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August 25, 2023
3 Tips to Running a Profitable Dealership Service Department
In an ever-evolving automotive landscape, the dealership service drive is emerging as a critical source of dealership profitability. While dealers have long recognized the revenue opportunities offered by repair orders, current market dynamics help emphasize the broader value of the dealership service drive. Today, the drive is no longer just a service center – it’s a conduit to conquesting, customer engagement and loyalty.
By identifying both their short and long-term opportunities, dealers can improve their service drive profitability by generating ROs, nurturing service-to-sales prospects and conquesting new customers – all at the same time.
Taking a proactive approach to running a profitable service department ultimately comes down to:
- Understanding both the short- and long-term opportunities in the service drive
- Allocating resources to support a strategic customer-centric approach
- Maximizing opportunities to conquest new customers and build loyalty
Understanding the Value of the Service Drive
In July, S&P Global Mobility upgraded its 2023 U.S. light vehicle sales forecast to 15.4 million units, reflecting better-than-expected economic and auto sales data over the past six months. However, the near-term outlook is still viable amid vehicle affordability concerns and potential production delays.
At the same time, customers are holding on to their vehicles longer, adding to an already increasingly aging fleet. According to S&P Global Mobility, the average age of cars and light trucks in the U.S. reached an unprecedented 12.5 years in 2023, increasing by more than three months as compared to 2022.
As customers hold onto their vehicles longer, they’re visiting the service drive more often. The S&P Global Channel Forecast, in collaboration with the Auto Care Association and MEMA Aftermarket Suppliers, projected significant growth in the U.S. light duty aftermarket in 2022, with revenue increasing by more than 8.5% from the previous year – and early forecasts anticipate a revenue increase of 5% or more for 2023.
But beyond just service revenue, the larger opportunity to maximize profitability lies in dealers’ ability to conquest and build loyalty with customers through the service drive. To harness these opportunities and optimize the profitability of their service drive, dealers need to take a strategic approach to aligning their sales, service and marketing efforts.
Resource Allocation: The Pillar of Profitability in the Dealership Service Drive
Efficient resource management is not merely a financial tactic; it’s a strategic maneuver that enables dealers to align their actions with short and long-term goals.
In the realm of the service drive, this means allocating resources to customer engagement initiatives that establish loyalty through strategic marketing efforts is key to fueling service revenue and the service-to-sales pipeline.
Beyond its role in facilitating repairs, the service drive serves as a launchpad for cementing customer retention, nurturing enduring relationships and facilitating ongoing interactions. And as auto sales continue to accelerate, it’s an increasingly strategic way to conquest new customers.
To make the most of these opportunities, dealers need to make strategic investments to break down the barriers between sales, service and marketing teams to provide a seamless customer experience. This includes staffing, training and incentives to motivate and align their teams.
By mastering the art of resource allocation, dealerships can ensure that every dollar invested contributes directly to profitability. This means identifying the service processes that have the greatest potential for generating long-term customer relationships and revenue streams.
Maximizing Service-to-Sales Opportunities
With growing aftermarket opportunities, there is increased opportunity for dealers to boost their loyalty efforts and conquest new customers through the service drive.
Remember: Not every service customer will be a prime sales opportunity right away.
It’s important dealership sales and service teams take a targeted approach to identifying prospective service-to-sales leads before their appointment. This enables teams to set the stage for a personalized customer experience tailored to each customer and appropriate for their stage in the buying journey.
Download the Whitepaper: 3-Step Guide for Dealership F&I Service to Sales Call Scripts
Four Strategic Opportunities in the Service Drive
While there’s no one-size-fits-all approach to working the service drive, there are four distinct opportunities that, when leveraged intelligently, pave the path to profitability:
- Service Loyalty: The dealership service drive is key to retaining customers and building loyalty. By maintaining consistent contact with buyers after their purchase through personalized service engagements, dealers can stay top of mind with loyalty customers, fueling repeat business and referrals.
- Service Unsold: Customers who exclusively service with a dealership but haven’t purchased are a natural service-to-sales opportunity. By understanding their needs and engaging them with tailored messaging, dealers can nurture these customers into eventual sales – while acquiring valuable used vehicles.
- Conquest: Buyers increasingly shopping around represents a lucrative opportunity for dealers to proactively target service conquest customers who may divert loyalty to their dealership. This requires dealers take a data-driven approach to identifying and engaging service conquest customers at critical points in their ownership journey with personalized messaging that showcases their dealership as the superior choice.
- Recall Opportunities: Recall cases transcend mere fixes; they’re opportunities for relationship-building. By delivering exceptional service during recalls, dealerships foster trust. This, in turn, opens avenues for repeat business and referrals, forging an enduring cycle of profitability and future sales.
In the constantly evolving automotive retail market, the service drive has consistently remained key to dealership profitability. The service department isn’t just a source of revenue from repair orders – it’s a hub of customer engagement, loyalty and conversions.
By taking a targeted approach to fueling their service-to-sales pipeline, dealers can maximize the profitability of their service department while simultaneously boosting customer loyalty and conquesting from competitors.
Want to learn how Mastermind can help your dealership gain insights that convert repair orders into new sales? Contact us for a free demo.
