Too often, CRM and direct marketing are used interchangeably. In so doing, focus on the “relationship” part of CRM is lost.  I think we can learn a lot about the value of that relationship, and how best to foster it, by thinking about successful personal relationships. 

If you expect to build a relationship with consumers, you cannot always ask for an immediate sale. This does not work in personal relationships, so don’t expect it to work with customers.   

Speaking from experience, I know dealers respect vendors who rise above the immediate sale, but too many lose focus on this basic value in pursuit of this month’s goal.  

The law of reciprocity is critical in building a relationship. If you want something of value, give something of value. No successful relationship is one way. If you want a consumer to set an appointment, value that appointment.  If you want an email address, provide a real price.  Look to sustain relationships between service intervals with invitations to special events, small gifts, or valued information. Are your communications reciprocal? What do you expect consumers to give, and what did you give in exchange? 

To create a relationship, communication needs to align with others’ needs, not yours. Focusing exclusively on sales offers not only falls on infertile ground, but dulls the senses to your future messages, which may be relevant. For example, as avid Yankee fans, my son and I buy StubHub tickets every year to see a Yankee home and away series. Consequently, I receive offers for Braves, Orioles, and – insultingly -- Red Sox tickets every week, drowning out Yankee offers.  The logic being that the common thread in my behavior should make it easy to get my business.  Whereas, the opposite effect is created. 

Are you reading your customers’ signals?  Are you analyzing that behavior and suppressing the irrelevant to allow focus on the truly valued? 

And, if you are not asking for the order with each communication, how do you measure success? 

1. Customer Knowledge.  Good relationships require intimate knowledge. Let’s get back to personal relationships here for a minute; you cannot anticipate and respond effectively without knowing how to reach your friends, their needs and the context surrounding their situation.

Yet, many dealers do not audit or value their customer data.  It’s wise to strive to know at least all contacts, all household members and all vehicles.  If you properly valued this data, you could explicitly invest to grow your consumer knowledge breadth and depth.  Many dealers lament that consumers do not provide email information.  If we all lived by the law of reciprocity, this would be less of a problem.  You could also reward based on CRM record quality, run safety clinics for soon-to-be drivers, or make other, similar investments focused purely on increasing knowledge. 

2. Engagement.  While we all have friends we see only occasionally, our strongest relationships are woven into the fabric of our everyday lives.  Interestingly, a dealership’s product is critical to its customers lives, yet through their communications and interactions, many dealers have conditioned their customers to think about the dealership only for infrequent transactions. 

With each customer you have an opportunity to form non-transactional bond -- from auto dealer, to mobility concierge.  For example, think about the complexity of vehicles today.  Most customers aren’t enjoying their vehicles to the fullest.  When is the last time you invested time in learning a new feature?   

As your communication intents become more diverse, your measurements need to become more multi-faceted.  Hold your communications accountable to producing the desired engagements – e.g. email open, website visits, clinic attendance – and then build models which link these engagement events to direct revenue drives, so that you can adequately allocate resources. 

Building relationships with customers is a fundamental part of this business. No dealership will last long if it cannot develop rapport and make a connection with the customer. So, put the “R” back into Customer Relationship Management and start building real relationships with your customers.  I promise you will soon see these efforts boosting your bottom line. 

For many, autonomous vehicles are synonymous with ride sharing and hence reduced fleet size and negative implications for dealership sales and service.   

Well, I see the world differently.  I see autonomous vehicles opening new opportunities to expand ownership in underserved segments. I also see likely increases in vehicle usage intensity, even should heavy ride sharing usage emerge. 

Let me explain my perspective, starting with the potential for increased vehicle ownership: 
First, while analysts suggest massive fleet reductions based on low vehicles utilization, they do not consider limits imposed by peak utilization and limited population density inherent in our social structure.  

Autonomous vehicles will dramatically improve personal mobility for our rapidly growing population with diminished driving skills, extending vehicle ownership much longer.  Furthermore, ride sharing provides the same freedom and productivity enjoyed by many Americans, to large numbers of the working poor who cannot afford a whole car.  These segments greatly outnumber the low mileage, near urban households, who forego ownership, or at least reduce household fleet size. 

