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David Zwick

David Zwick Founder

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Why Does Offering Service Valet Increase RO Value by 20%?

Why do customers who do not visit the dealership spend 18% more on auto service? Evidence and armchair psychology support our analysis.

I recently published a case study about the effects of service pick-up and delivery (service valet) on loaner turn time.  You can read the paper dedb0ef8b6c0713b68578848de132d62.jpg?t=1. (Spoiler alert: Loaner turn time was reduced by approximately 1.2 days, or over 40%.)

The study had a few other gems.  Among them, analysis showed customers who used service valet had RO values 18% higher than those who did not use service valet. Theoretically, these service valet customers  could have had more expensive repairs but that is not likely given the large sample size.

Instead, our longstanding experience shows service valet customers purchase more recommended services. So this begs the question:  

Why do customers who do not visit the dealership spend 18% more on auto service?

Evidence and armchair psychology support our analysis.  Consider the psychology from the customer’s viewpoint.

The dealership saved the customer a few  hours by not requiring them to visit the store to service their car. Result: customer saved time, feels valued.

Customers expecting to wait in the customer lounge for an hour are less likely to purchase additional services if it requires more time at the dealership and less time where they were planning to be (i.e. work, family, golf).

Customers in the comfort of their home or office, with a loaner, have no time constraint and are more likely to say yes to a suggested repair as the car is already at the dealership, the repair is likely needed, and there is little sense is saying No only to bring the car back at a later time.

Many customer segments (females and non-automotive savvy males) are more likely to say no to an “in person” pitch, when the suggested repair is outside the realm of what they were expecting. This is a natural reflex, especially in the automotive sector.

The median annual income of a luxury car owner in the United States is $99,364 or approx. $50/hour. The average luxury car owner would equate two hours of savings to $100. A customer is more likely to make additional purchases if it’s directly connected to a savings or discount in the same transaction.

The pick-up and delivery service sets up the sales concept of reciprocity. Now that the dealership has given the customer something (time, less pressure, more convenience), the customer will feel better about reciprocating.

Is another explanation for the increased RO value that a service advisor could be a better salesperson over the phone? Granted, service advisors like to have a direct (emotional) connection with their customers but there is a valid explanation as to why service advisors who offer pick-up and delivery show higher RO values.

We’ll look at the upsell transaction and service valet from the viewpoint of the service advisor in the next blog post. Stay tuned. Be driven.

Tom Wiegand
In the year 2000 when Digital Camera's were a new phenomenon, a Service Manager friend crafted a relationship with a local plant higher-up requesting permission to offer free pick up and re-delivery for anyone needing an oil or filter change, or any other service need. He was able to get 5 customers within the first 24 hours. He would take a digital camera pic of a red or yellow inspection item and email it to customers and built up additional RO dollars. He'd always send a 2nd email with a picture of their air filter side by side with a new one and ask the customer which one they preferred him to put in their vehicle at no additional charge. He more than doubled RO count and profit in less than 6 months. So yes there is genius in simplicity earning real, true loyalty offering valet service.
Roger Conant
Lots of experience in my former position with this. Luxury...yes(Lexus, BMW, Benz, BMW,Audi)---the least at the present time). Although I must say that I was stunned when I came to my present position/store, and discovered that they have a huge fleet of who knows about the future competitive landscape. But even with the brands mentioned above, if you're not completely ready for it with personnel/processes--stay away. The screw ups can really have dramatic implications. I believe the service center of the future will be into "equity mining" big time--and with that piece--the non-luxury stores might have to recalculate their metrics about offering valet. By the way--can someone point me to the David's case study he referred to...I can't seem to find it.
David Zwick
@Chris Mirca - The way I have seen the model work best is not by employing "Valets" on site that you pay by the hour. This can be expensive unless you can keep the person busy and only allows you to handle one pick-up/delivery at a time. The suggested method is to create a network of "Valets" that are part time employees that show up only when there is a pick-up/delivery to fulfill. There is software that allows all this to happen seamlessly, kind of like a closed Uber Like network where all providers have been MVR, Criminally checked as well as drug tested. The software allows you to know exactly which driver or group of drivers are available and everything related to their driving and location is monitored through the App.
David Zwick
@Tom Wiegand - I am happy to hear this is not a new idea. I think the challenge has been how to Operationalize it without needing additional bodies to coordinate. There are now tools to allow this to happen pretty seamlessly and in a branded way for the dealer and service writers. For those that want to handle just a delivery or two a day, handling it manually works pretty well.
David Zwick
@ Roger Conant - Your comments are interesting. One of the by-products of offering pick up/delivery is that loaners come back much faster when the customer doesn't have to come back to the store. We have seen loaner turn-times reduced by 40% and we know they can ultimately be reduced to roughly one day on average vs. 3 days which is commonly seen. Your Equity Mining comment is also relevant as the service drive can be used to deliver select customers, in a positive equity position, a demo instead of a loaner. The service car can be appraised while in for service and you already have the customer in a demo of a vehicle they might like. Lots of creative ways to think about the dealerships of the future. The link to the case study seemed to disappear. I will try to get it back up.

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