Customer retention at the dealership level is abysmal after a customer’s new vehicle warranty expires. Extended service contracts help somewhat, but the Cox Automotive 2018 Service Industry Study shows that, at best, 33 percent of vehicle maintenance and repairs happen at the dealership. Keep in mind, that doesn’t even mean it happens at the selling dealership.
It’s obvious that customers don’t trust dealerships. Focus groups have shown that the general public believes dealerships are obscenely expensive, usually with the perception that their service department charges double the rate of an aftermarket provider. That’s why customer defection rates are so high.
And whether you think your clientele are loyal or not, they’re shopping you for price. On average, car owners call around for two additional quotes before deciding who will get their business.
Now, you don’t have to have the lowest price to gain a customer’s maintenance and repair business. You just need to be close. You might be thinking, “Our service prices are very competitive with other local dealers and aftermarket shops, but it’s not enough!” You’d be right. It’s not enough to just have competitive prices.
Customers need to know your prices are competitive.
On this topic, I performed some firsthand research. Don’t worry, service managers, I’m not naming names. What I found are these contrasts between the customer’s perspective and the dealership’s view:
- Dealers perceived their prices to be in line and, in some cases, lower than the aftermarket. That is a very different view than the customer has of the dealership charging twice as much.
- Across the country, service managers believed customers would be willing to pay between 5 and 90 percent more for their services than an aftermarket provider. Customers are more likely to choose the dealer if they’re within 20 percent.
- None of the dealerships were aware that customers think they charge double the price of an aftermarket provider.
Consumers have no doubt that their OEM dealership is the best place to service their vehicle. They’re the only place that can perform warranty repairs and they have the special equipment necessary to handle the most complex diagnosis. They can expect to wait comfortably in the lounge, get a ride home with a shuttle, or even get a loaner car. There’s confidence in using OEM parts and fluids, plus a host of other advantages over the competition.
Consumers will happily pay more for these extras.
The challenge is for consumers to understand your dealership isn’t double the price. It’s on you as the authority in auto service to show them that your menu pricing is competitive.
If your sales-to-service customer retention is only 33 percent, that means 2 in 3 customers are going elsewhere. Some of that will be due to their proximity to your shop while others might be DIYers. But you can be certain that some of those – maybe 1 in 3 – don’t come through your service drive because they don’t trust your service pricing is fair. You can influence that figure.
Provide a consistent message through data-driven marketing that shows your pricing is competitive. Competitive comparison pricing data is the tool to use, and it’s readily available through most OEMs.
Use competitive comparison pricing data to show the value your store provides for services through service mailers, in-store menu boards, and on your website. And if you can keep the theme consistent, your customers will begin to take notice while they’re shopping around for the best price.
Again, it doesn’t have to be the lowest price in the neighborhood, but it must be within 15 to 20 percent.
- Send mailers to current customers, and especially to those who haven’t serviced at your store in the past 12 months. Show the competitive pricing along with the extras you provide.
Over time, implementing intentional strategies around competitive pricing analysis is bound to pay dividends.
Consumers develop trust in your dealership. Through transparent pricing and data-driven marketing, you’re able to build a trusting relationship with customers over the long term.
Customer retention rates are higher. The customers who would’ve gone elsewhere because they once thought you charged too much now continue to service their vehicles at your store. And when 74 percent of car buyers complete their purchase where they regularly service their car, that’s going to mean referral and repeat vehicle sales business.
Service department revenue increases. Even though you might be dropping the occasional price on a menu item, your overall revenue increases from the other RO lines you sell, as well as the multiple annual visits each customer makes between vehicle purchases.
There’s no need to make mystery shopping calls by yourself to a few local shops. InteliChek provides competitive comparison pricing data from local dealers and aftermarkets. It’s up to date and ready to put into action.
Better yet, InteliChek can make marketing your competitive edge easy through printed promotional materials, your website, and a nifty little widget. And because it’s all fueled by a third party, it gains traction with your customers in a way you can’t on your own.
Transparent service pricing is only effective if you’re competitive in your locale. With intentional use of competitive comparison pricing data, you’ll build customer trust while you’re at it.