To manage and motivate their service advisors, most dealers use highly variable pay plans based on gross margin. I believe such plans are counterproductive because they change the service advisor focus away from customer retention and those behaviors required to maximize dollars per units-in-operation.

This type of pay plan changes the focus along three dimensions:

1. From the important to the immediate. Retention requires dealers to compete for all vehicle maintenance items, not just the most profitable one. For example, tires, while low margin, are significant defection points. Consumers replacing tires through other channels often defect for other maintenance and light repairs. Today’s pay plans discourage advisors to compete rigorously to defend strategically important, but less profitable business.
2. From relationship to transaction. Advisors are encouraged to maximize $/RO, asking for the whole business today out of fear the consumer will not return. To better match consumer readiness and affordability, break work into immediate needs, near-term follow up items and longer-term requirements.
3. From “what works for you” to “what works for me.” Scheduling is a prime example. Advisors often guide consumers toward openings in their calendars, not the consumer’s, frequently leading consumers to find more convenient or timely options. Advisors are also tempted to push more expensive options or “dealer recommended” products, undermining consumer trust. In fact, if consumers better understood advisor pay plans, defection would likely be higher.

Most importantly, highly variable pay plans are not working; too much work continues to escape the dealer channel and advisor turnover remains unsustainably high.

So, what should dealers do?

First, pay plans should place more emphasis on consumer retention, rewarding advisors when a consumer returns to the store, regardless of who serves them next. Such an approach would focus advisors on consumer experience elements, such as meeting delivery times and Fixed Right the First Time, which are better predictors of customer satisfaction than surveys, which can be coached or manipulated.

Then the focus should shift to actively managing advisors, rather than relying on pay plans to manage people. Service managers need to look beneath the numbers, insisting on advisors presenting multipoint inspection results and properly noting declined services.

Managers should review penetration rates among strategic commodities such as tires, batteries and brakes, to assure these items are being retained within the dealership. Advisors could then be rewarded for achieving desired penetration in these commodities.

Active management should also include “RO reviews” where managers review specific situations and coach on missed opportunities to uncover any deficiencies in product knowledge and selling skills. Ultimately, advisors should be expected to grow service dollars from their VINs managed. Advisors who achieve a higher level should be rewarded more, while those who do not achieve the standards should be exited. The bottom line is that to maximize service revenue potential, emphasis must move away from a transactional gross focus.

When a person wants to buy a vehicle, a dealership is the first place they think of. When a person needs to get their vehicle serviced, a dealership is not necessarily the first place they think of. For service, there’s plenty of choices and competition for dealers.

That’s why service marketing is more important than ever. Historically in dealerships, service marketing has taken a back seat to sales marketing. According to NADA, fixed ops is responsible for 47 percent of a dealer’s gross profits. Yet service marketing is less than 10 percent of the average marketing budget for many dealers.

However, I do see this changing. Service marketing is currently going through a transition that reminds me of what was happening on the sales side back in 2005 and 2006. If you recall, it was during that time frame that many dealers adopted digital sales marketing strategies.

The transition was not always smooth. In the beginning, both dealers and marketing companies spent a lot of time and money on strategies and search terms that didn’t produce results. It took several years, and plenty of trial and error, before consensus was reached on what works.  

For service marketing, dealers have long relied on direct mail and email marketing as two primary channels to draw customers in. Both of these channels have their place, but if that’s all you do, your reach is limited. Consider expanding your service marketing repertoire.  

The good news is, you won’t have to repeat the same mistakes that were made in 2005 and 2006. Digital marketing attribution has come a long way since then, and fortunately we already know what works.

For service marketing, the more personalized the message, the better. The following digital channels are ideal for sending out targeted campaigns:

1)   Search Engine Marketing (SEM)

Search can be very cost effective for service because consumers search using very specific terms. On the sales side, a customer may use terms like “Ford Focus” that are very broad. With service however, longer search terms come into play such as “brake pads Ford Focus near me.”

Try pairing services, parts and accessories with your brand makes and models. Target customers within a 15 to 20 miles radius. Identify the search terms that perform well and review them on a regular basis, as there is likely to be seasonal fluctuation.

2)   Display Ads

Display ads can be generated based on the same search terms and location criteria as you use for SEM. Additionally, you can factor in demographics information such as age and income.

Retargeting is an effective strategy for people who have visited your dealership’s website service page, and for your customers who are due for service.

