Let’s cut to the chase. Internal debits from warranty claims are costing dealerships $100,000+ a year. And, with larger high-volume dealerships, this amount can be dramatically higher. Whether your dealership “needs” the money or not, my guess is that the owner would rather have it than not! 

Why is this happening and what can you do to prevent it? 

Well, it is happening due to a systematic failure in process. It starts and ends with poor documentation which in turn translates to rejected warranty claims. 

The very structure of a dealership lends itself to this phenomenon. Technicians get paid for each job they complete – most of the time at flat rate. Their motivation is to complete a job and then move on to the next. The more jobs they complete, the more money they make. Inputting the relevant documentation (pictures, video, written notes) for the warranty repair into the DMS is downtime for them. They either speed through it, or don’t do it until much later when their memory isn’t as clear. 

Then you have the person processing your warranty claims in the dealership. It’s a hassle when a warranty repair is unclear, or missing information, and just causes more work for them. This person either chases the technician down to get the details, or files a warranty claim missing important information. This, of course, leads to rejected warranty claims and internal debits which, in the most simplistic explanation, means loss of revenue for the dealership that was already reported in their financials. This can happen immediately, or it can be months later during a post-claim audit by the manufacturer.  

Consider adopting a new process in your dealership… video diagnostics. The technician simply uses their smartphone to make a video of the vehicle during the inspection process walking through all the issues, followed by another video after the repairs are completed. By so doing, they don’t need a good memory and, as long as they keep speaking about the repair during the taping, the person processing the claims doesn’t need to chase them down for lack of information. In addition, post-claim audits are easier because there is video evidence – that can easily be kept in the cloud and instantly retrievable – to share with the auditor. 

Adopt video diagnostics as a process and you’ll find technicians are more productive since they can move to the next repair faster; claims get filed faster as information is readily available when needed; and warranty claim acceptance increases.

Ujj Nath shares his vision of the fate of multi-point inspections in this short video blog.

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The next evolution in the automotive industry will fundamentally transform dealership service departments… and this one will be big: service departments that could be empty. 

If you look at current trends, you can see the writing is on the wall; ride-sharing being the biggest current shift. 

And that’s not all. Consider the fact that someday consumers may be able to simply speak to Google assistant on their smartphone and the vehicle will wake up and drive itself to the dealership, get serviced and then return to the customer on its own. 

Automotive News just released a very enlightening article about this titled, “How EVs could create the biggest disruption since the iPhone.” The article states, “Electric cars, with a little help from ride-hailing and self-driving technology, could be about to change the auto industry in a similar way to Apple's upending of the mobile phone industry 10 years ago. The rise of Tesla and its rivals could be boosted by complementary services from Uber and Alphabet's Waymo unit, just as the iPhone rode the app economy and fast mobile internet to decimate mobile phone giants like Nokia.” 

Consider this. A normal internal combustion engine vehicle can have upwards of 10,000 parts all working together. This presents a huge amount of potential service opportunities as the vehicle ages. In stark contrast, an electric vehicle has as few as 150 moving parts, which obviously greatly decreases potential service opportunities. 

In fact, according to the Automotive News article, “After disassembling GM's Chevrolet Bolt, UBS Group concluded it required almost no maintenance, with the electric motor having just three moving parts compared with 133 in a four-cylinder internal combustion engine.” 

Decreased service opportunities from electric car ownership will bring lower repair orders and increased time between service visits. This will severely impact service department profitability.  

And, with over-the-air software and hardware updates that require no dealership visit whatsoever, as electric vehicles increasingly populate our roads traffic in service departments will further decline. 

Take for example an associate of mine who owns a Tesla. When they took it in for it’s very first service at 7,500 miles the total repair bill was a whopping $25. Think this is an aberration? It’s not. 

Tesla is so confident about its vehicle quality that it has issued an infinite mile warranty. CEO Elon Musk states in a blog, “The Tesla Model S drive unit warranty has been increased to match that of the battery pack. That means the 85 kWh Model S, our most popular model by far, now has an 8 year, infinite mile warranty on both the battery pack and drive unit. There is also no limit on the number of owners during the warranty period.” 