Even as ride share takes hold, I expect usage intensity and miles driven per vehicle per year to rise with autonomous vehicles. This increase in total miles driven will ultimately lead to increased service visits and faster vehicle replacement.   

In addition, ride sharing enables increased drive-time productivity for passengers. This will dramatically shift fly/drive and public/private transportation decisions and may even encourage longer commutes as the office moves to the car.  More importantly, ride sharing has, by its very nature, significant “empty backhauls,” which increase the number of total miles driven per passenger mile, as vehicles find the next passenger. 

These factors should increase total fleet miles driven annually, growing service needs for the US fleet. That is until, or unless, more significant structural changes take place in American work schedule and residential patterns.  

Furthermore, autonomous vehicles can inherently address the distance convenience gaps which tilts service works toward more ubiquitous independent repair facilities.  However, this does not mean that dealers can just sit back and wait for the increased service business to arrive.   

Imagine your vehicle leaving your driveway or the mall at an appointed time to get serviced while you sleep or shop.  This is the future of service!  The competitive tide turns to those dealers who can manage more complex, consumer-responsive service operations.  Not only does this require seamlessly managing multiple shifts, but encourages proactively finding nearby vehicles to service when bays are empty.   

This requires new levels of integration between consumer engagement, telematics integration, shop load management and operation effectiveness. Those who invest first to create these capabilities with grow a service business that generates a return on fixed operations investment multiples over today’s vastly underutilized business model. 

Undoubtedly increased ride share/fractional ownership will drive greater “fleet like” ownership.  Not only will Uber and Lyft evolve into large fleet companies, but we will likely see thousands of private “fleet” owners investing to serve underserved markets, or seeking to cover ownership costs by leasing spare capacity.   

I was recently struck by the entrepreneurism of one of my young developers in India, who bought a car, not for commuting, but for leasing to an Uber driver who drove him to work, then used the car to take fares during the day, before returning him home at night.   

Welcome to the new era of vehicle ownership, Air B&B for cars! Dealers will all need to optimize their business models around fleet. I can easily imagine a world where passenger vehicles are up-fitted like commercial vehicles are today, based on different uses.   

As a dealer, you will have the opportunity to sell vehicles based on Total Cost of Ownership, or even lease on a per mile basis, with all service included.  Aligning service times to down time will be even more critical to these vehicles, because time in the bay takes away from time earning money.  Managing utilization could be a key differentiator for OEMs and dealers. 

If you are a franchise dealer, you can and should benefit from autonomous vehicles, if you recognize and embrace the underlying changes. 

Auto dealers would be better served if outdated metric was retired and replaced with a focus on service revenue per units-in-operation.

Chicago, IL—November 6, 2017— Affinitiv, a leading provider of marketing and technology services to automotive manufacturers and dealerships, today announced that CEO Scot Eisenfelder is challenging the auto industry's long-held assumption that service absorption is the best measure of a dealership's fixed ops revenue potential. Instead, Eisenfelder proposes, dealerships would be better served by the adoption of service revenue per unit-in-operation (UIO) to maximize fixed ops revenue potential. 

“Service absorption is one of the most frequently cited metrics at 20-group meetings. While asking the service department to carry store profitability has never been more important, I believe that focusing on service absorption as a metric is not only limiting, but dangerous to dealerships in the long-term,” said Eisenfelder. 

According to Eisenfelder, his primary issue with service absorption is that it's composed of two unrelated measures and does not accurately reflect store achievement relative to potential. “Service profits are not substantially driven by store fixed costs. Most dealerships' fixed costs support vehicle sales, not service, so there is no reason to expect correlation between the two metrics. Therefore, the metric itself does not provide any guidance for how to optimize service profitability,” Eisenfelder said. 