3)   Social Media

Thanks to big data, predictive analytics and automated marketing, Facebook is incredibly effective at generating service leads. However, posting generic promotional messages on your Facebook page won’t cut it. Consumers don’t respond to messages that are irrelevant to them, regardless of where those messages appear.                  

Use Facebook to create service offers that are highly relevant. Facebook has access to Oracle/Polk data, which means you can target people who own a certain make/model based on when they registered their vehicle. Try creating offers for OEM recommended services at certain mileage intervals.

Facebook tracks virtually everything its users do. When a Facebook user visits a Discount Tire website, Facebook knows that person may be in the market for new tires. Take advantage of this information to serve up a tire ad, as well as other ads for service keywords.

4)   Who to Target

The primary goal of service marketing is to retain your new vehicle sales customers through the ownership lifecycle. Your secondary goal is to reach new customers that have never visited your store.

Facebook and Google properties allow you to serve up ads to existing customers in your DMS. They also have tools that can be used to create look alike audiences within a defined radius of your store.

Another source of new prospects is in your CRM. Most dealers close about 50 percent of their new vehicle lead prospects. What about the other 50 percent? Many of them may have purchased from another dealership.

They gave you a shot at the sale, so maybe they’ll give you a shot at the service.

Try creating an unsold report of all the customers you didn’t close in the last six months, and create campaigns designed to re-connect and bring them in for service.

Service marketing can be highly effective for generating service appointments. But it requires moving beyond direct mail and oil-change coupons to an omni-channel approach using personalized and highly relevant offers.

Whenever a need arises in the marketplace, inevitably an entrepreneurial spirit finds a way to fill that need. However, in the last few years there has been a need in the retail automotive industry that nobody seems to be filling. First, some backstory.

Auto dealer consolidation is increasing at a significant rate. Between 2014 and 2017, an estimated 1,080 dealerships sold to a total of 612 different buyers, according to The Banks Report and Kerrigan Advisors. Since 2011, the number of private dealer groups with greater than 10 dealerships has risen to 141, a 57 percent increase.

One of the major reasons for this frantic buying spree is the economy of scale that larger dealer groups can achieve. The more stores a group owns, the lower their operating expense is per store, on a percentage basis. In a large dealer group franchise, sales, general and accounting (SGA) expenses are 13 percent less than in the average single store.

Once this type of economy of scale is achieved, a large dealer group can be more aggressive with their pricing, which can hurt single stores that remain in the neighborhood.

Yet, not all single stores and smaller groups want to sell to a larger group. How are they to compete? Is their demise inevitable?

Hardly. If you don’t want to sell your dealership, don’t. However, to stay competitive will require lowering your operating expenses. Of course, that is easier said than done, and it may in fact be quite impossible without some help.

Here’s the need: Why isn’t there a business that offers single-store dealers a way to consolidate and outsource some of their internal functions?

Look to the BDC as an example of how this works. Many dealers choose to outsource their BDC because it’s 25 to 30 percent less expensive than operating an internal BDC. That doesn’t even include the reduction in headaches. If the same cost savings can be achieved by outsourcing back office functions, single stores would be in a much better position to compete with large group franchises in their area.

Accounting, financing and human resources activities could all be easily outsourced, for example. Any function that does not require an on-site presence is game.

Once this “consolidated services provider” has a number of dealer clients, the opportunity also exists to leverage their combined purchasing power to negotiate better prices for outside services. For example, Internet and phone carriers give better rates (and service by the way) to larger clients. This would require a group of dealerships to agree to sign with the same carriers, but I doubt this is cause for complaint if the cost savings are significant.

With bargaining power gained through a group alliance, single-store dealers could potentially pay less for:

• Carrier services
• Parts
• IT products and services
• Third-party software and services

To my knowledge, nobody is filling this need at a time when more and more dealers are wrestling with the tough decision to sell, or not to sell. If I’m wrong and there is a business that provides consolidated services to single stores, let me know. If I’m right and nobody is doing this, why not?

Industry consolidation is a trend that will remain strong for some time to come. I get a lot of calls from investors, and one of their most frequent questions is about market capitalization; specifically, why market cap values for large, public auto groups are low (relatively speaking) to other retail models.

Carmax, for example, has a market cap of $12.8 billion with just over 180 locations. Compare that value to AutoNation, which has a market cap of $5.2 billion with over 300 locations; Penske Auto Group with a market cap of $4.4 billion and over 320 locations; Group 1 Automotive with a market cap of $1.5 billion and over 270 locations; and Lithia with a market cap of $3 billion and over 160 retail locations (all figures circa Feb 2018).

