We’ve got a problem in our industry, yet many of us haven’t realized it. Our service departments are bleeding customers to national chains and local repair shops – and it’s been happening for years.
The number one issue facing dealerships today isn’t inventory turn or overhead costs, it’s price perception of the service department – the idea that customers believe non-dealership service options are a better deal than what the average dealer lot can offer. We in the industry know that dealerships provide fair, competitive prices on quality service, but service shoppers don’t because we aren’t telling them, and it’s squeezing dealership profitability.
Yesterday at DrivingSales Presidents Club, I presented new research that was awarded Most Valuable Insight by a select panel of judges, dealer principles and general managers, which highlights this very issue. In an independent study commissioned through research firm GfK, we identified three key issues that significantly affect dealer service profitability. But first, let’s level set on the current state of the service business.
The average age of a vehicle on the road today is a record 11.3 years, up 14% since 2008. And as of 2011, 86% of them are out of warranty. More R.O.’s for everyone, right? Not quite.
Our friends at DMEautomotive report that though the $215 billion service market is expected to grow 15% over the next three years, dealer service revenue is actually down. Consumers, particularly young car owners, are consistently choosing national repair chains over dealerships, and it’s a big deal.
Now that we understand what we’re up against, let’s break down the new research from GfK.
The biggest takeaway from the study is that more than half of consumers believe dealerships are the most expensive option for service, regardless of repair type. But we shouldn’t blame them.
As consumers go online to research repairs, check pricing or look at reviews, dealers are usually nowhere to be found. Go ahead, see for yourself. Take out your smartphone, open your mobile web browser and search for “tires”, “oil change”, “brake job”, or any one of a thousand things a consumer may search for. Better yet, go to your own website and do the same. My guess is that you’ll be shocked at what you find – or won’t find, for that matter.
Strength of Reputation
The second “aha” finding relates to something most dealerships are already familiar with: online reviews. Though consumers care about the cost and quality of service, the research shows they also value the feedback of others. They want to know that work can be trusted and that the experience the provider offers will be hassle-free. As a result, consumers reported that Online Customer Reviews ranked third behind only Technician Certification Level and Price Guarantee / Warranty as the most important factor when choosing an auto service provider.
But there’s some good news too. According to the study, when all things are equal and little is known about the provider’s facilities, dealerships have an advantage; 27 percent of consumers prefer to have their vehicle serviced at the dealership, while 43 percent report no preference. Service shoppers want to get work done at the dealership, but they’re convinced to go elsewhere. Local shops and national chains win because they typically have more effective digital marketing strategies, better visibility for service reviews and more transparent pricing models – all of things that are within a dealership’s power to control, improve upon and use to influence service customers.
So as we look at ways to help shift the industry forward, to help highlight the positive experiences and stellar, competitive service dealerships provide, I’m proud to share that this week Cars.com added new features to our core BaseDrive package to promote dealership service. Active dealers will be able to showcase exclusive service content on their Dealer Profile Page, have top placement in our new Service Directory, and be featured through our service and repair Price Estimator Tool. It’s a small step down the long road of helping dealerships reclaim fixed ops profits, and we’re excited to lead the way.