Hidden profit opportunities exist throughout most dealerships. Whether those opportunities present themselves through service customers migrating to sales or sales customers that become service customers, all can lead to increased revenue and building relationships with your customers. Many dealers, however, don't incentivize those handoffs, so these episodes become missed opportunities, especially when it comes to recalls.

According to an article in Automotive News, employees are motivated to work the pay plans they have been given within their department. These departments then operate as separate silos, making it hard for the dealership to act as a team.

The problem with these kinds of incentive plans is that most service advisors don’t consider a recall a “red flag” that would prompt them to handoff the customer to sales because recalls aren’t considered “large repairs,” as there is no cost to the consumer.

However, when it comes to recalls for late model vehicles, many vehicle owners face additional repairs that can be expensive and cost-prohibitive. These consumers need your guidance to walk them into a new car that is a more valid and attractive option.

Here’s how it works: A well-trained (and compensated) service advisor identifies a large RO and quickly advises the sales manager about this customer with a massive service bill. Sales then research the customer, review the RO for their vehicle and select a potential new car and, if it makes sense, approaches the customer with an offer to upgrade to a more modern vehicle at a similar payment. 

By following this practice, you can end up with front-line quality vehicles after the recall (that you have to have to fix anyway) for a lot less than acquiring this inventory at auction. It’s a win-win opportunity - revenue from a sold unit AND profits from the trade-in after the recall repair is fixed.

Sadly, however, while dealers are finally getting wind of equity mining and the benefits of those service-to-sales handoffs, customers coming in for recall repair work tend to get overlooked.

If you shift your gaze to include recall repairs, you can capture a significant additional revenue opportunity and do consumers a favor by ensuring those unsafe vehicles are no longer on the roads until they can receive the necessary repairs that make them safe to drive.

I realize that we’re all probably sick of hearing about the Takata airbag recalls. Take a deep breath because it’s not over yet! As faulty Takata airbags have caused one of the largest recalls in history, endangering millions of lives, most of us assumed that all the makes and models affected by the Takata recall had been identified and that their owners were working through the process of securing the necessary repairs. Sadly, that light at the end of the tunnel is not yet in sight, as more recalls are regularly announced.

As the saga continues, dealership service departments, for lack of better parts, install faulty Takata airbags in vehicles to this day, knowing full well they will need to be repaired in the future. Also, under a special NHTSA allowance due to a shortage of airbags, some automobile manufacturers were, up until recently, still installing these faulty airbags in new vehicles coming off the assembly line. NHTSA permitted the action as long as those airbags are replaced by the end of 2019. Dealership service departments followed suit, replacing older faulty Takata airbags with newer faulty Takata airbags. These Takata airbags do not pose an immediate threat as they only become defective after a certain period and under certain atmospheric conditions. 

While regulators allowed the continued use of Takata airbags in new and recalled vehicles to keep up with demand, the rate of newly identified recalls suggests that we'll be dealing with the airbag crisis for some time. By the time all existing Takata airbags are repaired, we could be looking at a whole new (and significant) batch that need replacing.

Since the beginning of 2019, Takata recalls amount to more than 4 million vehicles, including Ford (1.4 million vehicles), Toyota/Lexus (1.7 million vehicles) and FCA (1.4 million vehicles). Takata recalls are NOT going away but are, in fact, increasing.

While 2018 marked the first year in which airbag recalls fell from the top spot, 2019 is off to a torrid pace. Over a one-week stretch in late February 2019, almost 4.5 million vehicles from Toyota, BMW, Ford, Mercedes, Subaru, FCA, and Ferrari were targeted with Takata airbag recalls. These staggering totals place Takata back on track as the auto industry’s largest source of recalls for 2019, long after most thought the issue was under control.

Manufacturers and dealers must be diligent and aggressive in notifying consumers and repairing these vehicles. While customer pay revenue is significant, warranty work can't fall by the wayside. In fact, customers frequently accept any needed additional recommendations at the same time as the recall work, just due to the convenience. 

Be proactive in doing anything and everything you can to notify recall customers in your market area to service these vehicles and make them safe. 