Large auto groups have several significant advantages over individual stores, such as economy of scale and negotiating power. Yet clearly, there is still room for improvement in terms of increasing value for shareholders.

A share re-purchasing program can help, but increasing value requires an emphasis on brand building along with a shift in how stores are managed. Carmax’s brand is based on the customer experience. It’s unambiguous—every customer knows exactly what they’re getting.

Carmax also manages its brand as a network, not as individual stores. For large auto groups to increase market capitalization, they’ll need to stop managing their business as a collection of stores and start managing them as a branded network of locations, similar to other retail models.

Some auto groups are already doing a pretty good job of this, but there’s more to building market value than economy of scale. Here are five strategies that large auto groups can try:

1) Lower operating expenses

Large auto groups inherently achieve some economy of scale compared to individual stores.

In an average, private dealership, Sales, General and Administrative (SG&A) expense as a percentage of gross profit is close to 88 percent, according to a recent Kerrigan Advisors Analysis. In public auto groups, SG&A expense as a percentage of gross profit is 74 percent. That’s nearly a 14 percent differential, which is significant, but there’s still room for improvement.

Many functions in dealerships can be shifted into a shared services model. Accounting, financing, information technology (IT) and human resources are the obvious ones.

AutoNation, for example, has created a $150 per vehicle advantage simply by consolidating back office functions.

2) Leverage bargaining power

When I worked with AutoNation, it was the largest advertiser in the Miami Herald, which meant it got better advertising rates. As a group, are you leveraging your bargaining power across the board with all vendors? Getting all stores onto the same DMS, CRM and third-party service software can significantly reduce costs. In the same manner, you’ll be able to negotiate better prices with marketing vendors, parts suppliers and Internet and phone carriers.

3) Customer management

Large auto groups are in a stellar position to increase customer retention. As we know, all dealerships lose a percentage of customers to brand defection every year. Dealers can do everything right in terms of marketing and retention strategies, yet still lose a customer because the customer simply wants to buy a Toyota instead of a Honda.

As an auto group, you have the ability to funnel this defector to another store so you won’t lose the revenue. This requires the use of predictive analytics across all your stores to identify which customers are most vulnerable to defection, and to create marketing strategies designed to retain them within the group.

4) Asset Management

This is an area with a lot of upside potential. Even in large auto groups, many stores still make inventory management decisions on an individual basis. A Ford dealer takes in a Toyota on trade, then decides to sell it at wholesale or send it to auction. If that dealer is part of a large auto group, that vehicle can be transferred to a Toyota store in the same group. The Toyota store is better equipped to maximize revenue on that vehicle by selling it at retail, versus accepting the auction price minus the transportation expenses and auction fees.

5) Explore New Business Opportunities

If your auto group has 20 to 30 stores within a metro area, start thinking about getting into the mobility business. Establish a fleet of vehicles and/or form relationships with Uber and Lyft. Start a subscription ownership model that fills the gap between short-term rental cars and long-term leases. You could run your own auctions. Start a rental car business or finance business. Find partners for new service opportunities; for example, AutoNation recently struck a deal with Google’s Waymo to service its self-driving minivans.

Large auto groups are primed to take advantage of a changing industry. There’s no reason to fear disruption; instead, embrace it. Increase market value by using the latest technology to lower expenses, leverage bargaining power, better manage customers and assets, and explore new business opportunities.

To grow profits in today’s automotive environment, many auto dealers are focusing on growing service department revenue. Achieving this goal presents a number of challenges, including:  

1) Declining new vehicle sales volumes

NADA predicts 2018 new-vehicle sales of 16.7 million units, down 2.3% from 2017. That’s not a huge decline, but new vehicle sales also face stiff competition from a glut of off-lease and used vehicles. Fewer new car sales means less future warranty work.  

2) Higher quality vehicles

Available work per unit is declining as quality improves, service intervals lengthen and work shifts from repair to replace. Dealers can no longer count on substantial warranty work and in-warranty customer pay business from new vehicle sales as a way to feed steady business to their service departments.  

3) Increased Competition

Independent aftermarket chains are entering a recession. Due to the recent spike in new vehicle sales, the volume of vehicles older than seven years and still in operation is declining.

This decline will continue until 2022, prompting chains to expand service offerings and launch aggressive marketing campaigns. Their prime target is customers with vehicles from four to six years old; the same customers that dealers like to target.