Wow, infinite mile warranties! While currently this confidence is only publicly stated by Tesla, every major car manufacturer is feverishly racing to compete in the electric car market. 

Additionally, a comparison done by Tesloop, a rideshare service which runs a fleet of Teslas, states that their total costs were $10K for 300K miles! 

“During the first 300,000 miles, the total combined maintenance and fuel costs of the Tesla Model S were $10,492, with a total of 12 days in the shop. Of these costs, $6,900 was scheduled maintenance and $3500 was headlight damage due to driving through deep water. Had this been an Mercedes S class, the scheduled routine maintenance and fuel would have been $86,000 ($52,000 maintenance and $36,000 fuel) with 112 days of servicing, or for a Lincoln Town Car $70k,000 ($28,000 maintenance and $42,000 fuel) with around 100 days of servicing.” 

What does all of this mean? 

Up until now, your dealership has connected with service customers anywhere from 2-3 or more times per year, depending on how much the customer drives. Aside from regular maintenance, you’ve had first crack at recommended services and replacements for wear and tear items such as brake pads and tires. Well, electric vehicles will change all that. 

It is now vital to make the most of every opportunity. Good news is that there are still 300 million light vehicles on US roads and these cars are lasting longer. Have you done a histogram to see what percentage of the service dollars come from cars that are more than 5 years old?  If not, you should.  In the future, the only way to keep your dealership’s service revenue from staying flat will be to start capturing market share back from the independents and to start servicing older cars.  

It makes sense to get ahead of the game.  Stand out from your competition now in order to keep the customers you do have and attract new ones. Prepare to offer your customers the convenience and ease they wish for now and will increasingly demand.

If you haven’t noticed, our culture has changed. Your customers are no longer willing to wait. Everyone wants everything NOW! 

Just look at the leader of the pack, Amazon. With this market powerhouse it’s all about same day or 2-day delivery. I can’t tell you how many times my first filter on Amazon has been to see how fast I could get something I needed – delivered right to my doorstep. This phenomenon is not going away. We’re already starting to see it in the automotive retail space. And soon, that will expand to include service as well. So, get ready for a huge shift. 

Why? 

Well, if you look at current trends, you can see that the writing’s on the wall; ride-sharing being the biggest current shift. In the next five years I would seriously advise you to start preparing for an automotive service environment that includes 24/7 service, or you will miss the next boom in fixed ops. 

Consider Uber, Lyft and other ride-sharing services. An ambitious driver will drive 60,000 miles per year, or 200 miles per day, approximately 300 days per year; allowing for a few days off. Any downtime for these driver’s vehicles costs them money. What do ride-sharing drivers want? Convenience. Take me for example. I like to get groceries at 2am because nobody is there and I can get what I need, checkout and be done. As ride-sharing proliferates, drivers will turn to those services that offer the most convenience and cater to their schedules. If those services are not at a dealership, they will go elsewhere. 

And, since 2010, new car buyers have decreased in every age group, aside from 55+. If, due to lack of convenience, today’s dealerships only get 1/3 of the repairs from younger generations, it becomes imperative to improve the convenience factor, or they will lose even more service revenue. 

Alright, so, what can you do now to prepare for this shift while optimizing your current service operations? 

I suggest that you: 

1. Take a look at your current operations and see what can be done to better maximize your service capacity. 

2. Once you’ve maximized your service capacity, institute a pickup and delivery service for your customers. It’s all about convenience and that extra convenience can make customers chose you over any competition. 

3. Extend your hours from 2 shifts to a 24-hour service operation, so customers can get service on their terms, whenever they can fit it into their schedules. 

4. If #3 above didn’t raise any eyebrows, I’m sure I’ll get a lot of push back on this one; but you’ll be thanking me several years down the line if you consider this option: What about building remote service facilities so that your customers can get service not only when they need it, but WHERE they need it? Think about it. Your current facility can only handle so much traffic. Perhaps OEM rules need to change so that these facilities can even be outside your PMA, which extends your brand and reach, and could even make for some new vehicle sales from service as well. 

