Scot Eisenfelder explains how tailwinds are affecting independent repair facilities and why it's more important than ever to have strategies to protect dealership service business in part 1 of this 2 part video blog.

From a consumer perspective, access to loaner vehicles is a major factor in service location choice—both in terms of franchised dealer versus independent repair facility, and among franchised dealer locations. Loaner vehicles help to overcome the inconvenience of having to drive further for service, and from having to wait at the dealership or make alternative transportation arrangements.

From a dealer’s perspective, placing consumers in loaner vehicles takes tremendous pressure off service throughout. A “waiter” is much more sensitive to service delays than a consumer returned to their daily routine in a loaner vehicle. In addition, a consumer with a loaner is more likely to approve an additional service request, because the unexpected additional time without their vehicles won’t affect their schedule.

Sounds like a win-win situation. Yet many dealers have not embraced loaner programs, and often limit them to the minimum requirements of the manufacturer. Rather than view loaner vehicles as a strategic asset that improves the customer experience and gives them a competitive edge, dealers focus on the expense, difficulty of managing the fleet and on the occasional customer who misuses the service.

Here we’ll address these three common myths about loaner programs.

1. Loaner programs are too expensive

The real issue here is that the expense is immediate and easily recognized, while the benefits are more subtle and long-term. For this reason, dealers have a hard time determining the right investment. In addition, most dealers fail to build processes that optimize the return that can be gained from loaner vehicles.

For example, loaners should be an explicit closing tool to convert additional service needs. When confronted with “no,” try offering loaners instead of discounts, particularly to waiters. Also, loaners can be used on an ad hoc basis to relieve waiting room pressure when operations fall behind, rescuing dissatisfied customers. Scheduling multiple shifts and expanded weekend hours also streamlines loaner utilization, reducing the cost per RO.

Instead of viewing loaner vehicles as an expense that needs to be managed, view them as tools that can help maximize service revenue and improve the customer experience.

Calculate the incremental cost of each loaner vehicle and estimate whether you generate sufficient incremental ROs or RO dollars to cover the cost.

If not, think about trade-offs that hold as much value as possible; e.g. expand coverage to your best customers only or in key situations, such as the last visit before warranty end.

2. Managing a fleet requires too many resources

Most dealers are not skilled in managing fleets, which is why many still outsource this function to Enterprise. Poor fleet management and infrastructure contribute to unnecessary expense and result in an unsatisfactory customer experience.

A fundamental shift in mindset is necessary. At most dealerships fleets are managed by controlling the overall budget, not by viewing what form of alternative transportation best meets the need for customers and helps to maximize long-term dealer profitability.

To those of us who rent vehicles nearly weekly or have used Zip Cars, it’s difficult to understand the antiquated sign-out and sign-in procedures at dealerships. It’s time to look into new technologies that facilitate a convenient process. Use technology to drive higher appointment rates and better understand when loaner access limits appointments, so that you can reduce the bottleneck.

Besides, when subscriptions become a meaningful part of the industry, dealers will have to become experts in fleet management, so you might as well start practicing with loaner fleets.

3. Customer abuse is rampant

While some consumers do abuse the service, most drive the car respectfully, pay their tolls and return the vehicle in a timely fashion. Habitual abusers should be removed from the program. Fortunately, these are the exceptions.

To help reduce abuse, it’s important to convey a clear, positive message to your customers up front. Ask them to respect guidelines so that the vehicle can be made available for others. This is better accomplished online than in person and separated from the formal contract. People are more likely to read and acknowledge simple guidelines on their computers than on paper when buried in paragraphs of legalize, when they are anxious to go on their way.

The most frequent abuse is not returning the vehicle in a timely fashion. Again, we should start with clear expectations and then look internally. Is it reasonable to expect the customer to return the vehicle before 6pm when we notify them at 5pm? The better we keep consumers informed about the actual completion time, the better they can plan their redelivery.

Second, we need to look at alternatives, such as Uber vouchers or pick-up services to handle situations such as airport runs or when a customer brings a vehicle home because the dealership missed their promise time.

Loaner cars are a strategic asset that give dealers a competitive edge. With proper management, technology and processes in place, they don’t have to be a resource drain. Loaner vehicles improve the customer experience and can help boost long-term, incremental service revenue. 