Dealers cannot afford to lose market share to independent chains. To maintain yield in this environment, dealers need to capture a greater percentage of their market service potential.

4) Shifting Customer Expectations

Today’s consumers expect a transparent and convenience-driven experience, which traditional dealer processes and systems are ill-equipped to deliver.

Your customers are baffled that they can track a pizza being made and delivered to

them, but must call your dealership several times to check on the status of their car, then wait to pay at a cashier.  

5) Lack of Service Growth Strategy

Growing service revenue doesn’t just happen. Growth requires the creation, execution and management of a strategic plan. Many dealers don’t have a strategic plan, unless you believe that doing more of the same counts as a plan.  

What was it someone once said about doing the same thing over and over again, but expecting different results?  

The good news is, it’s not all bad news. Our industry is exiting a period of unprecedented tailwinds that have created exciting opportunities for growth.

Since 2012, the combination of increased new vehicle sales and a 13 percent reduction in the number of auto dealerships has created the highest units-in-operation (UIO) to dealer ratio in history. 

To take advantage of this opportunity, you need to accomplish two things:

1. Increase service yield from current customers/UIO
2. Increase market share

Do you know what your dealership’s current revenue-per-UIO is? Do you know what you have to do to increase market share?

If you’re not sure, the first thing you should do is ditch the service absorption metric. I’ve written before how I believe that service absorption is a dangerous number and is an outdated metric for modern times. 

One major problem with this metric is that you can have 100 percent service absorption, yet still be losing market share. You can’t manage what you can’t measure.

Revenue per UIO allows you to measure both service yield and market share, so you can establish a baseline from which to grow.

How to Increase Service Yield

Most auto dealerships capture less than half the work needed on vehicles that enter their service lanes. To increase service yield, focus on providing complete vehicle care to your current customers. 

To do this you must identify, communicate and capture all service needs. This may require changes to your write-up, multi-point inspection (MPI) and service recommendation processes.  

Technologies such as mobile tablets can help, but incentives may need to be put in place so advisors and techs are encouraged to spend the appropriate amount of time with every customer. Additionally, data must be leveraged so your staff can easily identify recommended repairs.  

When customers arrive in the service lane, an advisor needs 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 last question is key to making upsells and capturing more service business. Also, prepare your customers for the next visit with a list of service recommendations for the next 10,000 miles.

How to Increase Market Share

Most dealers’ service marketing efforts utilize mail and email channels to remind customers about factory scheduled maintenance and select seasonal campaigns. Many conquest campaigns rely on “oil change” offers to bring new customers in.  

This marketing strategy performs significantly below potential impact. To drive more responses, an integrated marketing campaign must replace the “fire and forget” mentality. 

Omni-channel marketing leverages the following channels and delivers highly relevant offers to each customer: 

• Direct Mail
• Email
• Facebook/ Instagram
• Google/SEO
• Service PPC
• Display ads
• IP-based retargeting

With every customer interaction, data is collected and used to create a message or offer that drives the customer to the next stage. The customer is guided through needs notification to scheduling, to the appointment, to in-service notifications and post-service follow up.

This marketing strategy is designed to build relationships, instead of a one-and-done service experience. Creating processes and marketing programs that focus on the relationship, rather than the here and now, is a critical part of any service growth plan. 

One of the biggest marketing challenges is to capture the attention of your intended audience. We are all bombarded with hundreds of marketing messages every day, and to a great degree, we have learned how to “tune out” messages that don’t interest or aren’t relevant to us.

How do you get customers to pay attention to your messages?

First, prioritize engagement over impressions. You may get thousands of daily impressions from your billboards, banner ads and emails, but that doesn’t mean that your customers are paying attention. The best way to measure attention is engagement.

Second, expand your channels beyond direct mail and email. When it comes to service marketing, in particular, dealers still heavily rely on these two channels to reach their customers.

Yes, direct mail and email campaigns are effective and should be used on a regular basis. But a significant percentage of your current and potential customers toss mail in the trash and don’t open your emails. That doesn’t mean they aren’t interested in what you have to offer; it simply means these channels are not effective for reaching these customers.

You can’t afford to ignore a large percentage of your customers. The best way to reach them is to market in the moment they are living. Where do they spend their time? Where are their eyeballs?

Facebook
In 2017 nearly 203 million Americans were Facebook users, and 76 percent of those logged in daily. One in four minutes on a mobile device is spent on Facebook, and users spend an average 40 to 50 minutes a day on this platform.

