Service retention rates in dealerships have been steadily declining over the last three years, according to Affinitiv’s recent Automotive Loyalty Trends study, which analyzed data from more than 1,000 auto dealerships.

In domestic brand dealerships, service retention rates have dropped from 61.2% to 60.2%. At import brand dealerships, service retention rates have dropped from 67.8% to 66.4% and luxury brand dealerships have seen service retention rates drop from 67% to 65.3%.

At a time when fixed ops generates half of dealership gross profits, dealers can ill afford to lose any customers, let alone see a decline this significant. As part of our loyalty study, we surveyed 1,000 automotive consumers who had recently had their vehicles serviced at a dealership, and asked them about their service experience.

According to our survey, 33% of these customers felt that the dealership did not meet all of their expectations on their last service visit. And it turns out that to the majority of customers, the most important part of the service experience is having their vehicle ready and delivered to them at the promised time.

The three most important factors in the customer service experience were ranked as follows:

Vehicle ready when promised—74%

Advisor reviews services completed—55%

Fast payment process—45%

By a wide margin, failing to complete service and delivering a customer’s vehicle late, is the most common reason for a sub-par customer experience in the service department.

To help dealers improve their vehicle delivery process, we also asked how long after the promised time does a dealership have before customers consider the vehicle as “Late.” Here are the responses:

Less than five minutes—8%

Five to fifteen minutes—29%

Sixteen to thirty minutes—34%

More than thirty minutes—28%

Although a majority of customers grant a little leeway, dealers should strive to guarantee their vehicles are ready within five minutes of the promised delivery time.

Prioritizing the value of your customers’ time is the first step in meeting and exceeding customer expectations, and crucial to high customer satisfaction.

Includes contributions by Jeff Giere, Strategy Analyst at Affinitiv.

One of the biggest hurdles dealerships face when attempting to create a personalized experience for every customer is breaking down their data silos. Data silos are common in virtually every auto dealership today. They occur when information is accessible only to certain employees or only within one technology application. While many leading, non-automotive retailers have spent the last couple of decades integrating disparate systems to improve their customer experience, many dealers have fallen behind. Driven by the allure of small, startup tech companies, they put too much focus on continually adding non-integrated technologies that typically over-promise and under-deliver. As a result, dealers are facing the harsh reality of a significant digital-experience gap. We covered this––as well as the solutions––in our recent Mind the Service Experience Gap white paper.

Not only do data silos make big-picture decisions––like which customers to target to grow your business––harder, they can negatively impact individual customer interactions in the showroom and on the service drive, leading to poor online reviews and risking the alienation of new customers. So it makes sense that eliminating data silos can increase your customer experience, CSI, and even your store’s revenue. And luckily, there’s a fix.

The Low-Down on Silos

The most noticeable data silo for dealerships is online data collection. All too often, when customers submit a lead form, schedule a service visit on your website, or value their trade online, their data gets buried in a single application managed by one of your vendors. Unfortunately, this crucial customer data is not typically shared with any of your other systems. Then, when those customers come in for their test drive or service appointment, the dealer associate assisting them has an incomplete picture of the customer or their vehicle. The unsurprising results are a sub-standard experience for the customer and missed revenue opportunities for the dealership.

Worse yet, the next time a customer makes a transaction online, the website doesn’t recognize them.  They are then forced to provide the same information with every visit. Obviously, this practice is a problem and alienates customers as soon as the interaction starts. Every additional hurdle you create for a customer––an extra keystroke, tap, or click––leads to more frustration and abandoned transactions. And yet this situation occurs every day, resulting in lost sales and missed service revenue. That’s why it is so important to consolidate your vendors and centralize your customer data in one system. You also need to employ smart systems that continually recognize customers and eliminate unnecessary effort on their part.

One Customer, Fragmented Information

The best case scenario involving data silos is that all your customer information exists somewhere, scattered in the different applications used throughout your dealership. But unfortunately, “best case” doesn’t always equal “best practice.”

This kind of “data disconnect” can affect everything from sales interactions to marketing communications. In fact, a 2019 survey of 1,000 customers by AutoLoop found that 88% of customers value a personalized experience when visiting a dealership. If your customer information is siloed into different platforms and products, however, that crucial personalization data may be inaccessible or incomplete.

