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Looking at the recent projected numbers by NADA, it appears that fixed operations is in a position to increase on their 2014 total of service and parts sales of $91.73 billion. In this latest report NADA was projecting a modest increase of four to five percent in the customer mechanical number. However, there was a 20 percent projected increase coming from the warranty side, obviously we can thank the increased volume due to recalls. Recently, I was presenting in meeting with a group of high functioning CJD dealers and looking at their composite year to date we found that warranty repair was getting close to 35 percent of their total labor sales. This number is huge when you take in consideration it has typically been in that 20-25 percent range.
So why do I think this is a bad thing? We all want the added income, right? Warranty/Recall work is providing a substantial increase to all of our income – but is it here to stay? I believe that the litigious battle of recalls is here to stay, but are your customers? The added recall work is bringing new customers to your door that otherwise may have never come. They are giving you the opportunity to grow your customer base, but are they going to be long-term loyal customers? Can you forecast and count on this added volume next year in your customer pay numbers? My suggestion….. NO
Is the first experience your customer receives from you a positive one? Considering parts availability issues and the length of time to complete the recall, you will be able to retain a very small percentage of the “new” faces that are coming in to have their air bag inflators replaced on their 10-year-old vehicle. Most of these customers you will never see again.
Here is my biggest worry for 2016 and forward.
This added volume is helping pay the bills and has increased most of your commissioned based pay employees paycheck over the last several months but it is also allowing them to make this income through the path of least resistance. Recall work is eroding our customer pay business. Advisors car turn into a high volume recall factory and at the end of the month all theses bits add up to a glob. A customer that spends with us typically will stay providing it was a positive experience. A recall customer that also has a positive experience still does not have the loyalty bridge built as one that spends with us. Therefore a very small percentage of them will return even after a great experience.
To sum it all up – The recall business is here to stay. How are you going to make space for your long-term loyal customers and how are you going to keep your advisors focused on building the customer relationship one oil change and multipoint inspection at a time?