Your dealership probably has a Facebook page, but as we know Facebook has made it nearly impossible to reach customers without advertising.

But what do you advertise, and whom are you trying to reach?

The goal of your campaigns should not be to “sell” your dealership in a general sense. The power of Facebook really comes from its ability to:

• Connect with and send relevant messages to your current customers
• Reach new people who are likely to be interested in your business because they’re like your best existing customers
• Influence people who visited or took specific actions on your website

What if you were able to identify all of your customers in your DMS due for their 30,000-mile maintenance and drop service reminders right into their Facebook news feeds?

What if you were able to search for all Facebook users within a 10-mile radius that own a Ford Edge? You could post a blog or ad promoting the amazing new features in the 2019 Ford Edge, right into their news feed.

What if you could identify which of your customers had purchased tires from an independent tire shop within a certain timeframe? You could drop a tire promotion right into their newsfeed.

In case you’re wondering, yes, this is all possible right now. The amount of aggregate data that Facebook gathers from its users is staggering, and with the right marketing platform, dealers can easily leverage this data.

Google
Not only does Google hold more than 80 percent of total search engine market share, but 80 percent of all mobile searches start on Google.

The real power of Google is that it captures real-time intent, passion and lifestyle from actions taken on Google as well as the rest of the Internet.

This information can be used to identify what car shoppers are doing before, during and after they visit your website. What actions are they taking? Where are they spending the most time?

You can learn a lot about your audience demographics, including age, gender and interests.

Additionally, predictive analytics can tell you which users are most likely to convert, and can identify the most valuable customers for you to engage with via re-marketing campaigns.

This information can be used to create highly personalized and relevant display ad campaigns. Thanks to Google’s attribution, you will get better results with a lower overall ad spend.

YouTube
People love video. YouTube reaches 91 percent of the online population in the U.S. and supports a billion hours of viewing time every day. It’s also the second largest search engine, right behind Google.

YouTube is also owned by Google, so you can get many of the same benefits from, and accomplish the same objectives on YouTube as you can with Google.

The only difference is you do need to create videos, but it’s worth the effort. Because there are millions of videos to choose from, you’ll need to serve up videos that “stop the thumb.” An image of a car or information about a blowout sale are not going to stop the thumb, so you do need to get a little creative.

Of course, there are other marketing channels and social media platforms. But none of them can compare to Facebook, Google and YouTube when it comes to measuring where people spend their time.

It’s time to expand service marketing beyond direct mail and email. To capture your customers’ attention, market in the moment they are living.

I once heard influential thinker Michael Porter say that strategy is as much about what you choose not to do, as what you choose to do. Over time, I have found that, while rewarding, choosing what not to do is far harder. It is always tempting to chase sales by stretching into new demographics, new geographies or product segments. Like an elastic band, the further you stretch the weaker the band is at any one point. Therefore, we must choose carefully where to stretch.

Subaru is a great example. In the early 90s, Subaru of America almost went bankrupt chasing better capitalized competitors by extending beyond its all-wheel drive roots and cultivating a mainstream image. The bottom was an unsustainable 80,000-unit annual sales rate. Amid declining sales, Subaru executives found the courage to abandon front-wheel drive models, nearly 50% of the volume at the time, and refocused on AWD, reliability and niche appeal.

Over time, Subaru grow its brand by adding broader meaning to those attributes. This resonated with its core customers, culminating in the “Love Campaign,” which created a decade of uninterrupted growth with sales approaching 650,000 in 2017. Over the past 25 years, Subaru has resisted the temptation to go where the volume is and stayed true to its customers’ core values.

Building a brand starts with a clear understanding about the intersection between your unique capabilities and your core customer needs.

So, where do you start?

First, when attempting to find that intersection, start with examining the buyer values of your best customers, not those who defected. In service, those values probably include your expertise and amenities, especially the convenience of loaner vehicles which your dealership can uniquely provide. Core customers accept the fact that these benefits come at some premium. So long as your dealership delivers those benefits within levels acceptable to them, they will remain loyal.

Next, when it comes to brand-centric growth, it is important to take these unique capabilities and core customer needs and explain and promote the unique value your dealership delivers. For example, look at your invoice. Do you place a value on multi-point inspections, loaner vehicles and other services provided? Do you highlight technician certifications and tenure, or show videos on OEM provided equipment at every available opportunity, online and in waiting areas? I recently saw an independent repair facility employment ad underlining the phrase “no experience required.” Brilliant! But perhaps not the best way to promote its “unique” capabilities!