Say “So Long” to Data Silos

The immediate effects of eliminating your data silos include higher CSI scores, trust, and transparency and a significant lift in repeat business. And in the long run, it adds up to a lasting positive impact on your dealership’s revenue and profitability.

The solution is clear: integrate your data to enable a smarter customer experience. Your store might have the best individual technologies in the world, but if they don’t work together, they’re not much use at all. That’s why the best strategy for eliminating data silos is to adopt a seamlessly integrated sales and service solution. The ideal platform will do more than share valuable information across applications. It will also use the information intelligently, saving customers and employees time and effort.

Any sales or service professional knows the importance of a flawless first impression. Eliminating data silos in favor of a smart, integrated approach can upgrade that first interaction from “Hi, how can I help you today?” to “Hi, Bill, let’s test drive that F-150 Platinum you’re interested in” or “Hi, Diane, do you want to book your next service appointment at your usual time on Monday morning?”

In the automotive industry, the ability to earn a greater share of a customer’s spend is the key to driving higher customer lifetime value. To that end, many dealers utilize flawed retention strategies designed to achieve a minimum number of service visits rather than maximize the revenue potential from every customer.

Unfortunately, today’s automotive retention measurement and marketing programs are often severely limited, and most only tell a partial story about a dealer’s retention performance. For example: a typical retention program used by dealers will identify which customers have exhibited some minimum level of activity in the last 12 to 18 months––e.g., made a service visit––vs. those who have shown no activity. The typical reaction is to invest more in the no-activity customers with the hope of converting them to a loyal customer.

However, this strategy has two key risks: first, inactive customers are often defecting for reasons outside of a dealer’s control––a factor corresponding directly to the frequent disconnect between a customer’s wants and a dealer’s value proposition. Second, and perhaps more surprising, if you are lucky enough to reactivate a customer, they are significantly less likely to return again for the next visit. We analyzed a national sample of over 2M dealer customers and discovered customers who were once inactive and recently visited a dealer are 50% less likely to be retained than a customer who was always active.

The predictable result: over-investing in inactive customers may eventually lead to a downward spiral of performance, where high-potential customers are replaced with lower-value customers over time. Dealers are then forced to find even more low-value customers in order to replace the lost revenue of their best customers, and the unproductive cycle continues.

What should dealers focus on instead?

Dealers can offset the limitations of retention management programs by shifting some of the focus (and marketing dollars) to capturing a greater share from their active customers. Identifying the untapped potential for each customer is a crucial first step. This is determined by evaluating an owner’s complete transaction history over the lifetime of their current vehicle. From there, dealers can determine a service share of visits, which compares a customer’s actual lifetime visits to the number of expected service appointments based on the manufacturer’s maintenance requirements. The service share of visits score is one of the most important metrics available for measuring a customer’s potential.

To provide a specific frame of reference and determine the real percentage of expected maintenance visits that dealers are currently capturing from vehicle owners, AutoLoop analyzed the service transactions from over 1,000 dealers. We found the average share of actual service visits was just 50%. Translation: dealers are only netting half of the existing service opportunity from their active customers.

By employing the service share of visits metric, dealers can identify which customers in their database offer the best potential (such as customers with a score below 50%), along with which services they’re missing. Although they may have had just one service visit in the last 12 months, the low-share customers are still active and receptive to marketing messages, and they provide the greatest possibility for service growth. In other words, since these owners are currently splitting their service spend between dealers and aftermarket service centers, dealers who can successfully recoup all the revenue potential instead of simply a small portion stand to see the most profit increase. 

As well, dealers can further maximize their retention initiatives by pinpointing the particular service(s) a customer is missing. We analyzed the service history of consumers from a national sample of dealers who purchased new vehicles and discovered that in the first 5 years of ownership, only 25% bought tires from a dealer and only 13% bought brakes. Knowing and using the full history of each customer enables dealers to strategically target their marketing with messaging geared toward every individual's specific service opportunity.

The automotive service industry’s existing retention measurement and marketing programs, while useful to a point, only solve part of the problem. A more comprehensive approach would empower dealers with the information needed to make the most of their marketing investment. By utilizing share of services in combination with the current retention measurement offerings, dealers can capture the full potential from their most profitable owners and avoid the downward cycle of overinvesting in lost customers.