Scot Eisenfelder explains the three buckets that service customers fall into and how best to reach out to them.

On average, dealers capture just half of the necessary service work that needs to be performed on vehicles that come into their service lanes. This is a big leakage point that has a direct impact on service revenue. It also offers tremendous untapped potential.

In addition to acquiring new service customers, it’s important to focus on maximizing service potential from the ones you have. To be clear, I don’t recommend trying to upsell every customer or sell unnecessary repairs. If that’s your strategy, all you’re doing is compounding the problem.

Addressing this leakage point requires knowing why it happens in the first place. In my experience, most customers decline service for the following reasons, in this order:

Trust: I’m not sure if I really need this repair or not, and I don’t know if I can trust you.

Timing: I wasn’t planning to leave my car here today/more than one day, and I need my car.

Affordability: I only budgeted $300 for this repair, and now you’re asking me to pay $750. I don’t have the money right now or I’m not emotionally ready to pay for it.

It’s important to distinguish affordability and budget from price. Most customers coming into your service department know that you’re not the cheapest option in town. When a customer buys into your dealership value proposition, there’s a good chance they won’t go home and shop around to save $50 or even $100.

Think about it. You have a customer who bought into your initial value proposition. They brought their vehicle to your store. They were willing to buy some services from you, but not others. They have a need, even if they don’t realize it. You are prepared to fill this need.

All the ingredients are there for you to capture that business. So, what’s the best way to stop the 50 percent of unsold service repairs from leaving your service department on a daily basis?

Communication.

Start with electronic multi-point inspections (MPIs). A perennial problem most dealers have with the MPI process is that advisors and techs are compensated only for the work they do, not for doing the inspection. It needs to be ingrained that if they do the inspection, they are paying themselves.

An effective MPI process has five parts to it:

• Identify all the work that needs to be done.
• Have a quality conversation in a timely way with the customer about the recommended services.
• If the customer declines, identify the reason. Is it trust, timing or affordability?
• Offer a solution for the reason. If it’s trust, show visual proof of the repair with photos or videos, if at all possible. If it’s timing, offer a free loaner car. If it’s affordability, offer a payment solution.
• Continue the conversation for the 50 percent of the time when the customer says no.

It seems pretty simple, but communication is not something that registers as a high priority for many service staff. Conveying or relaying information, sure. Communication as in conversations that help to build relationships, not so much.

If you want to continue the conversation with your customers, it’s critical to have a tablet that helps your staff perform the MPI in an effective manner. A tablet can help to identify the work that needs to be done and it can be used to sell the recommendation, preferably with menu options.

The tablet also needs to be integrated with your CRM. I’m guessing that about one-third of dealerships right now use tablets for the MPI process. Yet in most dealerships, those tablets aren’t integrated with the communications system.

One of the most important reasons to capture the data in the tool is so you can use that data effectively downstream. It’s the data that helps you continue the conversation with the customer, which is necessary in order for you to re-capture that 50 percent of unsold service.

This is where most dealers fall down in the MPI process. Lack of continued conversations with customers. With an integrated tool, your CRM will prompt you to email, text or call the customer to remind them to come back in for service.

In your follow up communications, don’t just try to sell your customers. Offer solutions to their objections. Educate them on the importance of having the repair done, whether it’s a safety issue or because it will help to prevent bigger, more expensive problems down the road.

Tablets are more than just tools for capturing data. Their biggest benefit is that they can help your staff communicate, build relationships and overcome objections, so that you can turn unsold service into revenue.

According to the 2017 JD Power CSI survey, only 13 percent of consumers scheduled their vehicle service online. The progress toward online scheduling has been glacially slow, rising only two percentage points over the past three years.

This is despite the fact that nearly all dealerships now have an online scheduler and most service reminders are digital. Online scheduling usage is particularly poor when compared to travel where 75 percent of airline reservations are booked online and 49 percent of airline check-ins are performed digitally.

The same JD Power survey suggests nearly half of the consumers not scheduling online are “unaware” the option to schedule online exists. So, the natural tendency is to focus on raising awareness by showing the online scheduling application during delivery or sending specific communications about online scheduling.

