How PPM Drives Retention
With rock-solid processes and measurable goals, prepaid maintenance programs can help dealers keep more car buyers coming back and create limitless service and sales opportunities.
May 2016, Auto Dealer Today - Feature
Properly designed and presented maintenance programs help auto dealers engage customers throughout the ownership cycle.
Countless product providers use the word “retention” in their marketing campaigns, often boasting that their products contribute to an increase in customer loyalty. Very few provide the specific reporting necessary to prove that a lift in retention has actually occurred, and fewer still seem to have really thought out their strategies for keeping customers coming back to the selling dealer.
As far as I’m concerned, that’s the only meaning of the word that matters. When you are trying to decide which products are going to get a piece of the precious real estate on your F&I menu or be offered on the showroom floor or in your services lanes, ask yourself whether any of them will make your next customer take time out of their busy schedule to come back to your store two or more times a year for the rest of their ownership cycle.
I strongly believe that prepaid maintenance (PPM) programs meet that standard. Let’s take a closer look at how dealers are using PPM to drive customer loyalty and fixed ops revenue.
Advantages and Best Practices
Nationwide, dealers who utilize PPM as part of a retention plan are seeing real results. Before we get to the specifics of the programs, let’s review five basic requirements every retention program must meet to generate the results you’re hoping for:
- The return trip to the selling dealer must be a valuable and positive experience,
- The product must provide a mutual benefit to the dealer and customer,
- The dealer must have enough properly trained staff on hand and processes in place to ensure that the increase in traffic won’t create a logjam (particularly in the service bays),
- The dealer must have a starting point and a goal in mind and
- Everyone employed by the dealership — in every department — must be in on the plan, including your strategy, your goals and the means by which you will measure success.
The good news is that the right PPM can achieve all the goals listed above. The bad news is that many moving parts need to be in place for that to happen, and you have to choose the right one. Prepaid maintenance programs vary wildly. OEM programs and third-party F&I providers all have an offering of some sort. They are not all created equally.
Despite their best intentions, some programs will benefit the provider and not the dealer or the customer — or at least not in the ways they are presented. Once you lay out the goals of retention, you need to then look at the attributes of PPM programs that make retention happen and those that don’t.
- Can you create your own reimbursements? This is of particular importance to offerings such as free or discounted oil changes, among other examples.
- What’s the value proposition? You need not lose money to make PPM a customer value. Large retail markups will kill your strategy. Keep markups low enough to be attractive to customers, because revenue from customer use of a PPM manifests itself in more ways than one.
- Can you preload a one- or two-year program on all new and used vehicles and add a multiyear upsell in F&I? You want the ability to adjust on the fly when needed to make PPM a win for F&I, but only with a fair pay plan that doesn’t harm other F&I products.
- Can you market the program with a multichannel approach that includes digital, point-of-sale materials and direct mail? The more customers know about the program and how it benefits them, the more they will use it. This also includes marketing to sold customers who aren’t using the program.
- Can it be quickly and easily sold in the service department? This is paramount. It may take a while to hammer out the process and compensation, but giving your service writers ownership of PPM is integral to the success of the program.
- Who gets what? Make sure you are 100% in control of all the reserves and all the spoilage dollars.
- Can you measure the results? Be sure the program you choose delivers makes measurable accountability a reality. These two words are missing in most plans. That leads to program turnover and little chance for better retention numbers. Reporting must be in place to show what the actual retention effect is, how staff are performing, what plan types are selling in F&I and service and the overall ROI of the program.
Done the right way, PPM will generate a retention number of up to 70% for new and used customers (based on two paid visits per year). One-year retention numbers can be as high as 90% for dealers with a preload strategy. Overall retention numbers will vary by the PPM strategy employed.
Many dealers focus their PPM sales efforts on new-car customers, neglecting the used-car customer who is more likely to defect to the aftermarket. Others elect to only offer PPM in the service drive, limiting their sales opportunities. A PPM strategy is most effective when sold in F&I. In my experience, the service-only strategy will only get you up to 20% penetration because it’s viewed as a product, not a strategy. However, I have seen many dealers enjoy 70% or more F&I penetration where there’s a strong pay plan in place and a top-down strategy to market PPM as a retention and service-volume tool.
Adding a prepaid maintenance program won’t allow you to check off the “retention” box on Day One, but with the right people and processes, you can help your customers keep their vehicles on the road and keep them coming back to your store.
Ryan Williams is president of Fidelis PPM and DRIV Technologies. RWilliams@AutoDealerMonthly.com