Don't let the urgency of Takata airbag recalls slip from the top of mind to an afterthought. Take care of your customers. Do whatever it takes to assist them. And you will find that your efforts pay off in increased community safety, customer pay work, and SSI.

In my last blog, Technicians are the Key to Dealerships’ Future, I discussed how the race to acquire technicians may just be outweighed by the difficult task of retaining the ones dealerships already employ.

Of course, as consumers keep their vehicles longer and the amount of recalls increases, qualified technicians will be inundated with recruitment offers and the lure of higher pay. No matter how good your company culture is, a boost in income can tempt even the most loyal of employees. But, similar to Tesla and other industry disrupters, it now seems the auto industry has another villain to deal with - all other technology companies.

As automotive dealerships and manufacturers focus on hiring, training and retaining qualified technicians to handle the increasing amount of technology in today’s vehicles, these technicians are getting an education that has grown outside the field of the automotive industry. Modern in-vehicle technology demands a high level of training and experienced technicians to service and repair them. This level of expertise makes the technicians attractive to technology companies outside the automotive industry.

And a big problem is now growing even more significant.

In a recent article in Automotive News, vice president of the Automotive Service Association stated, “an individual trained at a high level on the electronic side becomes very attractive to other segments of our economy, such as aerospace and fleet operations. We are competing for the same level of talent with other, more complex industries.”

And many of those industries pay more.

The challenge is multi-faceted. First, the auto industry must keep and train qualified technicians at advanced levels of experience to merely maintain the existing number of vehicles on the road and those that will be added in the future. Second, with the continuing amount of recalls announced daily, manufacturers and dealers need these technicians to keep up with the pace, which can be an overwhelming work environment. Third, as the number of students choosing a career as an automotive technician continues to decline, the future pool of talent looks bleak. Last, but not least, if sales of new vehicles continue to drop as many experts predict, dealerships will be even more reliant on service revenue.

You can expand the facilities. You can add more shop-capacity and utilize all available technology to increase efficiency. However, without trained technicians qualified to work on the modern, technology-filled vehicles of today, these efforts will probably be in vain. It’s hard to believe that as little as 10 years ago, dealerships weren’t worried about CPUs and onboard computers, much less OTA updates.

Technology companies are watching and waiting; timing the opportunity to recruit away your service technicians. Forget about the life preserver, these aren’t just sharks coming to feed, but Jaws coming to devour.  

As an industry, what are we going to do to save ourselves from becoming chum? Are we going to sit back and watch other industries strip away our talent? Or are we going to create a more lucrative and inviting environment – the kind that makes us a preferred destination.

We may need a bigger boat. 

Service departments account for and absorb most of a dealership’s losses in sales and fixed expenses. That is not going away anytime soon. With new car front-end grosses declining, most dealerships will increasingly rely on service business to, well, stay in business.

The problem isn’t a lack of service business, but a shortage of qualified technicians to perform it. Also, according to a recent article in Automotive News, the race to acquire technicians may just be outweighed by the race to retain the ones dealerships already have.

With warranty and recall repairs on the rise, the sheer volume of service business has skyrocketed. However, according to that same Automotive News article, many technicians (especially those paid on a flat-rate pay plan) are dissatisfied and do not expect to remain in this career for more than a few years. In fact, in a recent survey of more than 35,000 service technicians, 52 percent stated that they wouldn’t recommend their career to anyone else, which is an increase from last year.

Other than the flat-rate pay plan, one of the critical points of contention is the divide between dealer management and technicians. Dealer leadership tends to want incentive-based pay plans which, ultimately, lead to staff paying their own salaries. From a business perspective, this is understandable. However, these type of pay plans can be dangerous as, by making a technician work faster to get paid more, work can be of lower quality.

Furthermore, in addition to the regular service department workload, millions of recalls need to be fixed. There are still a little under 17 million vehicles that have not had their defective Takata airbags replaced. And, as reported in the State of Recalls Report for 2018, recalls aren't going away anytime soon. Last year recalls increased over 2017 levels, which was a record year. The sad facts are that those same technicians who feel overworked and underpaid are staring at a long line of recalled vehicles in the service drive.