We should do a better job promoting online scheduling, but I do not believe “awareness” is the root cause of non-usage; inadequate value is. The bigger issue is that online scheduling has too little impact on the service experience, as evidenced by online scheduling users are just two points more satisfied than those scheduling the traditional way, on a thousand-point scale.

After initial launch, the airlines did not have to separately market their websites and apps because those capabilities improved customer service and spread virally. Why is that? The airlines’ solutions made the consumer experience substantially better.

Why is this not happening in automotive? It’s because we are grafting digital capabilities onto an analogue process. What benefit is the customer getting for booking online? Preferred appointment times? Shorter or more informed write-up process? Perhaps bypassing the service write-up all together? Not a chance! In fact, according to the JD Power CSI study, online schedulers are no more satisfied with service initiation than others.

Imagine if you checked in for your Delta flight this morning on your Delta app, but then you still had to wait at the ticket counter before boarding your flight. If this were the case, you would probably not use your Delta app. So why do we make consumers wait for service advisors?

One reason is so the service advisor can capture more information to help diagnose the problem. The second is to “upsell” more service. Other industries have successfully applied technology to address both. Chatbots can ask and respond to a multitude of customer issues. Think Alexa. In addition, Amazon has conditioned consumers to upsell themselves through highly relevant “people like you” suggestions.

Deploying similar technologies, dealers could clear the 7am to 9am bottleneck and accept vehicles when it’s most convenient to the customer. Additionally, they could increase service revenue by allowing consumers to make informed choices without perceived sales pressure.

Another major issue limiting online scheduling is that many dealers, afraid of competitive shopping, do not post prices online. So, they expect customers to schedule for a service when they don’t even know the price. Again, an analogy from elsewhere in the digital world. Would you order your Dominos pizza, if you went to check out and had no idea what your large Hawaiian pizza costs?

You can’t really expect a customer to schedule a 30,000-miile maintenance when they don’t know the price. Do you think a customer would use the Dominos listed pizza price to competitively shop Papa Johns? Of course not! Neither would most consumers on dealer service pages.

When customers click through to your online scheduler, they are trying to do business with your service department. If you make the process more informative and the gateway to a more convenient service experience, customers will respond by scheduling online more frequently. Not only that, but they will inform their friends about how to get better service. Before you know it, online scheduling for dealer services will go viral.

We are in a new era; one in which dealers make most of their money on the service side and not in new vehicle sales. Yet, as an industry we still spend far more money marketing the sales side of the business, and on conquest marketing, than we do on service marketing and customer retention.

Some dealers justify this by saying that sales drives service business. I would argue that equally, service drives sales business. When customers service with you, they are two-and-a-half times more likely to buy their next vehicle from you.

Yet, service is where most customer defection occurs. If you can plug the holes in your service bucket, you won’t have to pour as much water in the top. Here are a few strategies that will help.

Invest in the Relationship

We all know the goal is to develop a relationship with every customer, but what does that mean?

Your relationship with your customers is not defined by how you treat them. At the heart of every relationship is communication. How well are you communicating? Even more important, how well are you listening?

Effective communication is a two-way street. As dealers, we send out communications all the time. But, how much communication do you receive from your customers? Do you ask their opinions? Do you pay attention to which offers they respond to? Do you track how and when they are consuming your messages?

In any relationship, you must learn how to communicate. I believe in Omni-channel, using all available channels to relay messages. Studies in advertising have shown that it can take four or five impressions before the message sinks in and the person responds.

The same thing happens with personal communications, too, right? Your spouse may ask you to do something once, but you don’t do it. After hearing it several times, however, it begins to sink in that this may be important and you should probably do it.  

Perhaps more important than the means of delivery, is the message itself. When you do communicate with your customers, don’t always try to sell them something. A relationship is not all about you!

Customers want information and they want to feel appreciated.

Keep your customers informed about their vehicle and their service needs. Educational messages will generally be better received than a 10 percent off coupon. Tell your customers how to reset their clocks, how to use the features in their vehicle, how to pre-set their seats.

Also, be sure to thank them for their business. Some luxury dealers do a great job at this; I know one BMW dealer that sends their customers movie tickets as a thank you for service. If a customer brings their car in twice a year and you are not showing your appreciation in some way, that customer is vulnerable to defection.

