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Mike Gorun

Mike Gorun Managing Partner/CEO

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How OEMs are Giving Dealers a Jumpstart in Retention

Manufacturers are increasingly introducing programs designed to increase brand loyalty, and car buyers are staying more loyal than ever before. One of the most recent examples is GM’s decision to expand its free scheduled maintenance programs to more of its vehicles including most 2014 Chevrolet, Buick and GMC vehicles.

Many dealers have offered a few free scheduled services to their sales customers in an effort to not only introduce them to their service department, but to keep them coming back. With manufacturers focusing more on retention and shifting towards offering free scheduled maintenance for new car buyers, this offers dealerships greater opportunity than ever before to build a customer relationship with a car buyer (whether that car was bought from them or a competing dealer). This can not only increase up-sell opportunities, but also increase their chances at future vehicle sales.

Dealerships who have an OEM customer retention program need to recognize that this is a golden opportunity for them to really focus on “WOWing” the customer as, at this point, a customer has no concerns about price (the service is free to them). It’s all about the customer experience. Provide a great customer experience and they will continue to come back after their free maintenance benefit expires. Treat them poorly and they will take their vehicle to your competitor.

Cadillac has offered a 4-year, 50,000 mile free scheduled maintenance program for a while. Even with car buyers keeping their cars longer (58 month average in 2012), dealerships will still have the opportunity to impress and win the loyalty of the consumer for most of their time of ownership. If done properly in combination with the OEM’s brand retention strategies, a dealership can greatly increase their chances of converting that long-time service customer into a new car sale that then converts back into a service customer.

This “circle of life” could continue indefinitely as long as both the brand and your dealership focus on providing customers with programs that are designed to maintain the customer’s brand and dealership loyalty. As length of ownership continues to increase, fixed operations revenue becomes more important than it ever has been in the past. Leverage your OEMs brand initiatives to support your own dealership retention strategies and you can set yourself up to earn more lifetime customers.

The reason OEMs see the wisdom in using such maintenance programs is to sell more vehicles and importantly keep those buyers loyal to their GM dealer.  One might conclude then that this trend erases any market need for third-party prepaid maintenance (PPM) programs. After all, PPMs are substantially the same as those OEMs offer.

Given this, are factories’ free maintenance programs making third-party PPMs unnecessary?

On the contrary, they are now more vital than ever. The first automotive loyalty programs were utilized by dealers in 2002. Now, more than half of all the US dealerships employ some type of loyalty initiative (many through OEM sponsored programs).  But what about the dealerships with multiple brands where the OEM programs could do more harm to the remaining dealer brand than the good they provide to the other?  Multi-brand dealership groups need a solution that will allow cross-selling and plan redemption between all of their brands. OEMs simply can’t provide this type of solution, nor are they expected to.  Think of the brand Starwood Hotels and Resorts. We all know them as The Westin, Sheraton, The W, Le Meridian and others. Starwood wants to encourage their loyalty members to utilize all of their different brands but under one common moniker. Dealership groups that have multiple brands can benefit from this practice, and they will start realizing the benefits it provides to them in cross-brand marketing, (not to mention the vast amount of customer purchase data and analytics it provides).

With a third-party PPM program, a dealer extends maintenance services at a discount price (some dealers choose to give them complimentary to purchasers). Consider that for GM, late-year buyers of its 2013 models won’t receive free factory maintenance. A dealer offering a PPM program can bridge that gap.

Furthermore, only PPM programs enable dealers to:

  • Offer similar maintenance incentives to customers who purchase or lease a model year not covered by the factory program.
  • Offer these conveniences – and gain their retention value – to purchasers of other makes it sells from its used vehicle inventory.
  • Capture bought-elsewhere and other-make customers who visit the dealership service department.
  • Offer these advantages to customers of other franchises in its group whose OEMs do not offer free maintenance.
  • Offer customers prepaid maintenance after the duration of the OEM program to further retain them. 

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