Once you have your promotions nailed down, then, and perhaps most importantly, build your brand by executing your brand promise every day. Focus on high quality delivery and recognizing that your customers have a choice. You will never be the lowest cost or most convenient, so you must deliver the best value to those who trust you the most.

Your marketing and showroom behaviors often undermine brand-centric growth. Too often ads and sales behavior are not geared to attracting your best customers. With slowing growth and declining front end margins, I believe dealer profitability is an increasing battle for customer quality, not just customer quantity.

Rather than blasting the airwaves with dubious claims, you would be better served by more direct dialogue with customers who value your services.

One retailer I know redeployed broadcast media money to support Mothers Against Drunk Driving and safe driving clinics at local schools. Which do you think results in more consumers oriented to servicing at dealers – the community-focused message or the dubious claims?

In summary, when looking to grow service, you should first look for and satisfy more customers who value your unique attributes. This limits brand stretch, simplifies execution and builds lasting value.

Yes, this means you have to say “No” to chasing customers with low prices and $9.99 oil changes which undermine your brand, disrupt pay plans and do not build a loyal consumer base, as they defect for the next coupon. But remember, the best way to build your dealership brand is to choose carefully where you stretch.

There is currently much talk in the industry regarding automotive subscriptions as a new innovative ownership model. The fact is, the subscription model has been with us for a long-time. However, most models merely fill the gap between short-term subscription (daily rental) and long-term subscriptions (leasing).

This increased interest in auto subscriptions seems to be spurred by autonomous vehicles. However, while autonomous vehicles can reduce the inconvenience of returning the Enterprise driver to the lot, this technology does not change the fundamental economics. Mass adoption of medium term subscriptions must address the steep early depreciation curve and high remarketing costs, which require high fleet utilization and rapid, frictionless vehicle redeployment from customer to customer.

There is also a hidden assumption that subscriptions will be the demise of the franchise dealer model. Some prophesize dealers will be replaced by fleet management companies who buy direct from manufacturers. Well, not only do these arguments underestimate franchise law resilience, but they also fail to appreciate certain natural dealer group advantages in executing a subscription model.

Let’s look at those advantages for a minute: First, dealers have the local footprint to allow consumers to view and test drive vehicles. While perhaps less important, because one doesn’t need to live with mistakes as long, many consumers will still like to try before they buy. Second, dealers are better equipped to service vehicles throughout the vehicle useful fleet lifespan. Third, and most importantly, dealers have several mechanisms to manage utilization more seamlessly by shifting vehicles from fleet, to service loaners, to used vehicle inventory, to maximize asset value at any given time.

Mike Jackson described the underpinnings of this strategy in a recent Automotive News article. AutoNation is accumulating assets to maximize customer and asset values over time (more on this strategy in a future blog). Large dealer groups can offer consumers any vehicle that meets their needs, new and used, service those vehicles according to OEM standards and efficiently transition vehicles to other owners, or outside the ecosystem when needed.

This economic model is compelling, and it will be difficult for pure fleet management companies to replicate. Smaller dealers do not necessarily go away, but may need to partner with larger fleet operators to service and sell pre-owned vehicles no longer meeting the fleet standard, or for help adjusting fleet mix and size.

Shifting from a traditional model to supporting large consumer fleet operations involves many significant changes, including service operations. Effectively, fixed operation changes from a profit center to a cost center, with new demands. Subscriptions rates will likely include depreciation, capital and maintenance charges, so essentially service revenues get “locked in.”

Dealers will still need to reach consumers and invite them to service, but consumers may be less committed to regular service because they do not own the asset. Dealers will need to address convenience issues, as well as better identify preventive maintenance issues during scheduled idle time.

In this scenario, service operation efficiency becomes a key differentiator, as maintenance cost per mile becomes more explicit. Dealers who have relied on high margin dealer recommended

items to drive service profits will need to shift their focus to increasing throughput, maximizing labor effectiveness and reducing rework. Industrial engineering will trump salesmanship.

How pervasive automotive subscriptions become will depend greatly on the how well innovators address the fundamental economic barriers. However new ownership models evolve, as a dealer you will have the opportunity to benefit from new subscription models as you have with leasing, you just need to think through the implications on their operations and evolve with the market.