These are not difficult things to do; not that time consuming or expensive. Invest in your relationships by investing in communications.

Improve the Customer Experience

A good experience is a smooth, efficient experience. When a person shows up in the service lane, be prepared. If you have a scheduling system, you have the opportunity to know what your customers’ needs are before they show up.

The check-in process should take no more than two to three minutes, and it should be entirely focused on the customers’ needs.

As a dealer, you have the opportunity to create an experience that’s better than an independent chain. You have a more comfortable waiting room, better amenities and loaner cars. Don’t think of loaner cars as an expense; think of them as a strategic asset. Loaner cars are not expensive, what’s expensive is not getting the service.

Focus on value over price. Somehow, in your communications and during the in-store experience, you must find a way to sell value over price. Your dealership may be a little more expensive but your technicians are trained. Your manufacturer parts will last X months longer than a non-OEM part. Better parts and service lower the average cost of ownership, over time.

Only Sell What Your Customers Need

When I was at AutoNation, we estimated that we only captured half of the average customer’s service needs. There is enough work to be captured and done on vehicles without selling gimmicks.

By gimmicks, I mean things like radiator flushes and nitrogen to fill tires. Customers don’t need that. They need tires, brakes and windshield wipers. I realize these jobs don’t produce a lot of revenue. But it’s not all about today. Keep the big picture in mind. Earn your customers’ trust and when they do need engine and transmission work, they will bring their vehicle to you.

It really comes down to getting to know each customer and showing them respect. Do your service advisors view each customer as a welcome friend, or as a means to get their monthly bonus check? Focusing on monthly revenue goals can hurt long-term revenue potential.

These strategies can help plug the holes in your service bucket and prevent customer defection. You’ll find that by investing more in your current customers, you won’t have to spend quite so much trying to attract new ones.

Scot Eisenfelder shares what he believes the right marketing budget for service should be for dealerships.

When consumers search for vehicle service options in your area, does your dealership’s website appear on the search engine results page (SERP)? For most dealers, ranking organically for search terms is difficult because their websites are optimized for sales and not necessarily for service. Additionally, it’s difficult to compete with aftermarket service centers that have websites filled with pages of service-related content.

The best way to ensure that your dealership appears in search results is with pay-per-click (PPC) campaigns designed to rank for service search terms. If you’re wondering whether display ads may be a better option, it depends on what your goal is.

PPC vs. Display
Search/PPC campaigns capture customer attention at the exact moment they show intent. Campaigns are optimized to pull consumers into the business. Meaning: the customer seeks out your company in an online search.

Display advertising pushes content to the user and is better suited for brand awareness. In our experience, display ads seem to work best as part of an omni-channel approach and can significantly boost response rates for the overall campaign. For example, if you’re promoting a spring service special using email, mailers and social media, adding a display ad campaign will improve overall campaign results.

Ideally, a strategic display campaign will fuel your PPC advertising efforts with people converting from general awareness to intent. But, if you're just starting your digital service marketing strategy, we recommend starting with PPC and applying any remaining budget to display. After all, PPC campaigns connect you with your customers that are closest to their purchase decision.

Setting up your PPC campaign
PPC service campaign management works best when coordinated with your sales PPC efforts. When running search marketing for service, negative keywords should be applied in the sales strategy to prevent bidding against yourself, thus driving up the cost.

Before you start running PPC campaigns, check with your website and marketing vendors to ensure you don’t have any current PPC campaigns running that might overlap with new campaigns you set up. It's against Google's policy to let you run two campaigns going after the same search terms.

To ensure your ads show up in all relevant searches, your service PPC campaign should include search terms for services, brand services, parts and accessories.

Your ad content should be straight to the point. Consumers need to see your dealership name, the name of the service they were searching for and a price. Include a statement encouraging consumers to check out all your service offers and to schedule an appointment online.

Prepare for Landing
Link the ad to a landing page that features appealing visuals and your service department’s value propositions. One effective strategy is to create a chart comparing all the benefits that you offer and independent chains don’t.

It’s also helpful to have three or four strong service offers for the consumer to select from. Think beyond oil changes to wheel alignments, 20 percent off coupons and A/C performance checks. If your goal is to fill service bays on Wednesdays, include a “Wednesday-only” offer.

