BY Denise Gibson
Your auto dealer clients likely pay plenty of attention to their new vehicle advertising budgets. But their auto dealership marketing plan may not focus enough on the service department. For many dealers, the service department is a highly profitable business center. As consumers feel the latest financial pinch, your clients should consider a revised marketing strategy, along with ways to target their best customers.
The Details on Auto Dealer Service Departments
NADA reports that about 13.2% of revenue for new vehicle dealerships comes from service, parts and body part work. And the average dealership generates about $9.2 million in revenue from the service department.
For auto dealers, the service department helps to boost profitability because margins on new car sales are low. But the service department faces headwinds as well.
Consumers are concerned about costs. They have other complaints too. A J.D. Power survey indicates consumers are frustrated about long wait times to get an appointment, and they are kept waiting at the dealer once they arrive for service. In fact, they are willing to visit aftermarket services to obtain prompt service. This reality calls for a change in the auto dealership marketing plan.
Customer Retention
McKinsey data shows that auto dealer service departments face a customer retention problem. For the first two years following a new vehicle purchase, buyers are loyal to the dealers. They want to take advantage of the manufacturer warranties.
After that period, customer loyalty begins to fall off. By year 3, only 45% to 54% of vehicle maintenance spending goes to the dealer. And by year 9, customer retention for the service department can be as low as 17%.
The Growing Impact of EVs
The macro-economic trend of younger buyers being more interested in buying EVs, regardless of tax incentives, looms large. AudienceSCAN data shows that 32% of EV shoppers are between the ages of 35 to 44. In addition, around 21% of EV shoppers are ages 25 to 34.
These consumers are more far more likely than average to be environmentally concerned and to give to environmental causes.
These consumers may also be looking at the overall expense of ownership over the life of a vehicle and continue to purchase EVs. These vehicles have fewer moving parts. In the long run, they are less expensive for buyers to maintain. And for the dealer, the growth of EVs presents another challenge to their service department revenue stream.
How Dealers Can Meet the Challenges Faced by Their Service Departments
The dealer challenge is to increase service-related revenue from current and new brand owners. And they can accomplish that through a new auto dealership marketing plan.
McKinsey analysts encourage service departments to improve their outreach through targeted email campaigns. Reminding owners of important seasonal service is a must.
With better apps, dealers can encourage consumers to make service appointments at the best times for their schedule.
And dealers can use technology to improve one of the chief complaints that consumers have about vehicle maintenance. Consumers want to know the status of their repairs. Offering video or visual updates during the day can improve the opinion of the customer.
Promoting the quality of the service department makes great sense for dealers. Prospective buyers consider this aspect of vehicle ownership during their selection process. For example, AudienceSCAN data shows that 25% of Ford shoppers consider the service department during their evaluation period.
For automotive shoppers who weigh the value of the dealer’s service department in their purchase decision, know that over 55% have taken action as a result of a streaming ad in the past 30 days.
Auto dealer service departments should also know that 14% of auto repair customers are planning to change their service provider in the next year. In addition to streaming TV ad influence, these consumers also respond to text message and search ads.
You can help your accounts improve retention by improving their messaging in their auto dealership marketing plan. A good first step is to run a digital audit on them and compare the results to what their nearest competitors are doing. This feature is included in an AdMall subscription.
You can combine the digital audit data with AudienceSCAN information to be sure your automotive dealer service shop account is advertising in the right places to reach their target customers.
Image on Pexels by Artem Podrez.
