of their marketing investment. By utilizing share of services in combination with the current retention measurement offerings, dealers can capture the full potential from their most profitable owners and avoid the downward cycle of overinvesting in lost customers.

 

Doug Van Sach

VP of Strategy & Analytics

AutoLoop

How to speed up service transaction time

When you buy something online, checkout can take mere seconds. And chances are good that your credit card was saved from previous transactions, meaning you just have to click the checkout button and your order is submitted. At the grocery store, checkout takes maybe a few minutes—if you have to insert your card and wait for a receipt. So it comes as no surprise that customers expect this level of expediency in all transactions.

Not meeting these expectations can cause a lot of customer frustration, though. In fact, in our recent study, customers identified ‘speed of service’ as one of the primary reasons for not returning to a dealer for service. The paperwork and payment for vehicle service can take several minutes, if not longer. And that’s not accounting for backups or bottlenecks in the checkout process. What if a vehicle repair needs customer approval, but the Advisor hasn’t been able to contact the customer? Then the repair doesn’t start until the customer comes back, expecting their vehicle service to be completed. Obviously, this puts the dealership in an awkward position. So how can it be avoided?

Better Communication

The first step a dealership can take to speed up transaction times is to implement better, more efficient communication. Most dealerships use phones and email already, but few have taken the next logical step and started using SMS text messaging for customer communications. By adding text, dealerships can contact customers how they want to be contacted. Plus, texts have an incredibly high open rate—98% by some estimates—and are usually responded to within minutes. That means dealerships can get approvals for service while the vehicle is still up on the lift. Not only does this minimize downtime during that vehicle’s service, it cuts down customer wait time overall.

But text messaging doesn’t just streamline dealer-customer communication, it also makes for better internal communication. For example, sometimes a repair can get held up because of a missed call from the Service to the Parts Department. With more reliable internal communication, delays like this are far less likely to happen.

Faster, Smoother Bill Pay

The next step to speeding up transaction times is to go digital. The less paperwork the customer has to fill out, the faster they can get their vehicle. And dealers should get the bill in front of the customer faster—ideally, before their vehicle service is even complete. This can be accomplished with an email or text message containing a link to a secure payment portal. It’s even faster than paying in person. And if the customer can pay the bill before their vehicle is ready to go, then, once it’s finished, all they have to do is pick up the keys.

Get the Right Tools

The right tools can make service transactions so much faster. Have you ever tried cutting down a tree with a butter knife? The same is true in business, too. But by equipping your staff with digital tools to speed up your processes, it’s easier than ever to drive retention and loyalty to your store.

 

Dean Martin

Director of Marketing Communications

AutoLoop

More trades and higher sales start with a smarter appraisal process

As of mid-year 2018, used vehicle sales by new vehicle dealerships had exceeded $750M, according to NADA. The average dealership picked up a fraction of this amount—$9.6M, to be precise. Industry leader CarMax sold 721,512 used vehicles, taking home $14.3B in sales during its fiscal 2018 year. An added 409,000 vehicles were sold at CarMax wholesale auctions.

A couple of important takeaways from that data: first, CarMax currently leads the pre-owned vehicle industry. Second, it is leading with just under $15M in sales—less than 2% of the overall figure stated by NADA—as of the publication date of the company’s report. In other words, the largest player in the used-car market has become the frontrunner with under 2% of market share. That leaves in the neighborhood of $735M in revenue from pre-owned vehicles spread across the nation’s 16,794 franchised dealers—not to mention almost 11,000 licensed independent retailers. It is, to say the least, a highly fragmented market.

New vs. used

It’s also a highly lucrative market. Recent data shows that while used vehicles comprise a third or less of sales for dealerships, they account for about a quarter of the gross profit. Conversely, new vehicles bring in well over half the overall sales—and yet the resulting gross profit is only slightly above that of their used counterparts.

In other words, dealers can make almost double the profit from used vehicles that they will from brand-new models. A number of factors contribute to this: since dealers have considerably more leeway with pricing on used inventory, they can utilize reconditioning to increase vehicle value—and, of course, they are able to determine how much they’ll pay on trade-ins from consumers.

But not if customers aren’t bringing their used vehicles to the dealerships to trade.

