Dealer discounting for both service and sales have gone entirely too far. This discussion will focus upon service, and we'll address sales in our next discussion.

OEMs and their franchise dealers placed a heavy emphasis on becoming competitive in the service market place dating back 25 plus years. This effort was designed to stem defection of customers to the independent repair shops, become more price competitive, and drive more traffic back to the franchise dealer. Has this strategy paid dividends to the OEMs and their franchise dealers? I would say "no."

Franchise dealers have been so focused upon "price", that many dealers are now priced significantly less than independent repair shops. Independent repair shops have been very savvy, and have moved their pricing up, while franchise dealers move their pricing down. Have you ever noticed how many independent repair shops, inclusive of the large chains don't list price? The smart independent repair shop will advertise "dollar discounts", yet they don't list prices like the franchise dealer. The franchise dealer must stop listing price, stop lowering price, and please stop advertising $29.95 LOF.

Compare Jiffy Lube to your service specials, and note there isn't any pricing, only "dollar discounts." Here's a random Independent Repair Shop, note how the service specials are displayed. While the franchise dealer is promoting price, the savvy independent is promoting convenience, has higher pricing, and continues to take market share.

General rule of thumb is that a service department will spend 3% or less of customer pay labor sales on discounting. If a dealer generates $500k/month in customer pay labor, then your average dealer will spend approximately $15k/month in service discounts. I believe this methodology is flawed. Industry data supports that the franchise dealer is losing the service retention battle, yet we continue to advertise service specials in the same fashion as we did 25 years ago.

How does the franchise dealer beat the independent?

1. Scale back your service discounts, and spend a small portion of those savings on Service Customer Pick-up & Delivery. The independent repair shop can't compete with this service. Your service discounts will be less, and your gains will be greater. Service Pick-up & Delivery will yield more customers, more aged units, greater dollar per RO, and greater CSI.
2. Promote more "dollar discounts", and minimize listing service pricing for all of your competitors to shop. Independents charge $89 plus for an LOF all the time. How many times does an independent visit your web site, see $29.95 LOF advertised, and in turn charge a much higher price?
3. Clean up your website. Too many dealer's websites are overly convoluted with service and part specials, to the extent that it's very confusing and overwhelming for your customer. Jiffy Lube has one of the cleanest and most intuitive web designs going. Less is more when it comes to service and part promotions.

There's a reason why Lincoln Motor Company, Hyundai Genesis and now Cadillac are requiring Service Customer Pick-up & Delivery. It's time to win back your UIO.

Ken Hite is Senior Vice President at RedCap. RedCap's technology and drivers are utilized by OEMs and dealers for test drives and service customer pick-up and delivery. Ken has 25 years experience within the automotive industry, inclusive of retail, OEM, after-market and start-ups. The auto industry must learn to exceed customer expectations and implement business processes based upon customer convenience.