The good news? To date, automotive sales have remained stronger than many analysts originally predicted, with customers of all ages continuing to buy both new and pre-owned vehicles. Considering some of the earlier ominous forecasts, it’s no wonder numerous retailers are breathing a collective sigh of relief.

The not-quite-so-good news, at least for those retailers, though, is that new AutoLoop analytics show that customers are holding on to their vehicles significantly longer before deciding to repurchase. Since a key indicator of upcoming sales is the length of present vehicle ownership, analyzing current trade-in activity among today’s customers is crucial, as it offers invaluable insight into future vehicle sales.

To determine exactly how long customers are keeping their rides now, AutoLoop analyzed trade-in activity over 100,000 vehicle purchases. As a result, we found that in the first half of 2018, the average age of a trade-in was 5.1 years.

In 2017, however, the average age was 4.7 years—and in 2016, just 4.5. While this trend was fairly consistent across vehicle brands, luxury and domestic dealers showed the biggest increase.

So how does this translate to actual numbers for a retailer?

According to the data, the age of a trade-in vehicle is increasing by 6% each year. Another interesting discovery is that longer loan periods did not factor into this trend. In fact, our research showed the exact opposite. Customers whose loan terms exceeded five years actually traded in their vehicles sooner than buyers with shorter finance periods.

Those findings are just as significant for dealers as the ones showing a higher age on trade-in vehicles. They indicate that revenue from loyal sales customers will likely decline as customers choose to stay in their current vehicles longer and delay subsequent repurchases. Accordingly, retailers should start placing a higher emphasis on service and sales loyalty now, combining those efforts with the most intelligent sales marketing. Dealers would also be wise to invest significantly more in retention programs that continuously engage customers throughout the life of a vehicle.

In addition, retailers should develop more sophisticated approaches to interacting with owners who are considering replacing their vehicle, particularly as this segment slowly declines. Digital retailing is one such technology that provides a wealth of resources aimed at capturing the customer’s attention. Using those technologies to create more engagement opportunities helps dealerships maintain a competitive advantage, especially with customers who are more hesitant than ever to contact a dealer during the vehicle purchase process. Plus, digital retailing technology allows dealers to expand and enhance customer profiles, thus helping them deliver the smart, uniquely personalized experience customers are seeking most.

You know how service visits affect service retention, but do you know how service visits relate to the customer buying process? According to a recent study conducted by AutoLoop, we discovered that the peak repurchase rate occurs between the fourth and eighth service visit. This valuable insight gives you an edge in your marketing strategy: increase engagement and revenue by sending your service customers sales communications at precisely the right time. Learn how below.

The Facts: How Service Visits Relate to Repurchase

We analyzed thousands of deals across a large sample of dealerships and found that repurchase rates are highest between the fourth and eighth service visit; rates begin to drop after more visits (likely meaning that customers are keeping their vehicles long-term). Luxury brands are even more likely to purchase during peak intervals, and sooner too – the repurchase rates begin closer to the third service visit.
                       

Maximize Your Marketing: Here’s How

With this insight, you can make the most of your sales marketing efforts to engage customers at the ideal time in the buying process. Target your service customers based on the number of service visits. And stay top-of-mind by sending sales promotions with your current incentives, personalized offers based on your customer data, and more. Ensure your customers are informed of your best deals while they’re considering repurchasing – and encourage more of them to visit your showroom at their next service appointment.

Summer is here – and for luxury retailers, that means a significant increase in tire sales. Based on an analysis of over 9 million repair orders, we’ve discovered a large increase in tire demand for high-end models beginning this month. Peaking at nearly 25% of all ROs in July, this spike in tire sales goes through August before returning to normal levels in September.

Timing is Everything: Create Campaigns Now

Although all dealers see escalated tire sales in the last two months of the year, only luxury stores experience a dramatic surge during the summer – and it’s the ideal opportunity to drive profit even further with strategic new tire campaigns.

Start the season by showing customers why summer tires make a difference on their luxury vehicle, or remind them of all the safety advantages before they get on the road. Help them start their vacations with more peace of mind by offering complimentary oil changes, multi-point inspections, or car washes to maximize likelihood of purchase.

You can also feature personalized, limited-time specials, or create incentives based on an individual’s prior activity. And by consistently reminding customers of your technicians’ extensive training and expertise – and their exclusive use of genuine OEM parts – on each communication, you’ll reinforce the expectation of premium care for their luxury vehicle in your service lane.