As an example, Eisenfelder points to brands such as Subaru, Hyundai and Kia that have done well over the last half-dozen years. Vehicle sales have expanded faster than store operations, so dealers have relatively low fixed costs and not a lot of service capacity. This results in naturally high service absorption ratios that give dealers a false sense of doing well, when in fact a high percentage of their UIO revenue is being leaked to independent repair shops.  

Einsenfelder believes that the underlying premise of comparing service profits and store fixed costs represents an archaic view of automotive retailing. "Once upon a time, dealers could count on substantial warranty work and sufficient in-warranty customer pay business from new vehicle sales, so minor tweaks in fixed ops could achieve enough service profits to cover seasonal or temporary new vehicle declines," he said. 

However, front-end profit is in permanent decline and very little service business is guaranteed due to less warranty work, higher quality vehicles, more replace-than-repair work and more aggressive independent aftermarket competitors. So, relying on historic approaches and goals is insufficient to achieve desired store profitability. 

Most important, achieving 100 percent service absorption doesn’t represent a store’s service revenue potential. Today's franchise dealers only capture 20 to 25 percent of the revenue potential from their Units in Operation (UIO). "I would argue the focus on service absorption in part contributes to these results," said Eisenfelder. "Too many dealers are focused only on covering fixed costs, rather than competing on each revenue opportunity and driving the fundamental changes required to wrest dollars from aftermarket chains." 

A recent trend illustrates how dealers are falling behind. From 2010 to 2017, one- to three-year-old units in operation increased 48 percent; however, franchise dealership service and parts sales increased just 41 percent.  "This indicates that dealers are losing connectivity to consumers and vehicles, which is becoming more important as new vehicle sales slow and margins decline," said Eisenfelder. 

Eisenfelder concludes that dealers would be better served by focusing on service revenue per UIO. Not only does this better represent the true service potential for each store, but the metric facilitates more meaningful cross-store comparisons and diagnostics.  

Eisenfelder believes that maximizing revenue per UIO creates a fundamentally different strategic and operating mindset where the dealer does not concede any revenue to the aftermarket. According to Eisenfelder, a dealer focused on revenue per UIO should scrutinize all leakage points and determine what needs to be done to: 

• Provide superior value and convenience to customers 

• Engage in meaningful dialogue with consumers 

• Alter processes to mimic consumer experiences elsewhere 

• Leverage knowledge about customers and vehicle servicing needs 

“With such a view, additional investments in marketing, service lane technology or loaner vehicles are not measured as an expense, but against their impact on incremental service gross profit. With only 25 percent service revenue capture, dealers have the opportunity to dramatically expand store profitability no matter what happens to new vehicle profits, but only if they are willing to look beyond service absorption,” said Eisenfelder. 

Affinitiv’s end-to-end service marketing solution is driven entirely by data and advanced analytics, allowing dealers to send customers highly targeted messages at the right time on the right communications channel. Affinitiv’s layered, multi-channel communications approach has been proven to increase reach and frequency, boost response rates, lower marketing spend and improve customer retention. 

In the past year, Affinitiv has continued to share its vision of creating connected customers for life with auto manufacturers. 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, Audi, Volvo, Rolls-Royce Motor Cars and Maserati North America. 

Headquartered in Chicago, Illinois, Affinitiv has seven offices across North America and India, and employees more than 500 team members.  

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.

Service absorption is one of the most frequently cited Fixed Ops metrics at 20-group meetings. While asking the service department to carry store profitability has never been more important, focusing on service absorption as a metric is not only limiting, but dangerous to the long-term.   

My primary issue with service absorption is that it's composed of two unrelated measures and does not speak to a store’s achievement relative to its potential. Service profits are not substantially driven by store fixed costs. Most dealership fixed costs support vehicle sales, not service, so there is no reason to expect correlation between the two metrics. Therefore, the metric itself does not provide any guidance for how to optimize service profitability.  

The underlying premise of comparing service profits and store fixed costs represents an archaic view of automotive retailing. Once upon a time, dealers could count on substantial warranty work and sufficient in-warranty customer pay business from new vehicle sales, so minor tweaks in fixed operations could achieve sufficient service profits to cover seasonal or temporary new vehicle declines. 

