Jim Roche will be speaking at the upcoming DrivingSales Executive Summit in two weeks. This is a guest blog about the importance fixed ops will play in the future of the dealership.
Dealerships have long invested in the service department as a way to increase profits. However, key shifts in market and consumer behavior are placing an even greater emphasis on fixed operations for both short-term and long-term success.
Consider these recent findings: the service department now makes up 49 percent of a dealership’s gross profit, up from 45 percent in 2012, according to the NADA’s annual Dealer Financial Profile. And 74 percent of customers who visited the dealership in the past 12 months for service are likely to return to purchase their next vehicle, compared to only 35 percent of customers who did not visit for service, according to Cox Automotive Inc.’s 2018 Service Industry Study.
Taken together, these findings indicate that the service department will continue to drive more of a dealership’s profits this year and for years down the road.
So, how can dealerships capitalize on these trends? For starters, dealers need to understand that customers and their expectations are changing. By 2020, millennials are expected to account for 40 percent of all car buyers, according to the Autotrader Next Generation Car Buyer Study.
This new generation of buyers places an even greater emphasis on the customer experience. Millennials are used to one-click ordering on Amazon, tracking pizza delivery with a Domino’s app and hailing a car service on their smartphones from Uber or Lyft.
Successful dealerships will respond to these changes by focusing on delivering an exceptional customer service experience. This means adding amenities such as coffee bars, Wi-Fi and others in the dealership. More importantly, this means investing in a technology-enhanced experience that makes it easier for customers to schedule service appointments and extending hours to provide more convenient service times.
In addition, dealers need to make sure their customers are familiar with their service departments. Xtime market research shows that customers are more than twice as likely to return to a dealership for service when introduced to the service department at the time of purchase.
If dealerships introduce the service department at the time of delivery, they lay the foundation of creating a life-long, loyal customer. They can increase the chances that a customer returns for that first oil change or regular maintenance, which can lead to more service visits and eventually another vehicle purchase.
The changing trends in the auto industry and consumer behavior demand a different view of fixed ops. It can no longer be run as a separate part of the business. Fixed ops should be seen as the cornerstone of the entire dealership that builds long-term customer relationships, starting from day one.
I hope to see you at the DrivingSales Executive Summit to provide more details on why fixed ops is critical to driving profitable growth at your dealership.