Yes, this will take some getting used to; more resources and some changes in scheduling and organization. However, I strongly believe change is on the horizon and it is something you need to get ready for in order to survive and thrive. 

Doing it now means that your dealership has the first-to-market edge. And, while your competition may think you’re crazy, consumers will flock to you and remain loyal as you become the Amazon of automotive service. And that’s what leads to a profitable future.

In a recent  article Colin Shaw, a leading customer experience thought leader and author, details his car-buying experience – and not in a positive way. He experienced car-buying the same way that car dealers have always done it in the past. Spoiler Alert! -- The title of the article is “Unbelievable! Does Car Buying HAVE to Be SO Bad?” 

What are the long term service ramifications of this “BAD” sales process? 

Answer: Limited or NO loyalty for your service business! 

Dealerships currently average only 33% retention of car buyers into the service department. Those customers angered by the sales process frequently decide to drop the dealership from consideration when it comes to servicing their vehicle.  

I am sure you all know how important service revenue is the overall financial health of your dealership. Well, when you start the relationship with a bad experience the ripple effect can be extremely costly. Lost opportunity costs include: 

•  Multiple years of service work revenue 
•  Up to 80% decrease in the opportunity to sell that customer another vehicle 
•  Lost referrals they could have given 

And let’s not forget how much time, effort, and money you spend trying to win them back for service and sales opportunities. In total this can add up to thousands, or even tens of thousands of dollars of lost revenue per customer that abandons your dealership due to a bad sales experience. 

The key to growing your business is to keep your customers and have them refer other customers.  That is why the hugely popular customer service score NPS (Net Promoter Score) asks one question only - ““How likely are you to recommend this business to a friend or colleague?” 

A few simple things can make a big jump in loyalty gains: 

    1. Honor agreed upon prices and avoid the “Today Only” mindset. 

    2. Simplify the foursquare process as much as possible and set a time limit for negotiations. 

    3. Focus on the “lifetime value” of customer during the sales process. 

Sticking to old processes and singing that “same old song” which doesn’t apply to current generations will send your customers out the door to your competitors. Be open to new ideas. Change is not your enemy. Dealerships that adopt new technology, realize the need to focus on the customer experience, retention and loyalty, are already leading the pack into the future. Do yourself a favor and jump on board! 

Every business wants to be the market leader and have success. Yet to do so, many have the mindset that it is necessary to spend more money. “Buy a Super Bowl ad,” they say. “Spend hundreds of thousands on TV and radio.” The trick to getting big isn’t always about trying to reach the most people possible. In fact, according to American author, entrepreneur, marketer, and public speaker Seth Godin, it is focusing on what he terms the “minimum viable audience.”

This is the smallest audience you can capture and maintain. When you focus on that, you have a much better chance of making them happy, changing processes that need to be changed and creating a customer experience that’s truly memorable.

Focus too big and your message reaches nobody -- it’s too generic. Today, effective marketing relies upon personal preferences and connections.

Why?

Because nobody can be everything to everybody at the same time. That newspaper ad or “spray and pray” direct mail spend targeted at EVERY customer has a very small return on investment. Sure, the low percentage of people that do respond do so because you happen to hit them at the exact right time with the exact right message. But, what about the other 98 percent of the people? You just annoy them.

Would you rather capture 2 percent of the revenue and alienate the other 98 percent, or flip that around?

According to Seth Godin, most major brands are now focusing small and that is exactly what has made them big and keeps them thriving.

There is a reason why User Experience (UX) and customer experience are today’s buzzwords. In the automotive world, true growth isn’t gained by coupons, discount or novelties, but rather by ensuring that your customers become loyal advocates.

Ensure that each customer that comes in for sales or service has a great PERSONAL customer experience. Try it out. Send in a mystery shopper and spot check your customer experience.

According to today’s highly successful companies, a greater focus on the personal customer experience rather than mass marketing to the universe leads to far more growth.

Take care of your customers with a personal touch and they will take care of you.