However, front-end profit is in a permanent decline and very little service business is guaranteed due to less warranty work, higher quality vehicles, more replace-than-repair work and more aggressive independent aftermarket competitors. So, relying on historic approaches and goals is insufficient to achieve desired store profitability. 

More importantly, achieving 100% service absorption doesn’t represent a store’s potential.  Today, franchise dealers only capture 20 to 25% of the revenue potential from their Units in Operation (UIO). I would argue the focus on service absorption in part contributes to these results because many dealers are only focused on covering fixed costs, rather than competing on each revenue opportunity. This leads to tweaking service marketing and operations, rather than driving the more fundamental change required to wrest dollars from aftermarket chains or to more completely service vehicles. 

Recent experience illustrates how dealers are falling behind. From 2010 to 2017, one- to three-year-old units in operation increased 48%!  However franchise dealership service and parts sales increased just 41%!  So franchised dealers lost share, indicating lost connectivity to consumers and vehicles, which will become increasingly important as new vehicle sales slow and margins decline. 

As a dealer, you would be better served by focusing on service revenue per Units In Operation (UIO).  Not only does this better represent the true service potential for the store, but facilitates more meaningful cross-store comparisons and diagnostics. Are underperforming stores not seeing enough VINs?  Not seeing them with enough frequency? Not yielding enough revenue per VIN seen? Which operations are not being performed with enough frequency? 

Most importantly, focusing on maximizing revenue per UIO creates a fundamentally different strategic and operating mindset where the dealer does not concede any revenue to the aftermarket. When focused on revenue per UIO, I encourage you to scrutinize all leakage points and determine what needs to be done to: 

• Provide superior value and convenience to customers 

• Engage in meaningful dialogue with consumers 

• Alter processes to mimic consumer experiences elsewhere 

• Leverage knowledge about customers and vehicle servicing needs 

With such a view, additional investments in marketing, service lane technology, or loaner vehicles, are not measured as an expense, but against their impact on incremental service gross profit. With only 25% service revenue capture you could dramatically expand store profitability, no matter what happens to new vehicle profits. But only if you are willing to look beyond service absorption. 

I was recently asked my thoughts about reaching the Millennial audience differently.  Anyone with teenagers, like myself, does not need data to know that we are more likely to find them on Snapchat than reading a newspaper.  But it is far too easy to say that digital is our way to reach Millennials. First, not only do Millennials consume multiple media channels, their parents consume most of the same channels, albeit in different proportions.  Therefore, to reach either audience, you need to fully utilize all channels, not just attempt to guess which will be most effective; I always stress “Omnichannel” over “Multichannel” marketing.  In today’s fragmented media, it is difficult to obtain the desired reach and frequency to drive behavior with any one channel for any one consumer segment.  

That being said, the greatest difference in reaching Millennials is not the media, but the message.  Millennials have higher expectations regarding a message being authentic, informative and actionable.  

1. Be Authentic: To be authentic the message must be consistent at all points of contact. Millennials expect to find the same digital offer when scheduling service, in the service lane and on the invoice.  Any deviation is a breach of trust, leading to immediate defection. They will back that defection up with negative reviews, which other current or future customers can read and then also potentially defect to the competition.  So, be sure that you can either back up any offer or statement, or don’t make it.  Millennials are used to all answers being only a click away.   
2. Be Informative: Informative messaging provides the whole context needed to make decisions.  So, you better include pricing, reasons to service now, operating hours and directions.  Paradoxically, they do not want to be “sold,” and certainly, not “upsold,” but, if provided with enough context, will upsell themselves.  Remember, they have grown up with “people like me” purchasing habits.   
3. Make it Actionable: Finally, Millennials are notorious for instant gratification. If the message isn’t immediately actionable, right there on the device where the message was received, don’t expect a call later.  Be prepared to take the appointment through email, text, call, or instant message, at all times. 

While we need to stay current and be present in all the media channels Millennials consume, unless we change our messaging as well, the resulting silence will be as deafening as our dinner conversations. 