With more than 50 percent of technicians surveyed reporting that they do not like their jobs and do not plan to stay at them longer than a few years, the future of recall repairs and compliance is at risk. I understand that dealership profitability is vital. However, I can guarantee you that, if those experienced technicians leave while new, inexperienced technicians (supposedly) take their place, dealerships will find that the decade of lucrative service revenue will swiftly dwindle, leaving millions of vehicle owners at risk.

Perhaps it's time to reevaluate compensation plans for technicians to not only shore up the staff dealers already have but to attract future technicians that dealerships will need to ensure profitability.

In a twist of irony, I’ve come to realize what consumers and dealerships have in common when it comes to vehicles recalls – assessing how important they are. Every day I work with dealerships throughout the nation, trying to get them to understand that recalls are not only about vehicle safety but also about an opportunity to engage consumers at their moment of need. It still amazes me to see dealerships ignore the iron in the fire, dismissing recalls as either a distraction to their core business or a body of angry consumers they would rather not try to win over. It’s as if some dealers take these recalls and crumble them up for easy disposal. 

Sound familiar? Every day, consumers on the receiving end of a factory recall notice do the same thing – they send it to the trash heap.

Truth be told, we all have to do a better job resolving the recall crisis, and consumers are more willing partners than we suspect. The consumer survey Recall Masters published in last year’s Fixed Ops magazine reveals that, while vehicle defects are the responsibility of the manufacturer, many consumers lay the bulk of the blame, and their frustration, on the servicing dealership who failed to address the recall during their last visit. While most dealerships are proactive in notifying their customers of existing safety recalls, many consumers fail to read the notice and throw them in the trash. These consumers then perceive that they were never notified and vent their frustration on the dealership. In fact, 55.2% of customers reported that they are either “very upset or upset” with dealerships that don’t clearly disclose that their vehicle contains a recall. As an industry, we're just not doing enough to help consumers identify and repair vehicles. We need to own and simplify the process for consumers.

Now for the good news: 75.1% of consumers reported knowing that the appropriate place to get their recall work done is either the dealership at which they purchased the vehicle, or a dealership that sells the same make, and 70% are aware that the manufacturer pays for recall repairs. So, if vehicle owners know where to go, and that they won’t be on the hook financially for the repairs, why do more than 1 in 4 vehicles on the road today have an open recall? That’s the challenge.

Sadly, only 28% of consumers surveyed indicated that they will act within seven days of notification, while 53% report that they will act anywhere between 1-6 months! Why do most consumers take so long to get their vehicles repaired, even when aware of safety issues that could place lives at risk?

You might surmise that vehicle owners are busier than ever and don’t have the time to get into the dealership to attend to the repair. Maybe they don't understand the severity of the recall. Could it be possible that they don't want to lose the use of their car for any amount of time? Truth is, there are many reasons consumers are not heeding the recall warning with any sense of urgency. As an industry, if we want to have an impact, we need to adapt.

Think about it – what has your service department done to meet the needs of this very unique audience? Is your dealership doing enough to roll out the red carpet for these consumers? For those dealerships that have, the results are amazing. Not only are they winning over new customers and solidifying relationships with existing customers, but they are also reaping revenue in customer pay ROs and new vehicle sales. It all starts with thorough information and multi-channel communication.

Consumers want to know when their vehicles have an open recall and expect the dealership to notify them, whether that’s via the mail, email, phone or otherwise. They also respond better to communications that arrive via their preferred method. Take a multi-channel approach to recall notifications with phone calls, mail, text, and email, and you stand a much better chance of getting through to the customer. You’ll also want to make sure those mailers are designed to stand out and are sent via first class, as first class mail has a much better chance of being read, rather than being tossed in the trash.

Today’s consumers use email and text messaging as their primary forms of communication, which is where the multi-channel approach comes in. In fact, the younger the consumer, the less likely they are to answer the phone if they don’t recognize the number, and voicemail tends to be ignored. But many older consumers still prefer calls so you can capture a wider audience with a multi-channel approach.

