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Mike Gorun

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What has been your experience with Prepaid Maintenance Plans?

 

Here are some facts about Prepaid Maintenance Plans (PMPs):

 

* Customers who use a dealer’s repair facility are 17 times more likely to purchase subsequent vehicles from that dealer.

* Boosting a PMP repair order with another $150 to $350 of additional up-sold retail customer-pay business adds serious money to the bottom line.

* When a PMP plan is built into used vehicle prices, a dealer can bump after-sale service use of the dealership from 15% to upwards of 50%.

* Typically one in five customers return to the dealership for service, but PMP plan holders visit servicing dealers at a rate of 72%.

* PMP plan holders who return to the dealership purchase incremental retail service about 90% of the time.

* PMP plan holders spend an average of $128 per visit for incremental retail service upsell products and services.

* A dealer that writes 1,500 repair orders per month can easily sell 150 to 200 maintenance policies just by asking the customer. In F&I, it takes a 500- to 600-unit store to generate the same 200 maintenance policies.

 

So, given these upsell profit opportunities, why are some dealers' prior experiences with PMPs disappointing? Many have said that customers simply won't buy these plans. However, when these programs are examined, it is clear why customers aren’t interested — because they are loaded with services of low value to the customer yet priced quite profitably for the dealership.

 

Today’s redesigned PMP programs offer a wide range of products and services, often with a tiered pricing structure that works for both the consumer and dealer. Additionally, today's PMP plans are software-driven, handling once time-consuming chores like plan registration, service claim and premium submissions. Because dealers control these programs, any reserve or forfeiture is immediate.

 

Every plan will experience forfeiture. It results when a customer terminates the plan early or for whatever reason does not use the plan. For most traditional PMP plans, the third-party administrator holds this dealer-funded reserve, from which they would take up to 60% of the value of the cancelled services as part of its fee structure. But the self-managed programs of today eliminate that third-party forfeiture, so the dealership keeps the excess revenue.

 

Dealers, have you ever tried a Prepaid Maintenance Program? What have your results been?

 

To learn more about MediaTrac’s Prepaid Maintenance Program UltraCare, click here: http://www.media-trac.com/products/ultracare.shtml

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