Improves with Time? What Dealers Need to Know about Service Profits and Vehicle Age
When owners began to doubt their vehicles’ value due to the necessity for more frequent maintenance, cars’ maximum mileage used to be around 100,000 miles. You recently purchased a new car after paying steep repair fees for a long time.
Then, in the 2000s, new technologies transformed the typical car into a mechanical-computer hybrid. New technology has increased the cost of new vehicles while extending the lifespan of older ones. People began keeping their older cars since doing so was now less expensive than buying new ones and because new technology made clunkers take longer to become.
According to recent estimates from 2020, the average American’s car is now nearly 12 years old. It’s amazing how many even older cars there are: 25% of cars are older than 16 years. If the typical driver logs more than 13,000 miles annually, 16 years of ownership would equate to 208,000 total miles, more than tripling what was anticipated of a car in the 1990s.
What exactly does this mean for dealerships, then?
Longer car ownership results in fewer sales chances for dealerships, making the creation of servicing options even more crucial for profits.
More Years Owned = Higher Retention Value
The goal of the service push is to increase brand and dealership loyalty, which will increase sales and satisfy customers. It becomes simpler to retain a sales customer if they return for service, but only if you live up to their expectations and remain relevant.
Understanding how long-term consumers benefit from the service can be done by measuring the Customer Lifetime Value.
Client Lifetime Value takes into account:
What a consumer pays annually
Gross income resulting from such investment
How long have they been a customer of yours?
Any recommendations they give you, in addition to a number of additional things
The annual cost of maintaining and repairing a vehicle rises as it gets older, so you make more money from customer-pay ROs with a greater profit margin than you do from the majority of vehicle sales. The computer systems that operate newer-model automobiles also have a chance for higher profit margins when they get older.
It is considerably less expensive to keep an existing customer than to try to get new ones—by a factor of approximately 10! Customers who have previously done business with your dealership are familiar with what to expect from future dealings with you. Targeting and retaining your most profitable customers can be done with the help of lifetime value marketing.
With increased data mining, conquest marketing has gotten more efficient, yet retention marketing still has a higher return on investment. Every consumer who purchases or receives service for a vehicle from your dealership is recorded in your DMS. With the use of that information, you may send them the finest offer to entice them to come back for service via email, direct mail, digital ads, newsletters, and other channels.
Higher costs due to older vehicles
After the sale is completed, it’s best to schedule the first oil change and inform the customer about your dealership’s loyalty program (which typically entails more oil changes, right?). The entire purpose of offering consumers an oil change is to get them to return for service so that you may upsell further services.
Service profitability is aided by this tactic, but only when it is effective. Let’s face it: most consumers don’t make a special effort to get an oil change at their original dealership. Independent stores have persuaded them that dealerships are unreasonably slow, expensive, and inconvenient for basic services.
However, larger repairs on older automobiles are more profitable, and there are several methods to advertise that business. Although the majority of consumers do not travel for an oil change, many do so in order to be certain that the proper parts and specialized vehicle knowledge are used.
The premise behind this concept, which we refer to as profit-per-client throughput, is that you may maximize profits from each and every customer by acquiring and retaining their business. You can locate lucrative businesses by keeping track of models, purchase and service anniversaries, manufacturer announcements, and more.
Marketing your OEM’s roadside assistance program to consumers at their 30/60/90 maintenance milestones for the services you know their vehicles require
Recalls and warranty coverage disclosure to customers for profitable warranty ROs
Quality Trades + Service History + Global Profitability
The longer a car is on the road, the less value it retains, although a known sales and service history can help. You can assess whether a customer’s vehicle is worth pursuing an exchange when you have a long-standing relationship with them and a complete record of servicing visits.
Whether to rotate inventory when they’re in the market for a new vehicle or when you’re searching for quality used inventory to resell, the front of the dealership may decide when it’s appropriate to have a trade-in conversation with your client, but your entire dealership can profit from the trade.
When a salesperson tries to sell to a service customer, there is frequently friction. However, a devoted client will keep returning. Even though their new car might initially produce less lucrative work, the trade-in nevertheless generates service profit from internal ROs during reconditioning.
A well-timed trade proposal can bring in new revenue for the dealership as well as retain devoted clients who will come back for service in the future.
Conclusion
You should think about how well-executed marketing techniques might help a service acquire more profitable business as the average age of cars rises. When these older vehicles start to wear out and need emergency repairs, consumers search online for services. Service clients will think of your dealership every time if it is transparent, convenient, quick, and affordable. Relevant messages delivered at the appropriate moments are crucial.
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