Recall repairs aren’t going away anytime soon. Dealers who take care of these customers have an excellent chance of building trust and loyalty, leading to higher profitability from the lifetime value of the customer. At the same time, this also helps customers and their fellow motorists stay safe through recall compliance. When your dealership takes hold of a recall strategy that meets the needs of these consumers, the path will be paved with prosperity through a channel which few other forms of outreach can provide.

According to a recent article in Automotive News, investors and car dealers have shifted their focus to the used-car space because dealers have more pricing and profit controls; something the digital retailing space is forced to focus on. With profit margins plummeting and new car sales expected to decrease, many are eyeing the pre-owned market. The financing firm Ally recently extended their deal with Carvana to provide up to $2.3 billion in financing while AutoNation invested $50 million in online used-car retailer Vroom!

Investors only put money into companies they believe will grow, bringing them a return on investment. That’s common sense. The fact that this is all happening with a focus on used cars – whether those are bought from an industry disrupter or a franchise dealership – speaks volumes. This shift in focus to used cars may be because of increased profit margins for these companies. But assuming this comes to pass, the biggest winners will be consumers. Why? Because as the volume of used car sales increases, legislators will be forced to shift their recall focus to used vehicles – the one area where dealers can still sell vehicles without fixing recalls.

And, when that happens, consumers will demand that legislators enforce many of the same laws which govern the sale of new vehicles with open recalls. Some say the fuse is already lit and it’s just a matter of time.

While it’s easy to see why legislators were comfortable banning the sale of new cars with open safety recalls (the selling dealership can repair them on their own), dealers with off-brands don’t have the same capability. They are forced to take their units to what could be a competitor for repairs and, perhaps, get pushed to the bottom of the list. Some industry pundits predict that dealerships will give priority to regular customers over competing dealers needing recall repairs.

Recall legislation will continue to protect new car consumers. However, it is in the consumer’s best interest for legislators to extend similar protections to buyers of used cars. As current trends suggest that the pre-owned market will soon make up a larger portion of overall vehicle sales, it’s easy to see the impending crisis for consumers, the industry and the government. If the purpose of legislation is to keep consumers safe (which is presumably why recall laws exist when it comes to new cars), then the same logic should apply to used car sales.

While I can understand how this could put a burden on dealers, there are ways to manage inventory efficiently without sacrificing consumer safety. Vehicles acquired via a trade-in or at auction can be checked for open recalls, with appropriate valuations to offset the burden of repairing the recall. Those acquired from auctions can be checked for open recalls prior to placing bids.

As the used car market continues to expand, our industry should consider the impact the practice of allowing unrepaired vehicles with safety recalls will have on consumer safety. As well as the potential legal liability presented by selling faulty products, along with the resultant damage to the integrity of the brand. Some dealers already refuse to sell vehicles with open safety recalls. It’s a mountain we can climb if, as an industry, we choose to do it together. 

Customers don’t necessarily arrive at your dealership expecting a great experience. When it comes to service, many dread a higher-than-normal repair bill. They expect to hear additional maintenance is needed, but don’t want to spend a lot of time at the dealership and can get annoyed if made to wait longer than anticipated.

Whether this annoyance due to long wait times applies to your dealership or not, many customers do, in fact, arrive at your dealership with these frustrations in mind. Before they’ve even pulled up into your service drive, the customer may already have set the tone for a poor customer experience. That needs to change.

How can a dealership alleviate these concerns; make the customer feel welcome and ensure they leave satisfied and happy? Perhaps it will help to take some lessons from a customer experience expert’s playbook.

I am sure most of you have heard about the Ritz Carton’s legendary approach to customer service. Even Apple sent their staff to Ritz-Carlton training before they opened a single retail store, according to a recent article on Entrepreneur’s website.

Based on this acclaimed training, Apple employees now follow three simple customer service steps which any business, including your dealership, can follow to improve the customer experience. They are as follows:

1.   A Sincere Greeting – The typical dealership is a busy place and the customer can be left waiting without an appropriate welcome. Some dealerships have rectified this with greeters in the service drive, or technology such as a message board to welcome each customer for the day. However, too often, dealerships simply have a line of cars waiting to be checked in every morning, processing customers as if on an assembly line. Sometimes service drive staff are so overwhelmed by this morning influx that their body language and tone simply can’t be disguised.