I’ve had the privilege of working with several leading luxury brands including BMW, Lexus, Porsche, Maserati and Rolls Royce.  From these experiences, I have learned to adjust owner communications to meet the unique needs of these brands and customers.  

Following are some tips I have learned over the years form working with many luxury service departments. The key point to learn: Luxury is different! 

1. Use More Channels: To be successful, it is important to use more channels to reach luxury customers.  Each channel added to a marketing communication increases response by at least one percentage point.  With a higher RO value, each percentage point is worth much more for a luxury brand.  Therefore, investing in more channels – mail, email, SEM, display and Social -  nearly always pays. 
2. Invest in More Engagement: Not only is each luxury appointment worth more, but standard maintenance appointments tend to be further apart.  With 10,000 miles between standard intervals, to maintain relationships, luxury brands need to find other reasons to engage their customers between service intervals.  For example, early ownership events such as a 2nd delivery to maximize feature utilization; or pit stops to top off fluids, replace wipers or check air pressure; help address owner needs. These types of events build usage habits during the post-purchase honeymoon period.  Another idea is to gather telematics and predictive failure data. This can provide valuable information that can then be used for regular communications regarding the customer’s full maintenance needs. 
3. Work the Data Harder: To catch repairs between service intervals, how about leveraging telematics and predictive failure data to inform owners regarding likely additional service needs?  Luxury brands tend to have a high percentage of leases so consider identifying second owners to maximize revenue from each VIN sold, including pulling sales data from sister stores. In addition, leverage unsold customers in the CRM and use targeted SEM that is particularly focused on older model year parts.  It is also important to make different offers near lease end to entice servicing throughout the whole owner experience, with an eye toward sharing reconditioning costs. 
4. Offers should Focus on Value over Price: While every owner wants a good deal, I am reminded of what Dave Power once told me; there are fundamentally two customer segments, “those who use time to save money; and those who use money to save time.” In luxury brands, we find more of the former than the latter, yet offers tend to still focus on discounts. Concierge services, or premium loaner vehicles, can be more effective enticements for the customer to return for declined services.  It is also worth focusing on higher end voice-to-voice interactions and more liberal goodwill policies. Remember, these consumers are comparing their experiences to premium airline help lines, the Ritz Carlton, or their favorite fine dining, not Jiffy Lube or Pep Boys! 

If you want to win with a luxury brand remember, Luxury is different! So, treat it that way and win. I hope these tips help provide some good food for thought. 

Is your service marketing budget out of whack? And if so, what’s the right number? 

There is a clear misalignment between the service department’s contribution to store profits and the investment in service marketing.  According to NADA, service is responsible for 47.3% of dealership gross profits. However, working with dealers we estimate service marketing is <10% of the average dealership’s marketing budget. Why aren’t dealerships investing in marketing to support fixed operations?  

Look at these charts for a minute: 

Many of my dealer friends argue the chart is misleading because vehicle marketing indirectly drives service profits by setting up future warranty and customer pay opportunities. They feel that the alignment is not as bad as it seems.   

Well, I contend that the indirect relationship flows at least equally the other direction.  First, only half the service customers were sales customers. So, the indirect impact from sales is at best half.  More importantly, servicing owners are 1.5x more likely to remain loyal than non-servicing owners. In addition, loyal owners pay higher margins, providing the loyal sales base needed to sustain a store through challenging economic and product cycles.   

We can differ on which way the net arrow points.  But in my opinion, the indirect benefit from sales to service justifies a fresh look at this huge misalignment.  It rather represents a traditional mindset that service naturally flows from sales, and therefore requires only limited marketing encouragement.   

Given dealers only capture 25% of the service spend, the flow is not very natural. In addition, by most estimations, it is getting less certain as increased leasing places more vehicles in the hands of second owners that much earlier. And let’s not forget how independent service centers are increasingly competitive. 

