In recent years, the automotive service department has grown increasingly important to dealerships’ bottom lines.
While NADA reported that service drive revenue dipped industry-wide to just $51.9 billion in 2020, by June 2021, service revenue rebounded to $60.4 billion. This means not only has the department recovered but it’s once again thriving.
Now amid ongoing inventory shortages, the service drive has become key to attracting and retaining customers. According to IHS Markit, vehicle sales will only grow around 4% in 2022 thanks to continued inventory shortages and additional restrictions. Meanwhile, the average age of vehicles is older than ever, increasing to 12.1 years in 2020.
As this aging fleet coupled with new vehicle shortages spur additional service visits, the service department has become key to improving dealership profitability by driving increased service revenue, new vehicle sales, pre-owned acquisitions and more.
In this blog post, we share dealership service department best practices to maximize dealer revenue and grow their service department in 2022, including:
· Connecting service and sales to maximize dealership efforts
· Supporting pre-owned acquisitions
Improving the Connection Between Sales & Service
As previously mentioned, the dealership service drive can support numerous other departments and revenue-generating operations – including fueling new vehicle sales. But to take advantage of these opportunities, you need to ensure your service department is well-connected to the rest of your dealership.
Assess Current Internal Communication Practices
Working toward a common goal requires buy-in from every department, including service, sales and F&I to ensure your efforts are both consistent and collaborative. Analyze the way your teams are communicating and sharing information across departments, as well as the tools supporting those processes.
Utilizing Predictive Analytics
For example, utilizing behavior prediction technology that integrates with a dealership’s CRM, DMS, service and inventory data, dealers can empower their service department to proactively engage sales leads and fuel sales revenue. This strategy requires dealers to ask a team or member of their service department – or a well-connected BDC – to mine their upcoming appointments. This will allow you to identify potential sales and revenue opportunities, such as those driving vehicles out of warranty or over their lease mileage.
Supporting Pre-Owned Acquisition Efforts through the Service Drive
With new vehicle inventory challenges expected to continue throughout at least the first half of 2022 and used vehicle prices on the rise, dealers everywhere are continuously on the hunt for popular pre-owned vehicles to fill their lots. But as auction prices rise alongside customer demand, buy-backs and trades have become key to building a profitable and sustainable pre-owned inventory.
Taking a similar approach to mining upcoming service appointments, many dealers have looked to their service drive as a sustainable source of pre-owned acquisitions and sales revenue. Here, equally strategic dealers take a proactive approach to engaging prospects to stand out among aggressive offers from competitors.
Customer Communication Amid Inventory Shortages
Conduct In-Depth History
Since service customers are typically not yet in-market, this process requires your team to assess each customer’s service and purchase history to understand their buying trajectory and identify patterns in their portfolio. Additionally, your team should use the information gathered in your service and sales CRMs to determine an estimated value before the customer’s appointment.
Focusing on Long-Term Profitability through Retention Marketing
The most effective way to grow your dealership’s revenue – service or otherwise – is by improving your customer retention. Typically representing a dealer’s highest ROI sales and the most likely to generate service and other fixed-ops revenues, keeping your loyalty customers continually benefits your dealership’s bottom line.
Communicate with Customers
On the flip side, the service drive supports dealership loyalty. Customers who service at a dealership are 2.5x more likely to make their next vehicle purchase from that dealer, according to automotiveMastermind findings. This presents an invaluable opportunity for dealers to proactively protect their customer base from competitors’ conquest efforts by staying in consistent communication with their service customers. Conveniently timed service reminders provide dealers a natural opportunity to connect with buyers on a regular basis long after the initial sale.
Whether it’s regular emails about service specials, seasonal promotions or automatic maintenance reminders, when powered by behavior prediction technology, dealers can ensure these communications are tailored to each customer. This technology also allows the communications to be delivered at the time and in the format they prefer. These tools also enable dealers to build each customer communication upon the last, acting as a service concierge that keeps customers engaged long term.
Long before new vehicle inventory shortages, the service drive was growing increasingly important to dealership profitability. Now, as new vehicle shortages are spurring some customers to hold on to their current vehicles longer, fueling both additional service visits and increased demand for pre-owned vehicles, the service department has become a critical source of dealership revenue.