Be sure to include a link to your online scheduler.

Data Analysis is Key
Once your campaign is underway, analyzing performance is important. There may be keywords that trigger a lot of impressions but not very many CTRs, and vice versa. Knowing how to optimize your PPC campaign is critical for keeping costs in line.

• With PPC campaigns the primary metrics to monitor include:
• Number of clicks
• Impressions
• Average Daily Impression Share
• Click Through Rate (CTR)
• Average cost per click
• Average position
• Conversions

For each of these metrics, your service marketing vendor should be able to provide you with average benchmarks for your location and your brand. Metrics vary widely depending on a number of factors.

The vast majority of consumers search for vehicle services using their computers or mobile phones. Dealers can’t afford to sit back and let aftermarket service centers claim the top positions on SERPs. Claim your digital real estate and move from lost to found with a targeted service PPC campaign.

As new vehicle sales profits become more difficult, it is important to increasingly turn your attention to growing your service business.  Dealers are rightly interested in finding new service customers to replace lost customers. However, service conquest is very difficult because you must overcome three challenges: reaching current driver, determining service need, and unhooking customer from a current service relationship.

While there are many potential databases and approaches to locate service conquest prospects, each has limitations that need to be explored to prioritize their use and extract the most potential, as follows:

1. Unaddressed Units in Operation.  Review your current marketing program business rules to assure all known UIOs are being addressed. The customers most often overlooked include older or non-CPO used vehicles; appraised vehicles not won on trade; same brand sold used vehicles sold within the group; fleet sales; and retail parts customers. For most of these customers dealers have a recent contact and the consumers have done business with or expressed interest in doing business with the dealership.  Furthermore, if actively managed from the beginning, service needs and timing can be predicted on equal footing with new vehicle sales.
2. Re-engage “lost souls”.  While not technically a conquest, lost souls represent a chance to grow the service base. Dealers usually know nearly as much about these customers as loyal customers, often including defection reasons.  Most dealers assume lost souls are non-responsive to previous marketing, when in fact they may have been unaware or uninterested in the offer provided. Given today’s fragmented media, it could be the message was not seen or that the type of offer presented was not compelling.  Before writing off these customers, vary the media, particularly by adding digital or social media and move from discount to convenience-based offers. If defection reasons are known, address early and directly before engaging in more marketing.
3. SEM/PPC.  Consumers responding to service-focused SEM/PPC ads are almost assuredly in market and open to new service relationships. Unlike new vehicle clicks, these are not service “tire kickers” and they are not wed to a particular service provider, or they would have googled them directly.  So even when “loyal” customers are captured through SEM/PPC, they are cheaters-in-waiting. Because service SEM/PPC is the true battleground between independents and franchise dealers, clicks can be expensive, so each click most be carefully nurtured by ad copy closely tied to each search term and compelling landing site content closing linked to scheduling. 
4. CRM No Sales.  While less is known about “No Sales” than active customers, it is known that many bought the same brand vehicle elsewhere and expressed an interest in doing business with the dealership. In addition, unlike other lists, the store already paid for the contact and knows the contact information quality based on previous dialogue.  In addition, many of these contacts will include appraisal information which can serve as another conquest source. Some consumers may feel funny returning to a store they rejected, so welcome back messaging and offers will likely enhance results.
5. Third Party Lists. There are several services which provide owner lists and contacts.  Lists vary significantly in quality due to challenges in following title transfers, differences between owner and operator and frequent contact changes.  Generally, lists are improving in quality, but few provide insights required to understand needs and media/message preferences.  I encourage dealers to review any list against their own database to check quality and derive insights which may change communication approach – e.g. whether a 5-year old vehicle has had one owner or more.  As a default use an approach that treats independents as the primary competition with messaging that promotes dealer services and addresses services typical for the vehicle cohort.  While such lists often provide low response rates, selecting the right media and message produces a solid lifetime value ROI, particularly if care is taken to rekindle the relationship.
6. Defectors.  Among third-party lists are those which provide insights into consumers who defected to independent service providers, sometimes including which services were purchased.  In aggregate, these provide valuable feedback on selling effectiveness, particularly for tires and other routine maintenance programs.  Realizing value from individual records is more challenging because the immediate need was just serviced, and you must re-establish the relationship.  Therefore, you may need to engage in a multi-step communication strategy, reminding the consumer of the dealer brand proposition while promoting additional service items, not covered by the most recent repair order.