Identify, Target, Increase

To maximize your response rates, use a marketing program with built-in machine learning to identify the customers most likely to buy tires in the near future. Then, target that segment with the most relevant and strategic messaging to further drive the sale. With the combination of a seasonal sales spike and predictive analytics, you have multiple possibilities for peak profit on tires for luxury brands during the summer months ahead.

Almost half of a dealership’s sales customers never return for their first service appointment – that’s a hefty chunk of a dealer’s lifetime service potential! What causes this pattern in car buyers, and how can you channel more of them from your showroom to your service lane? AutoLoop surveyed our subscribed dealers and their customers, and we discovered vital insights that will enable you to establish a long-term relationship with your customers – and generate more consistent revenue.

Why Customers Go Elsewhere for Service

Studying a large sample of dealers and finding that nearly half of sales customers don’t return for their first service visit prompted the need to dig deeper. So we surveyed customers who purchased a vehicle in the last 12 months at a dealership and discovered that the biggest reasons they bolted for the aftermarket service providers was due to comfort and cost-related factors. The primary reason customers did not return to the dealer for service was due to an inconvenient location to their home or workplace. Other reasons include:

• Competitive prices
• Speed of service
• No appointments required
• Price options

Address Pain Points to Win Them Back – and Keep Them

In addition to marketing to your dealership and informing customers of Service Department amenities and specials, target the pain points listed above to overcome customer perceptions. If a new car buyer misses their first scheduled maintenance appointment, offer deeper discounts or savings on bundled maintenance packages to overcome the inconvenience of your location and compel them to choose your dealership over the competition. Emphasize the acceptance of walk-ins and the availability of loaner vehicles or shuttle service, if available, to solve the comfort factor. And promote your factory-trained technicians and genuine OEM parts selection. That way, your customers will know that in your service lane, their vehicle will receive the utmost care – something the other guys can’t guarantee.

Doug Van Sach shares how tire sales impact customer loyalty in this video blog.

AutoLoop VP Analytics & Data Services Doug Van Sach shares some gaps between Millennial expectations and reality in this video blog.

Today, the Big 3 automakers account for only 44% of the market – a 26% decline from 2 and a half decades ago. In this short amount of time, consumer loyalty is no longer within reach, as the average customer retention rate across the industry has sunk below 50%. This amounts to dealers losing more than half of their customers each year.

Why the sharp decline in loyalty?

Carl Sewell wrote his ground-breaking book “Customers for Life” in 1990, changing how many dealers viewed their customer relationships and paving the way for the industry to drive higher levels of service and loyalty. While increased competition and online pricing is partially to blame for the decline in loyal consumers, a critical factor is the changing mindset of the U.S. consumer. The hard truth for dealers is most consumers have redefined what it means to be loyal in the digital age.

How the meaning has changed.

AutoLoop surveyed 1,000 vehicle owners from across the U.S. to better understand their mindset towards loyalty. We were surprised to learn 62% of consumers actually consider themselves loyal to an automotive service center despite the low retention rate for the average dealer. To better understand the gap between consumers’ attitudes and their actions, we dug deeper. When we asked customers to tell us what loyalty means to them, we found a split among generations.

• Baby Boomers were most likely to say loyalty equates to always visiting the same store when they have a need for service.
• The younger generations are more likely to cite loyalty as a “sometimes” rather than an “always” behavior.
• Slightly more than half of Millennials actually believe they are loyal even though they frequently visit competitors.

In other words, loyalty is more of a convenient activity rather than a commitment. Given this discovery, dealers are faced with a new challenge – prevent their best customers from going elsewhere even if they show no signs of disloyalty.

Our research shows that dealers lose close to $1M per year of service spending from their current customers. To address the lost revenue opportunity, dealers need to dramatically rethink their marketing strategies. Many dealers are using outdated, disconnected marketing programs with little to no coordination across media and touch points.

Engagement is key.

Given the constant threat of losing business to competitors, progressive dealers need to use a variety of integrated programs to stay top-of-mind and continuously engage with their customers. At AutoLoop, we are leading the charge by integrating more programs and touch points to ensure dealers stay relevant at all times. From appointments to inspections, newsletters to maintenance reminders, and loyalty programs to mobile apps, AutoLoop has the fully-integrated platform dealers need to stay ahead of the competition and keep their customers coming back time and time again.