September 2016, Auto Dealer Today - Feature
We’re used to big promises that don’t pay off, aren’t we? We call them “big wind, no rain” or “big hat, no cattle,” and when I was growing up, a lot of products sold on late-night TV rarely seemed to deliver. Grammarist defines the verb form of “hawk” as “to sell goods, especially noisily or aggressively.” In the fixed ops arena, plenty of so-called experts are hawking programs for service retention.
I will take this opportunity to join the fray, but I intend to let the data prove my points. I hope to convey here what too many mistakenly believe is too good to be true: You can grow service retention without backflips, without aggravation, and without risk. The key is a prepaid maintenance (PPM) program that keeps customers coming back and keeps your service managers, writers and technicians busy.
No Fine Print
No promise should be compromised by small print. Likewise, whatever the product being considered, it’s wise to know exactly what it is and what it can deliver. So let’s make sure we understand what we’re talking about when discussing prepaid maintenance plans.
Every PPM, whether it comes from the factory, a vendor or your own office, includes a number of key features, including:
- Some combination of services consumers frequently need or use with some regularity. The majority of dealers offering prepaid plans package three or four of the following services: oil changes, tire rotations, alignments, replacement wipers, and filters.
- Dealers sell these packaged services to customers at a discount off retail, and the same is true whether the PPM is a giveaway or purchased in the F&I office or the service lanes.
- The term is typically for one, two, or three years, and the plan is renewable upon expiration.
- Services are redeemed as required by the consumer. Because PPM customers bring their vehicles in more often, every redeemed service covered by the plan creates an opportunity for upsell.
- Plans may be OEM-branded or dealer-branded. Factory plans can typically be redeemed at any dealership in the manufacturer’s network; the plan you build or buy yourself is only intended to drive retention at your store.
Please note that, if you Google “prepaid maintenance plans,” you will find some complaints. Most of the criticism out there is based on higher-priced plans. Dealers who achieve strong retention gains and service growth sales from plan usage tend to price them to be highly attractive to (and affordable for) most any consumer. This strategy foregoes margin on these basic services for downline service growth and retention.
The Big Questions
There are a number of questions every dealer must ask when considering a PPM retention program — whether you design and administer a program in-house or use one offered by a third party. Does your retention program drive consumers to your shop? Is the customer experience positive enough to bring them back? Are there accountability tools baked into the retention plan to measure the lift in customer-pay dollars for each visit so program ROI can be accurately calculated?
However you answered, know this: Your ultimate goal is to keep that customer returning to your dealership to redeem plan services. Depending on the plan you implement, you can produce:
- 85% first-year retention and 65% retention in the second and third year,
- $70 customer-pay upsell per repair order, and
- $1,105 in customer-pay service business per year for the majority of the average six-year ownership cycle.
Scott Smith, dealer principal of Automotive Associates of Atlanta, said his operation enjoyed a 20% boost in service business following a campaign to sell PPM. He believes these plans are fulfilling a business need once driven largely by new-car sales. “The reality is there is little profit in new cars, so a dealer has to drive service into the service department and achieve growth there.”
The Bare Essentials
Easy and effective service retention is proving its bottom-line value for countless dealers, though there can be a hitch: These plans really only work when they are set up and managed correctly, and that is no easy task. Here are the essential components of a sustainable PPM program:
- Everyone involved in the sale of PPM must be able to confidently express its benefits to customers. Sales and F&I pros must know as much about how they work and what they cover as your service manager does.
- Between visits, you must follow up to educate customers as to how much money the plan has saved them and how to continue to maximize the coverage.
- Your service advisors must be able, with complete confidence, to engage plan holders redeeming their benefits in the service drive. Advisors who also can process those discounted or “free” services quickly and enthusiastically — and whenever appropriate and ethical — they must be prepared to upsell the consumer on other potential service needs identified by the technician.
- You must be certain — and make clear — that advisors will be compensated for their efforts to sell and redeem the plan and its benefits.
Simple and effective plans make the above requirements easy to meet. They do not unduly disrupt advisors, take up their time, or fail to deliver what the customer has been promised. So make sure your plan, if it’s provided by a third party, builds advisor compensation into its overall value to the dealership.
Prepaid maintenance drives retention and additional service revenue that flows from retained customers. Dealers and staff will find these programs easy to implement, easy to use, and easy to sell, and they will drive business into your service bays and help you provide an exceptional customer experience.
Ryan Williams is president of Fidelis PPM and a 20-year veteran of the auto retail and service industry. Email him at email@example.com.