One Size Doesn’t Fit All: A Three-Bucket Approach to Service Retention

Articles | June 8, 2018

Author: Scot Eisenfelder for Fixed Ops Magazine

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When it comes to service marketing, many dealerships have a one-size-fits-all approach. They use primarily email and direct mail to send coupons or to notify customers of factory-recommended services and dealership service specials.

Rarely do they think about the vastly different service needs their customers have during different stages of the ownership lifecycle. To understand these needs and how to better meet them, it’s helpful to review recent sales trends.

From 2010 through 2015 the auto industry experienced a robust growth rate in sales, which has held steady ever since in the 16.5 to 18 million SAAR range.

Source: Automotive News Data Center

What do these numbers mean for your dealership’s service department?

The volume of vehicles in the one- to three-year age range is flattening. The majority of owners in this age range are the same customers who purchased or leased from your dealership. They still have a relationship with your dealership and their manufacturers’ warranty or lease terms provide them with incentive to visit your service department.

Generally speaking, it doesn’t take a whole lot of effort to get these customers into your service lane.

Meanwhile, the volume of vehicles in the four- to six-year age range is growing and will continue to do so for the next few years.

Source: Automotive News. Forecast assumes 2017-2019 sales of 17.4 million units

Blue: 1-3 year old; Orange: 4-6 year old; Gray: 7-9 year old

In this age range an increasing percentage of owners are second owners who do not have a relationship with your dealership. In fact, approximately 30 percent of cars are sold on a lease with typical terms up to 36 months. Virtually all of these leased vehicles are now in the hands of a second owner.

As vehicles fall out of warranty and more repairs are needed, and the associated costs of those repairs start rising, customers begin to value shop.

For dealers, this is a critical time to maintain connectivity and to demonstrate the value of getting vehicles serviced at your dealership.

The volume of vehicles in the seven- to nine-year age range has been in decline for the last five years. Although there is some projected growth ahead, for dealerships the owners of vehicles in this age range is a tough sell. These are typically second or third owners and affordability becomes an issue, so price tends to matter more than value.

Traditionally, the seven-plus age segment has been the bread and butter for aftermarket service centers such as Pep Boys. But as this segment has been declining, the independents have become a lot more aggressive at targeting owners in the four- to six- year range, which also happens to be the ideal customer target for dealers.

What this means is that the next few years are a critical time for service departments, as a potentially larger percentage of your customers become vulnerable to defection.

Three Buckets

Mass-market service promotions will always draw some new customers, but as a strategy they fail to target customers during periods in the ownership lifecycle when they are making critical decisions. Additionally, generic messaging isn’t relevant to the customer and therefore does little to increase loyalty and retention.

Just like in sales, dealers need to target the right service customer with the right message at the right time.

One way to accomplish this is to divide vehicle owners into three buckets defined by the age of their vehicles.

1 to 3 Years

For the next few years this bucket is flat, so the natural flow of easy money from in-warranty work is also flattening and may even start to reverse. Newer vehicles also require less frequent maintenance, translating into longer periods between visits.

Service marketing during this time should focus on relationship. As in, keeping in touch and showing appreciation and gratitude when a customer does visit. Also, remind customers of your community involvement and philanthropy.

During this period, it’s not a good idea to over market to these customers, or try to upsell them unnecessarily. You want to build and maintain trust, and the best way to do that is with honesty and transparency. Think about how you can give more than what you get.

Your goal in the first couple years of ownership is to plant the seeds of loyalty and hope that it comes to fruition during the next stage of lifecycle ownership.

Towards the end of this period is a critical time when your customers become vulnerable to defection, so your marketing reach and frequency must increase and your strategy must shift as well.

The single most important visit during this period is the last visit before the customer’s vehicle is out of warranty. Rather than promoting a ten dollar discount for an oil change to these customers, a better strategy would be making their 40,000-mile maintenance more affordable.

If you can win that next visit you stand a chance of retaining their loyalty through the next lifecycle, so put some time, energy and money into how you approach this visit.

4 to 6 Years

Despite the projected growth of vehicles in this age range, dealerships will have to work harder to draw in these customers because the independent repair shops are aggressively targeting them.

Additionally, as vehicles in this age range are likely to change hands, you’ll want to add conquesting to your service marketing strategy. You must find both the new owners of vehicles you have sold or leased, as well as new owners of vehicles that CarMax and other competitors have sold.

Your service marketing during this period should focus on value. You must convince vehicle owners that as the cost of ownership rises, your dealership is the better choice for keeping their vehicles running smoothly.

For consumers, price is inevitably part of a value proposition, so during this period you may want to consider shifting your strategy to making slightly less margin per repair, but increasing your overall volume of repairs.

You can also provide value with amenities. The difference between an oil change at a dealership and an independent shop may only be ten dollars, but you can add value with nice waiting rooms, free WiFi and coffee and by throwing in a free car wash.

For larger ticket items, the sell becomes more challenging. The difference between a brake repair at an independent vs. your dealership might be a hundred dollars or more. For that amount people are willing to put up with bad coffee, so how can you provide value to make up for that? Perhaps a free loaner car, or pickup and drop-off service, and reminders about how certified technicians and factory parts make for a more reliable repair.

During this period is also a good time to aggressively market factory-recommended maintenance and promote the benefits of regular maintenance to vehicle owners.

Another strategy is to expand your parts selection for your customers. Try offering a good/better/best price option for parts. At this point you need to be willing to do whatever it takes to win that customer.

7 to 9 Years

Vehicle owners in this age range are more focused on affordability than value. However, during this period it’s likely that several major repairs will be necessary. For your dealership, it’s worthwhile to send occasional reminders out how important it is to replace timing belts, alternators and other parts at recommended intervals.

For big jobs like transmission and engine work, try building trust by promoting your highly-experienced, certified technicians and OEM parts.

As dealers spend more time and effort creating new service marketing strategies, it’s important to remember that a one-size-fits-all approach does not deliver optimal results.

By separating vehicle owners into three different buckets, you will be able to better meet their individual needs at different stages of the ownership lifecycle. This strategy helps to create more relevant, meaningful communications that will result in higher levels of loyalty and retention.

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