A sincere, warm welcome can go a long way towards increasing the customer’s experience right at the start of the transaction. This helps set the right tone for the entire customer transaction.

2.   Fulfillment of Needs –A huge part of any customer experience is receiving the repairs they seek. Are those service completed quickly and fixed right the first time? This is largely how manufacturer surveys score the dealership. Regardless of those surveys, fulfillment of needs is vital for customer retention. A happy customer will continue to come back for service and, with successful delivery over time, advocate your brand. Whereas one bad experience can cause up to 17% of customers to search for another vehicle maintenance solution.

3.   Say Goodbye using the Customer’s Name – Even if you missed welcoming the customer by name upon arrival, once the RO is complete, you have all the information needed to give the customer some words of appreciation and a sincere goodbye. Use the customer’s name as they leave while handing them the keys to their vehicle. This may seem a small thing, but your customers will remember personalized service and leave on a high. This can positively affect their overall experience and perception of the dealership.

These points were good enough for Apple to adopt, cost little or no money, and can increase revenue while retaining more customers. So, if your customer experience could use an upgrade, what are you waiting for?

Technology that helps safeguard drivers and passengers is flourishing. Vehicle manufacturers are adopting sophisticated driver safety systems as standard equipment. The problem is, what happens in the event of a system failure?

You have more than likely experienced the “blue screen of death” on a Windows-based computer, or the endless spinning wheel on a Mac. Technology is not impervious to errors and hiccups. In fact, when it comes to electronics and computers, system failure is commonplace.

As technology is increasingly integrated into vehicle operating systems, we’re presented with a whole new set of issues to deal with... namely, what happens when technology and manufacturer defects collide?

It’s one thing for an OEM to identify a mechanical issue and issue a recall notice. Franchise dealers are prepared to fix these situations if the parts and experienced technicians are available. However, it’s quite another matter when these recalls involve technology – or, even worse, a mechanical failure in combination with a technological one.

Keep in mind that technology controls many of the vital mechanical systems in a vehicle – from lane correction and braking systems to power steering and airbag deployment. To further compound the problem, a recall could be a mechanical issue, a technology issue, or both at the same time.

Our industry has embraced safety as a selling differentiator to consumers, so it’s only right to follow through when it comes to deliverables. Consumers rely on the technology in their vehicles to keep them safe. But it only takes a failure of technology to render their vehicle inoperable and leave them pretty helpless. Or, even worse, to result in an accident.

In fact, modern vehicles can be hacked to such a degree that an outside party can take control of steering and brakes – a huge safety concern. As vehicles continue to become more computer-based, manufacturers, and the general public have good reason to be concerned. Even Tesla has issues with its advanced technological features, such as self-driving mode, which has caused more than a few deaths.

As of this moment, most recalls involve mechanical issues, but that will change in the not too distant future. A recent article in Automotive News shares that a study by AAA found that even minor incidents can be very expensive to repair.

I’m not suggesting that consumers stick with old-school vehicles with little or no technology, but that introducing new technology into vehicles introduces a whole new set of problems when it comes to driver and passenger safety. And these are issues we should be looking at closely, and acknowledgr that manufacturing defects will ensue.

I think it’s fair to say that automotive technicians are getting harder to find. These days, less people are choosing a career in automotive repair, even though technicians make great money and many need little or no formal college education or previous experience. Look at independent repair facility employment ads and you’ll no doubt find plenty of messages stating, “no experience necessary!” While that may be the case at some dealerships for their quick service, things are rapidly changing.

A recent article in Automotive News discusses the many challenges dealerships are facing as qualified technicians become more scarce, while service department revenue becomes even more vital. According to the article, the U.S. Bureau of Labor Statistics forecasts that the automotive industry will need 796,000 technicians by 2026 – an increase of 46,000 techs from just two years ago.

While this will present a challenge for dealerships, it also represents opportunity. Dealerships have an edge that independent repair facilities will never have: OEM training. As vehicles become more technologically advanced, dealerships will have the support and information available to them – as well as the staff on-site to train them – whereas independents will not.