Not so fast

According to recent AutoLoop analytics, customers are now holding on to their vehicles significantly longer before deciding to repurchase. An analysis of trade-in activity over 100,000 vehicle purchases showed that the average age of a trade-in one year ago was 5.1 years. But in 2017, the average age was 4.7 years, and in 2016, just 4.5. In fact, data indicates that the age of a trade-in vehicle is increasing by 6% each year.

In addition, consumers have more trade options than ever before—without the new vehicle dealer being involved. As a result, dealerships are seeing less and less of their most profitable inventory. And while vehicles are also sourced from auctions, individual trade-ins don’t carry the burden of auction fees, nor are they nearly as likely to be inventory that another dealer didn’t want.

Listening to the buyers

Let’s go back to the first takeaway. Currently, CarMax leads the used-vehicle industry, and its growth is continuous. After opening 15 new locations during fiscal 2018, the company ended the year with 188 used car stores. Another 15 are slated to open this year. Despite the impact from consumers trading less frequently now, CarMax still grew total revenues by 8% last year. What is the magic formula?

Surprisingly, it’s not that complicated. In the company’s own words, “CarMax continues to lead the industry by making the entire customer experience more simple and seamless.” The corporation’s annual report goes on to detail the many improved procedures, technologies, and offerings presently in the works, all aimed at reducing the complexity of the trade-in process and prioritizing transparency for every consumer. While the “customer experience” may sound like a worn-out cliché to many dealers, it doesn’t change the fact that today’s buyers do demand a different trade process, they want a transparent experience – and they can now choose companies that provide both. That means dealers should embrace that reality if they want to be successful.

Let’s be clear, consumers aren’t flocking to CarMax because they’re getting a premium price for their trades. The reason most customers choose CarMax is synonymous with the company’s goal: shoppers want buying a vehicle to be a simple, seamless, painless experience, and they would clearly rather sell their own vehicle for less, if need be, than face the potential hassles of haggling at a traditional dealer.

Check look-to-book ratios

It’s a fact that appraisal-to-delivery ratios are critical to raising profit. That is, when dealers increase appraisals, they’re generally able to buy and sell more units. Plus, they rely less on auctions, which helps reduce the cost per sale. Regularly measuring the look-to-book ratio is key, because a dealer appraising 20 vehicles and trading for 10 has a fairly healthy 50% look-to-book ratio—whereas a retailer that appraises 20 cars and only trades for 5 is clearly missing some sales opportunities.

In those cases, it’s worth looking at ways to improve appraisal effectiveness to close the sales gaps. And since creating the simplest, most transparent experience has proven to drive trades, the appraisal process will naturally be an integral part of that. With the right tool, dealers can easily deliver this experience to every customer.

Start simple

For dealers using the Trade-In Valet solution, appraisals couldn’t be simpler. Customers fill out a quick, four-step appraisal form on the dealer’s website and within minutes, they get a guaranteed evaluation backed by the dealership. Because Trade-In Valet utilizes actual third-party appraisal experts that specialize in a particular segment, customers receive accurate, guaranteed cash offers in a fraction of the time—on their terms, before visiting the dealer.

Not only is it far simpler for customers, it’s also much easier for dealers. Evaluating trade-ins costs time and money, and the Trade-In Valet appraisal experts help retailers save both with fast, market-based pricing on every deal. That means fewer auction fees, less wholesale loss, and no frozen capital for dealerships, as well as smoother sales overall.

The real payoff, however, comes with the accrual of higher-quality inventory. By trading directly with customers rather than sourcing trades from auctions and wholesalers, dealers can build the pre-owned inventory they want while offsetting competitors and driving more gross profit per sale.  As well, retailers can maximize this advantage even further by ensuring a competitive mix of new vehicles—and then leveraging those back into their pre-owned offerings at a later date.

End with an edge

Going into a potential purchase with an easy, straightforward appraisal is one of the best ways to convince customers that the rest of the purchase experience can be equally transparent. In fact, successfully alleviating their fears about getting “ripped off” on their existing vehicle is arguably the fastest – and most effective – method of building the trust necessary to close the sale. Since the appraisal is one of the most emotional and contentious phases of the car-buying process, by making it a positive experience, you can drive future service and sales opportunities as well as profitable referrals down the road. And Trade-In Valet is one of the only solutions in the market today that can provide this crucial ease and transparency, while giving consumers the hassle-free, straightforward experience they demand and deserve.