There is no silver bullet for service conquesting.  I recommend that dealers continuously invest in building their actionable database, realizing the limitations with each data source and devising a communication strategy that recognizes the needs of each segment.

By many historical measures, service opportunities have never been greater for auto dealers. In the last decade auto sales have boomed, creating an unprecedented service opportunity tailwind for the next decade. More factory scheduled maintenance programs are driving initial service visits. Increased CPO volume has created more reconditioning and used vehicle service business. Additionally, a rigorous recall environment is driving many customers back to franchise dealers.

So why are dealerships losing service market share?

From 2010 to 2017, one- to three-year-old units in operation (UIO) increased 48 percent, yet franchise dealership service and parts sales increased just 41 percent. Today, franchise dealers only capture 20 to 25 percent of the revenue potential from their UIO.

Of the vehicles that are brought in for service work, less than half of the potential service revenue is captured. This can be attributed to many factors, including:

• Too much focus on maximizing revenue with “dealer recommended services,” which undermines consumer trust
• Inconsistent inspection processes
• Slow service initiation and delivery
• Failure to match independent service centers in operating hours and product and service offerings
• Failure to offer loaners and other incentives to increase value
• To increase revenue per UIO, the focus must move from a scheduled maintenance mentality to one that provides customers with complete vehicle care.

This requires the ability to identify, communicate and capture all service needs. To accomplish this, dealers may need to review and make some changes to the following processes:

Write Ups
The importance of write ups cannot be underestimated. When the future success of your dealership hinges on its ability to analyze and use data, the data has got to be good. During the write up process, the more information that can be entered, the better.

The use of mobile tablets in this process is critical. Many dealers complain tablets take too much time, but the reality is, a paper process is no longer acceptable. Instead of measuring the process as fast vs. slow, measure it as informed vs. uninformed.

Here’s a good guideline. If your process is poor, it will take more time to complete it using technology than it did with paper. If your process is good, it will take less time to complete it with technology than it did with paper.

The Multi-Point Inspection (MPI)
In addition to a MPI, advisors need to check the following, every time:

• Is there an open recall?
• Are there declined services from last time?
• What are recommended services/repairs on a vehicle like yours?

The answers to the first two questions can easily be found using a mobile tablet integrated with your DMS and OEM communications.

The answer to the third question is a bit tricky.

As an industry, we rely heavily on MPIs to identify necessary repairs. The problem is technicians aren’t paid to do MPIs, they are paid flat rates per job. Is it any wonder they don’t always take the time to perform a thorough inspection?

As a result, technicians rely on their learned knowledge base and memory to check for repairs commonly needed for your vehicle brand, based on mileage. However, their knowledge base isn’t as helpful when servicing other brands.

Today you should be leveraging data to provide customers with recommended repairs in a vehicle similar to this. It’s possible for techs and advisors to receive these types of notifications right on their tablets, regardless of the year, make or model of the vehicle. This greatly increases upsell opportunities.

Service Recommendations
Dealers can no longer expect to see customers every 3,000 miles. Today’s average length between service visits is closer to 10,000 miles. When your customer leaves, plant the seed for the next visit.

A complete MPI process will identify potential service opportunities within the next 10,000 miles. Before your customer leaves, email or print out and hand them a list of service recommendations for the next 10,000 miles.

Additionally, ask the customer is they’re planning any trips with their vehicles, which may shorten the expected time of their next visit.

Leverage Data
At every step of customer interaction, the data you collect and store should be integrated into a marketing strategy designed to drive the customer to the next stage.

From needs notification, you should have the ability to track how many customers scheduled an appointment. During the scheduling, write-up and in-service notification processes, customer interactions and preferences are gathered.

All this data can be used in the post service follow-up process to lay the groundwork for the next needs notification. The use of predictive analytics to create highly targeted and relevant offers will further maximize revenue potential.

Capturing more service from current customers is simple in theory but requires diligence to execute. These processes have been around forever and your service staff “know” how to do them, which is why it can be extremely challenging to make any changes. The only way to ensure the necessary change is with the use of data and accountability.