By Ryan Williams, President, Fidelis PPM

When a business fails, failure is rarely sudden. A post-mortem will usually uncover when and where the first rust of failure set in.

Take for example, the case of a failed mainline import store. Rust first crept in when uninspired management failed to update store processes and practices to keep up with the times. A wrong attitude also kept them from recognizing change or hearing from wise counsel. Management, even, it seems, slept through the flood of customer migration to competitors.

I’m not sure there’s an antidote for pride and deaf ears that allow for failures like that. Good managers I know want to identify trouble early, so intervention can stop corrosion and prevent eventual failure.

To breathe life into a dying store, dramatic action is needed. Often, management must go and its old culture ripped out and a collaborative, customer-centric environment put in place instead who will champion this new culture. Upended sales, CSI, and retention buckets must be set right fast, and fast.

Remaining customers must be re-welcomed, new customers earned and retained, and defected ones gone after and their service business recaptured if possible.

Build retention fast

Fortunately, there’s an automated way to rekindle customer retention and pursue lost business. Using this technique, the new owners of that failed store put in place a web-based dealer-branded prepaid maintenance (PPM) plan to attract, incentivize, and retain new and existing customers. 

“We knew that if we didn’t hold to the business we did have, that even with new car sales the store would continue to struggle,” a new, senior manager told me. “The stores had to build that new base to fuel their future service businesses.”

DME Automotive has noted that dealership customers are 86 times more likely to purchase their next vehicle from the dealership where they have their car serviced.

That’s why getting customers into the habit of using the dealership for even routine maintenance is smart, and that’s the goal in mind when you provide them with this kind of retention program.

Within three years of initiating such program, new dealership reported having improved first-year retention performance to third place from near last (in its market); to first place in in-warranty retention, from near last place; and to seventh place in out-of-warranty retention. As a result, its customer-pay repair order volume per month increased from 270 to 670! 

Focus on improvement

Certainly your store is healthier than this store was, but even healthy stores benefit when using PPM programs to attract and retain customers. That aside, don’t ever think rust cannot be attaching itself to your business that if left unnoticed and left alone can be devastating. 

Here are a few spots where rust can quickly set in:

• Sales-to-service turnover: How dealers engage with customers influences customer satisfaction – and retention.  First-visit service appointment rates reach 90% - compared to 50% or less - where the sales-to-service handoff is performed correctly. Service satisfaction increases 44% when an advisor greets customers within two minutes of their arrival, industry sources report.   

• Service bay utilization: Service operations consultant Mike Volkman of Service Department Solutions notes these bay usage essentials: Shop loading structured to technician availability; management that supports billable time throughout techs’ shift schedule; hold technicians and advisors accountable for maintaining the shop’s effective labor rate; and, pursue a one-to-one service-to-parts sales ratio.

• Service systems: A McKinsey & Company report notes “focusing on improvements in the service department to win more repeat customers can help dealerships increase their profitability and reduce both their own and the automakers’ customer acquisition costs.”

• Service attitude: Customer engagement and satisfaction are talked about, but hard to achieve. Explain, thoroughly, service inspection findings. Walk customers through the details of what was done and why. Customers want to know how their money was spent, so show them. Too many advisors seem uncomfortable and neglect this. If customers receive more interest and engagement at the donut shop counter than at your advisors’ counters you lose.

Whether you’re looking to revitalize a store or push a stellar performer higher, prepaid maintenance programs drive measurable and significant customer retention and return on investment.

On a national basis, prepaid maintenance programs like this average an 85% first-year retention rate, with retention at 65% through year three. As most of these plans encourage customers use them three to five times a year, they get into the buying habit at your dealership quickly. Plus, on average plan use nets a $70 per visit RO upsell.

When a business-building retention program like this is automated, management is freed up to focus on other essentials, from new and used car sales to inventory management to F&I and competitive analysis and marketing strategies.

Ryan Williams is president of Fidelis PPM and DRIV Technologies. Reach him at Ryan@getfidelis.com or visit www.getfidelis.com