 

Mike Dodd

CEO

Trade-In Valet

Coupons: what to consider

Price is often a major factor in the purchase of any service or product. But it’s important to separate perceived price and received value. For example, $5 for a bottle of water might seem expensive, but that’s a deal if you’re walking through a desert. And there’s nothing blatantly wrong with paying more for quality (or perceived quality)––just look at businesses like Apple®, Nordstrom, and Jaguar.

However, this has given rise to the idea that lower prices mean lower quality, and discounts such as coupons diminish products and services even more. While it’s true that some people might think that way, there’s no evidence supporting this. In fact, coupons add value for some customers, bringing them back to your store. And coupons aren’t just for those struggling to make ends meet: 90% of consumers use coupons in some way. Whether you want to offer coupons or not, it’s important to approach your Service Department’s discounts and value-adds strategically.

How to use coupons effectively

There are several factors that come into play in creating effective coupons, and it can get overwhelming. Here’s a short list of coupon best practices to drive business.

  1. Be clear
    The coupon should specify what it can (and can’t) be used for. Include the original price to show how significant the discount is. And try to use flat-dollar discounts rather than percent-off discounts when possible––they’re easier for customers to understand. Be sure to include any usage disclaimers such as “Limit: one per customer” and the expiration date if there is one.
  2. Add value without lowering cost
    Informational coupons describing unique offerings are very effective at driving customer traffic. Also, coupons offering something free with purchase, such as a small gift, a car wash and vacuum, or other additional service will allow you to entice customers without discounting your current products.
  3. Plan ahead
    Save your best coupon offers for your slowest times. And if you’re targeting a special event, season, or holiday, make sure you send your coupons out early enough that they’re usable, but not so early that they
    get forgotten.
  4. Target specific customers
    Sending everybody the same offer doesn’t do your business any favors. Segment your customer lists to reach the right people with the right message. Usually it’s wise to offer larger discounts to prospective customers to draw them in, and smaller discounts to your regular customers to keep them coming back.
  5. Keep a couple for a rainy day
    Ensure you have coupons readily available for your best customers—or offer them in instances where a coupon makes a difference between them completing a needed service or having to wait. It shows your customers that you’re dedicated to their experience, and helping them takes priority over making money.

These tips will help jumpstart your coupon marketing strategy. Of course, it helps to have a marketing ally you can count on to assist you.

How to drive traffic without using coupons

In a recent AutoLoop study, we discovered that the biggest reasons customers avoid going to the dealer for service were related to comfort and cost. To overcome the price hurdle, your store could offer a price match guarantee or publish customer price comparisons on your website. This allows consumers to compare pricing before their appointments and avoid sticker shock when they arrive. If you’re not the lowest price in your area, it’s doubly important to explain the value your Service Department provides customers that they won’t get elsewhere. Tackle the comfort sticking point by highlighting standout perks such as OEM-trained service technicians, a guaranteed quick transaction time, reliable shuttle service, or a well-appointed waiting room. Calling out these value-adds shows customers that, while your shop might cost more, it’s well worth it, even if it isn’t the Ritz.

Finally, customers want options. Providing customers with good/better/best menus for common services or parts can go a long way toward earning their returning business. Ever visited a restaurant where the host forgot to give you menus? It’s hard to know where to start without knowing what the restaurant offers. Immediately making visitors aware of the services and pricing you offer is one of the most basic conveniences you can provide. And it’s beneficial for you, too: we’ve found that customers who are given several pricing choices and service levels are more likely to take your recommendations and encourage more ROs. That’s why it’s essential to promote these menus, both when customers schedule service and when they visit.

When in doubt, do what makes sense for you

Whether coupons are right for your store is a question only you can answer. Whatever you decide is right for your Service Department, there are a variety of ways you can draw customers to your store that will enhance their experience and drive more business.

 

Stephen Coambes

Director of Professional Services

AutoLoop

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