Auto Dealers Neglecting Service Operations, Experts Say

LAS VEGAS – Auto dealers are missing the boat when it comes to exploiting the full potential of their service operations, two industry experts say.

With new-car sales still slowed by the economic downturn, these fixed operations account for the bulk of a store’s profits. Yet most consumers shy away from having their vehicles serviced at a dealership due to the perception they are not trustworthy and likely to charge more than an independent repair facility.

So says Kevin Root, vice president of Driverside.com, a website that provides advice on how to own and operate a vehicle. The site also reviews new and used vehicles.

Speaking at the Driving Sales Executive Summit presented with WardsAuto here, Root says dealership service departments are “under attack” from large chain repair shops such as Pep Boys, and stand-alone mechanics who he generically refers to as “Joe’s Garage.”

“We’ve got a new challenge in front of us here,” he says to the dealers in attendance.

To drive home his point, Root says when General Motors Co. and Chrysler Group LLC shuttered hundreds of dealerships during their respective bankruptcies, many customers did not seek out another franchise for service.

“Ever wonder what happened to all those service customers?” he says. “The reality is only half of them went on to another dealership for service.” The other half ended up bringing their vehicles to independent repair facilities.

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To find out why dealers are losing so many service customers, Root’s company conducted a study asking participants what their perceptions were of the three main repair and maintenance options: dealerships, national chains and independent garages.

Fifty-three percent of respondents said independent garages offer the best deal, while 47% indicatedthe independents provide the highest-quality repair. Additionally, 66% said dealers overcharge.

While the results paint a bleak picture for dealers, there are ways to reverse such negative perceptions, says Mike DeCecco, director of industry relations and marketing at Dealer.com.

Kevin Root, president of Driverside.com, says dealership service departments are “under attack.”

In today’s society, online forums are particularly important to consumers. If a dealership receives a poor review, it’s highly unlikely it will attract service customers.

“Eighty-nine percent of folks say they would consider using reviews to (determine) where to take their cars for service,” DeCecco says. “We are herd animals. If someone says (a particular location) is best, people will go there.”

As such, he says it’s important to monitor such sites and strive to provide topnotch service. “It’s time to rethink the way we do service.”

Another way to attract and retain service customers is to forge personal relationships, Root says. Again citing his company’s survey, he says some 61% of respondents indicated independent repair shops were “most likely to build a meaningful relationship” with customers.

The perception dealerships don’t strive to build such relationships is largely rooted in reality, Root maintains, noting typical marketing tactics such as sending out email blasts and direct-mail advertisements to help drive that belief.

“We asked customers if they were getting that kind of stuff from dealers, and they said yes,” he says, adding most said they throw out the direct mailings and delete emails.

Rather than send out mass-market materials, dealers should personalize their message. One example is to send out emails that include the customer’s name, make and model year of their vehicle and the reason for the message.

It’s also wise to send out mailings or emails offering discounts for maintenance and service, particularly to customers who haven’t visited the dealership in a long time, DeCecco says.

“Why wouldn’t you send a very impressive special (offering) to someone who hasn’t visited in over a year? Do you have anything to lose? You’re off their radar.”

In addition to altering marketing messages, Root suggests dealers modify their websites, especially the portion devoted to service, so consumers can see information relevant to their vehicle.

“Add digital service-reminder bars that change color as they get closer to service,” he says. “Two weeks out, the (service reminders) trigger an email alert to tell (customers) to come in. You can track all that.”

Ultimately, optimizing dealership service operations comes down to the proper allocation of resources, Root says. “Here’s the thing that baffles me. We talk about how 80% of profits come from fixed operations, but 80% of the content on websites (is devoted) to sales content.”

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