So, what is the right number?  Actually, I don’t know.  Because we are so far from alignment, it is difficult to estimate the most economical place to stop.  However, I can suggest a way to determine the right level over time.  I once had dinner with a former Expedia CMO and I asked, “How do online businesses determine their marketing budgets?”  He stated Expedia didn’t have an ad budget.  In astonishment, I stammered “What do you mean?” My friend explained, he kept spending, so long as each dollar of additional marketing spend yielded three dollars of revenue.   Pretty logical! 

So, what would this look like in our industry?  Many dealers are perfectly fine spending $300 on a TrueCar lead which yields at best $1,800 front and back gross.  Marketing spending across the industry per new vehicle sold was $630 in 2016; or 33% of variable ops gross margin.  By this formula, you should be satisfied with an incremental service marketing spend that yields 10x in gross, up to $17k per month in service marketing. (The average dealer Service & Parts CP GP per month is $177k.) 

As a dealer, do you find it hard to image spending that much?  Well, isn’t that better than facing the harsh reality that stores continue to afford 75% service leakage as new and used vehicle margins continue to decline? 

When social media marketing burst on the scene nearly a decade ago, just about every dealership immediately piled onto the bandwagon. We didn't all know exactly what we were doing; we just knew we had to do it because everyone else was doing it. 

At the time I was with AutoNation and we spent a lot of money and time trying to figure out how to market our dealer brands effectively on social media. The biggest issue for us, and I believe for many other dealers, was the lack of attribution. It was impossible to identify exactly how many sales and service appointments could be tied back to a particular Facebook post or tweet. 

I remember one day I got into it with a Twitter guru who called me a Neanderthal for questioning Twitter's marketing value for businesses. I asked him how many retailers he follows on Twitter. He left me alone after that. 

Another issue was that social media experts defined success by metrics that mean nothing to auto dealers. The number of "Likes", views and interactions on a Facebook page doesn't have any correlation to the number of leads, appointments and sales that your dealership generates.  

Yet, the power and allure of social media cannot be denied. Hundreds of millions of Americans log into their Facebook, Instagram, Twitter and other accounts on a daily basis; often several times a day. Then there are the millions of businesses that have been hugely successful increasing their brand presence, reaching and connecting with new audiences on various social media platforms. 

As social media algorithms evolved, the use of organic postings to influence fans diminished, and the era of pay-to-play began. Your dealership can now display ads to targeted audiences and you'll get some basic metrics, such as how many people saw the ad and clicked on the ad. Granted, this is better than it used to be but how many appointments did that result in? What is your ROI? 

If you are a dealer who has been frustrated with the lack of attribution from social media marketing, take heart. I have good news because another evolution in social media is underway and it's going to change everything.  

This new era requires a shift from viewing social media as a unique medium that requires clever and funny postings, sharing viral videos and lots of friends in order to be successful. Instead, view social media as another channel through which you convey the same marketing messages that you are already doing successfully using other channels, such as email, direct mail, text or phone. 

But wait! I can hear the social media experts shouting already. Consumers don't like it when you try to sell to them on social media.  

This is true if you're trying to sell to customers who aren't in the market for a new vehicle. It's also true for customers who have no relationship with you at all. But it's not true for all of your customers, or for in-market vehicle shoppers. 

Let's say a customer purchased a vehicle from you a year ago and is due for their first 15,000-mile service. They may appreciate seeing a friendly reminder in their Facebook feed, along with an offer from your dealership for that exact service. 

Likewise, if Mary is in the market for a new vehicle and has been researching SUVs, she may respond to a gorgeous photo of a SUV while she's browsing Instagram. When she clicks on it, she is brought to a landing page on your website where she can view an inventory video or virtual test drive. 

This is the next evolution in social media marketing, and it's all possible now thanks to marketing automation technology and data analytics. Dealers can match customers in their DMS to social media profiles, track their online behavior and serve up automated, custom ads and offers to individuals at the exact right time in their buying or ownership lifecycle.  

The best part is the attribution. Dealers can attribute service ROs, vehicle sales, revenue and other activity back to specific ads that were displayed to specific customers.  

Finally, social media has grown up and joined the ranks of other proven marketing channels. For dealers that like to know the ROI of their marketing spend, it should be a glorious new era.