Automotive service and repair is a $215 billion a year industry.  Change is either an obstacle or an accelerant to getting your fair share.  Or rather, your response to change is the determining factor.  Change at the local level as well as global shifts may be out of your control, but you can respond and adapt.

Lay of the Land
The automotive service and repair industry is commonly divided into three segments: dealerships, independent stores and aftermarket chains.  I’m not taking sides here – I don’t care if you own an independent shop, are the Service Director at a Chevy dealership or manage a Midas store.  Global factors affect each segment in different ways and players in each segment need to respond differently to meet their business objectives.

Each of the three sectors has customers that are loyal to that sector.  These customers are loyal because they value the things that the sector does very well.  They also represent the ideal customer for each sector, preferring to frequent the sector and spending most of their service/repair dollars there.  For the most part, the strategy should be to keep loyal customers happy, but don’t fall into the trap of trying to entice loyal customers of other segments into yours.  The cost/benefit, for example, for a chain store to provide the amenities that attract dealership loyalists probably won’t work out – but it doesn’t have to in order to maintain and grow your business.

Big Picture: when you set aside the loyal customers in each segment, you’re still left with 77% of potential customers and 42% of the total service/repair dollars in play.   That's about $90 billion.  And it’s not a zero sum game: every year, 50 to 60 billion dollars of work is left unperformed – if you’re good at getting your existing customers to take care of neglected services you’ll do just fine.

Global Change
The average vehicle age is now 10.8 years, a product of a weak economy and more reliable vehicles.  From 2008 to 2011 32.5 million more vehicles moved into the over 7 years age group – and 7 million less are in the 6 years or newer category.  This moves the average vehicle further from dealerships’ traditional service/repair sweet spot, making that segment vulnerable.  Interestingly, aftermarket chains have benefited disproportionately compared with independent shops from this migration in recent years.

Changing population age may have an even bigger impact.  For example, a snapshot reveals that those loyal to dealerships are most likely to be not just older, but actually quite senior.  It also doesn’t appear that as people age they start a natural progression towards becoming loyal dealership customers.  If that’s the case, dealership loyalty may be more generational than age related which would mean dealerships are on the cusp of a massive loss as their most loyal customers, frankly, die off.  And, as young people enter the world of vehicle ownership, they are more likely to start with independent shops and aftermarket chains for their service needs.

Dealers in Retreat?
So does this mean rejoicing in the aftermarket as dealerships strike camp in retreat?  Hardly.  OEs are lengthening warranties and broadening their coverage to keep owners coming in longer for more warranty work, providing the opportunity to sell additional customer-pay work.  OEs and dealerships are both offering covered maintenance for a period to give them a chance to win over consumers to their service departments.  Dealerships are offering things like” free tires for life” if you take care of routine maintenance with them.

If this sounds costly – it is.  But it generates much needed revenue from the parts and service side of the house.  With the ability for consumers to find dealer invoice information on the internet, margins on new car sales are extremely low, sometimes even generating a loss.  Profits from new car sales are heavily dependent on accessories and Financing and Insurance products. 

This year’s vehicle sales profits are up, fueled mostly by used car sales where the consumer doesn’t know what the dealer paid for a vehicle so they can’t squeeze the margins as hard.  Which leads us to the topic of: “We service all makes and models”.

I subscribe to e-newsletters from all kinds of service centers to see what they’re doing.  I recently received one from a dealership in my area.  It featured six maintenance services at special prices.  The fine print after each service read “Toyotas only”.  Since I don’t currently own a Toyota the message I got is “We don’t want your service business.”  I understand that there is some discomfort with having to service an unfamiliar make.  It will take longer and may not be as profitable.  Maybe it sticks in one’s craw to turn to aftermarket parts suppliers.  But more and more dealerships are saying, “If I’m in the business of selling cars and my most profitable sales are used cars (of all makes and models) why wouldn’t I:

1. Try to capture the service/repair revenue on all the cars I sell
2. Build a relationship of trust with those service customers so that the next used car they buy is with me?”

Aftermarket Living Large?
No doubt the aftermarket in general will benefit from these global shifts in service/repair buying habits, but the number of aftermarket bays is growing in lockstep with the flow of money. 

When we moved to our current offices in early 2005, one of our near neighbors was a Big O Tire Center.  The owner had recently purchased the franchise.  Within his four mile service area were a Jiffy Lube, a half dozen or so independent repair shops, a Tire Factory and four new car dealers.  Since then the same area has added Costco, Wal-Mart, Les Schwab, Discount Tires, two Grease Monkeys, and, just this year, two independent tire stores a couple of blocks away.  You think his world has changed?  Nobody is getting a free ride in this market. 

What To Do?

1. Hang on to what you’ve got!
   1. Improve your customer experience at every touch point
   2. Learn why your loyal customers are coming in and make sharing that story a part of your process with every new customer
   3. Reward loyalty and referrals
2. Maximize sales opportunities
   1. The cost of acquiring a new customer has already been paid when they walk through your door – don’t miss the opportunity to increase your ARO by reviewing manufacturer’s recommendations and conducting an inspection
   2. Use technology to educate your customers on the services you offer with:
      1. Educational digital lobby TV
      2. Point-of-sale tools on your website
      3. A digital menu board at the service desk
3. Go for your share of the $140+ billion of service/repair that’s not already committed to a loyal relationship
   1. Build an extensive web presence: Younger buyers and those who are not committed to a particular store or industry segment do a lot of internet research when making the decision of where to go
   2. Use content marketing: If your website doesn’t say anything about timing belt replacement, search engines will never send someone looking for timing belt replacement to your site.  Have content for everything you want to sell.
4. Communicate
   1. Send reminders for declined and pending services: most prefer e-mail communication
      1. Leverage the technology with e-mail videos that target specific services
   2. Studies indicate that 3 months is the ideal interval for communicating with your customers – keeping you top of mind and reinforcing your relationship
   3. Use social media to promote helpful information, service content from your website and customer experiences

The world, it’s a changing.  But it’s full of opportunity for those who make the effort to perceive and act on the possibilities.

Lance Boldt is Vice President and Co-Founder of AutoNetTV.  AutoNetTV’s digital signage products deliver entertaining and educational TV programming to the lobbies of automotive service and repair businesses as well as digital menu boards and automotive website video content.