Predictive analytics engine allows dealers to leverage their data and conduct multi-channel campaigns designed to increase customer retention

Chicago, IL—Dec 5, 2017— Affinitiv, a leading provider of marketing and technology services to automotive manufacturers and dealerships, today introduced the Connectiv1 Platform, an end-to-end loyalty marketing solution designed to create connected customers for life. Connectiv1's advanced predictive analytics engine makes it easy for auto dealerships to leverage their customer data and target customers with the right message at the right time on the right communications channel.

“Every dealer knows that it's critical to keep customers engaged throughout the ownership lifecycle, but the question is how to effectively do that," said Scot Eisenfelder, CEO of Affinitiv. "Connectiv1's analytics engine connects data across the entire customer journey, providing dealers with a 360-degree view of their customers, vehicles and campaign effectiveness all in one place."

Connectiv1 allows dealers to create and manage marketing campaigns using a multi-channel approach proven to increase reach and frequency, boost response rates, lower marketing spend and improve customer retention. The platform provides dealers with a cost-effective way to implement their manufacturers' customer loyalty and retention marketing programs, and can also be used by individual dealers to create their own retention programs.

Connectiv1 is a cloud-based, mobile-first platform that dealerships access through a user-friendly, modern and personalized portal. The portal, dashboards and reports can all be used on smartphones, tablets and PCs. The platform includes an advanced predictive analytics engine that allows dealers to leverage the customer data they already have in their dealership management system (DMS) and CRM.

"Big data has been a buzzword for a while but the challenge for dealers is how to analyze the data and what to do with it," said Eisenfelder. "Connectiv1's analytics engine removes that challenge by creating models that automatically determine the best timing for communications, best offer types, amounts and best channels to reach customers."

In sales, these in-market timing models can be used to target customers most likely to purchase. In service, timing models can be used to target customers in the service consideration phase and give dealerships an edge over local independent repair shops.

The Connectiv1 Platform manages communications delivery by determining which channels the customer is most likely to see a dealership's offers. Multi-channel marketing campaigns are implemented across mobile/text, digital ads and PPC, social media, direct mail, email and voice channels. The platform supports OEM branding and content management.

Only Connectiv1 allows for digital and social to be treated as a channel for any marketing message. "Typical email and print programs reach about 80 percent of a dealership's active customers," said Eisenfelder. "Leveraging digital and social media channels can effectively capture customers that have partial mailing addresses or have opted-out of traditional channels."

The Connectiv1 Platform includes Affinitiv's groundbreaking Social Roots program, allowing dealers to leverage trigger-based targeting algorithms to drop service reminder notifications and other messaging directly into a customer's Facebook and Instagram feeds.

Through Affinitiv partnerships with auto manufacturers, Connectiv1 is also integrated with vehicle telematics technology. When it's time for a scheduled service, this enables customers to receive in-vehicle notifications and schedule an appointment at their local dealership.

Connectiv1 is the only marketing solution with an integrated service appointment scheduling feature that allows dealers to send promotions, offers, real-time notifications and easy online payment options to customers via email or text. Customers can schedule appointments using their mobile devices and also decline or approve work in seconds from their mobile device.

The Connectiv1 Platform offers dealers unparalleled reporting and dashboard capabilities. Dealers can access a library of reports pre-configured by their manufacturer, as well as create their own custom reports. Reports can be scheduled for daily, weekly or monthly delivery and can be exported to PDF, Excel or image formats for sharing and presentation.

Rich visualization of key performance indicators (KPIs) can be viewed through the integrated Dashboard application, allowing dealers to easily monitor and analyze campaign trends and performance. Connectiv1 has a core library of hundreds of KPIs, charts and tables that are aggregated to the regional- and OEM-user levels.

Additionally, a built-in notifications engine allows users to subscribe to key alerts with a directed response path. This creates greater marketing campaign collaboration, simplifying processes such as campaign order approvals and proofing.

Connectiv1 also has a built in marketing calendar, providing a visual guide to campaigns fulfilled in the past and information on upcoming campaigns.

Currently a dozen OEMs are using Affinitiv aftersales marketing solutions to create loyal and repeat customers. Affinitiv's current OEM partners include BMW, Kia, Lexus, Chrysler, Volkswagen, MINI, GM, Porsche, Mitsubishi, Volvo, Rolls-Royce Motor Cars and Maserati North America.

Headquartered in Chicago, Illinois, Affinitiv has seven offices across North America and India and employs more than 500 team members. Affinitiv solutions are currently in more than 5,500 dealerships across the U.S.