While eight years in the future may seem a long way off, now is the time to find these technicians, train them and continue to keep them up to date. That will give you, as a franchised dealer, a compelling value proposition and a competitive advantage over your competition and the independents.

I’m not suggesting that you have to go recruit Master Technicians and pay a premium right now. I know of a Master Technician at a very established and respected high-line dealership who started as a bike mechanic. He worked his way up, with no automotive technician experience, to become one of the best technicians in the world, winning global technician contests.

Yes, this may well be the exception rather than the rule, but my point is to plan ahead and start hiring, training and building up your service department resources now. It is possible for an entry-level employee to be well trained, to become competent and bring value to the dealership.

I’m sure that you’ve been hearing a lot about how the industry will change with the arrival of self-driving and autonomous vehicles. How much technology do you think is included in those vehicles? Do you think you’ll be able to advertise, “no experience necessary!” for such an advanced vehicle? Probably not. And, with regards to recalls, there doesn’t seem to be an end in sight, especially as cars become more dependent on software and electronics which are prone to failure over time. 

However, if you place a priority on recruiting and training technicians now, in eight years, you will likely be in a position to provide exceptional service to your customers. And, not only that, you’ll also acquire new service customers from those independents who won’t have the knowledge or experience to handle even the most routine maintenance.

And that’s how you remain profitable and win the battle. 

In the last few years, a war between dealerships and independent service centers over consumers has fueled a competitive fire. At stake is millions spent by consumers on retail service and, perhaps, the survival of many dealerships. The marketing weapon of choice used to be retail signage or print advertising, but now it’s all about digital marketing. And, in the digital world, the independents are winning the war.

However, one segment of service business which is completely safeguarded for dealers is recall repairs. But hold that smile for a minute, as this recall opportunity doesn’t necessarily mean that consumers are thrilled to be visiting a dealership. Recent surveys suggest that consumers prefer independent service centers, citing quick service and ease of appointment scheduling.  So, once the recall work is complete, that customer quite often defects to an independent for future service.

Today’s internet behemoths have essentially trained consumers to expect prompt service - an “I want it now” mentality. And, sometimes the speed at which recall repairs can be completed is out of the hands of dealerships. Parts availability, trained technicians and shop capacity, all play a part in fulfilling these customer’s needs.

Well, how did Amazon leapfrog and, at times, squash traditional “brick and mortar” industries in an era where people “want it now?” How did they find that balance between “now” and “fulfillment” that has escaped the grasp of many now defunct retailers?

They used technology.

There are a plethora of technologies in the automotive industry alone that, collectively, can transform a dealership’s scheduling, parts and service capacity into a well-synchronized machine that provides consumers with the “Amazon-like” experience they have come to expect.

With the huge volume of recalls dealerships and consumers currently face, it makes sense to investigate technologies that can help your dealership deliver a better customer experience. Look for solutions that help identify and improve shop loading and capacity. Technologies that help prevent service advisors from promising customers they can accommodate them when, in fact, they can’t due to lack of parts or shop capacity, leading to angry customers. Amazon isn’t perfect, but they have a pretty stellar track record of delivering on promises, which convinces consumers that the experience is desirable.  

Use technology to build and strengthen relationships with recall customers and, perhaps, even convince many of them that they should continue to bring their vehicle in for regular maintenance…not just recalls.

In my last blog, I pointed out that “discounting” as a differentiator in the service industry does not serve dealerships well. I’m not reversing on this stance by using Amazon as a model. This isn’t to suggest that Amazon doesn’t lead with “price” as a key market differentiator – obviously, they do. What I’m saying is that Amazon implements technology to create efficiencies that make it difficult for other online retailers to keep pace. 

Amazon has figured out how to keep prices low while being more profitable today than they did when they first launched. For dealerships to compete with independents in an environment where customers expect low prices, speed and efficiency, it only makes sense to search for innovative technology solutions.

It may take knocking down some old processes that serve as anchors to dealership service departments. But, if the focus is on the customer experience, then the effort will pay off with better profitability, improved CSI scores and customers who will happily pay more for quality technicians and parts.