For more information, visit www.affinitiv.com.

About Affinitiv:

Affinitiv is a leading marketing technology company exclusively serving automotive manufacturers (OEMs), dealership groups, and individual dealers. Affinitiv enables its customers to produce, manage, measure, and optimize multi-channel communications to drive brand loyalty and increase revenue across the dealership. Affinitiv’s digital and analytic capabilities offer an end-to-end solution that supports a consistent experience across the entire consumer lifecycle. Affinitiv was formed through the strategic combination of DPS, Peak Performance, OneCommand, and TimeHighway.com. Affinitiv is headquartered in Chicago, IL.

When asked “who are your competitors in service?” most franchise dealers answer, “independent repair shops,” and state that the focus of that competition is price.   

While it is certainly true that most consumers who defect go to independent repair shops -- particularly the large chains, and these shops tend to be less expensive -- that is only part of the story. 

In fact, when VINs are lost, independent shops are often not the largest leakage source, particularly during the warranty period. Rather, it is the most fearsome competitors -- the evil twins “decline” and “defer.”   

At AutoNation, we believed we only completed half the work needed on the VINs entering the service lane. We either failed to find, or failed to sell, that additional work.  Most often price was not the primary factor giving rise to the evil twins.  We failed to achieve our service potential because of inadequate trust and communication. 

So, what can a dealership do to handle these evil twins? Here are a few tips: 

1) Build Trust: Addressing Trust needs to start in the showroom. Years of adversarial negotiation -- final prices that aren’t final and opaque add-ons such as Doc Fees -- set the stage where consumers are conditioned to decline services not included in the glove box plan, almost as a reflex.   

You do not help yourself in the service lane by adding high margin services with unclear value propositions, often at the expense of tires and other lower margin necessities. Most pay plans are aligned with this behavior, as writers are paid largely on the gross generated, not on perfectly meeting the needs of each customer.   

While addressing these root causes requires more fundamental change than I have time to cover in this blog, it is important to acknowledge how traditional retailing practices are undermining lifetime value realization, as that realization is becoming more crucial to retailer success.   

You can start improving Trust by addressing transparency and consistency in your pricing.  Publish pricing for your most common service work on your website. Move from “percent off” to specific offers, and carry those offers proactively from marketing to scheduling to service lane, rather than forcing consumers to ask. Focus selling menus on items consumers absolutely need; factory maintenance, worn items, deferred services and recalls.   

While I am not philosophically opposed to services over and above factory recommended, calling them “dealer recommended” is practically suicidal, reinforcing every negative view consumers have about dealer service. I always tell stores, “sell them if you believe in them enough to use in your vehicle and call them by their purported benefit,” – e.g. longevity, fuel economy, or performance packages. 

When it comes to selling, the best advice I got was “intent trumps technique.” If your service writer clearly has the consumer’s best interest in their heart, consumers with say “yes,” even if the writer fumbles through the talk track.   

So, the question to ask is whether you are hiring “care takers” or “mercenaries” as writers, and compensate them accordingly.  Sorry, I am drifting back to pay plan and other bigger issues. 

2) Communication: Next, you need to take on Communication.  First, most dealership communications are too slow, not informative enough, and in the wrong media.  The largest leakage point is the inability to reach consumers in a timely fashion, with sufficient information for them to decide on additional service requests. With predictive analytics, you can prepare consumers about likely service needs before they leave the store; and while they have time to thoughtfully consider a major expense. 

Too often, writers rely on phone calls rather than texts or emails. These days, digital communications tend to be preferred. They are more likely to be received during the business day and can carry the contextual information the consumer needs to make any major purchase decision. According to JD Power’s 2016 CSI study, nearly 40% of consumers prefer to learn about vehicle needs via text, yet only 3% received a text.  Now that stat is improving, but we have a long way to go. 

3) Break down the MPI Results for the Consumer: When MPIs generate a long and expensive repair list, you can learn selling techniques from dentists.   As one who too often procrastinates regarding dental visits, I am confronted with multiple issues which need to be addressed.  My dentist does not ask for the full order that day, but rather she breaks it into the urgent, the important and the cosmetic.  I think we could learn a lot from that approach.   

4) Third Party Validation: Finally, third party validation can give consumers confidence on the items presented.  

In summary, if you address Trust and Communication, not only could you realize more service revenue from the vehicles entering your service lanes today, but it would also go a long way to stemming later defection to the independent shops.