Increase dealership service conversion and customer lifetime value

"If you give a mouse a cookie" [1]. You may or may not be familiar with this popular children’s book series by author Laura Numeroff, each book opens with the main character receiving something, like a cookie. Then, in a playful circular and interrelated pattern they ask for more items until we arrive back to the beginning…when they ask for another cookie. There’s an interesting connection to this book and a dealerships Customer Lifetime Value.

“If you give a mouse a cookie, he’s going to ask for a glass of milk. When you give him the milk, he’ll probably ask you for a straw.”

Now apply this simple storyline to your customer relationship. A prospective customer reaches out to you (online, in-store, etc.) and you provide them with something. Hopefully, this will lead to them asking for something else. Unfortunately it’s not as simple as a children’s book, yet the process could be mirrored in a simple 1-2-3 action plan.

“If you sell someone a car, they’re going to need it serviced. When you offer them service, they’ll probably come back.”

A study conducted by the late Art Spinella, President of CNW Research concluded that:

• Customers who regularly serviced their vehicles at the selling dealership became repeat vehicle buyers 86% of the time
• Customers that occasionally service their vehicles at the selling dealership became repeat buyers 46% of the time
• Customers who seldom serviced their vehicles at the selling dealership became repeat buyers 18% of the time
• Customers that never serviced their vehicles at the selling dealership became repeat vehicle buyers only 8% of the time

As we have all heard throughout life, “knowledge is power” and “actions speak louder than words”. I often tell my kids “if you know, then do”. The information above provides valuable insight as to next steps your dealership may take to increase service conversions and retention. The challenge in its success is a comfortable transition process and a shared benefit between departments to elevate the importance of showroom to service conversions. An example is provided after action step 2.

The remainder of this article assumes that this topic is familiar and your dealership management team has discussed the importance of conversion rates, service revenue, customer retention and CSI scores. These are all interrelated and bear impact on profitability. Simply stated, your showroom and service departments are accountable for new customer acquisitions. They conquest using various marketing tactics, source leads and receive training on converting the prospects to customers. Yet so often they [sales and service] do not work together effectively, leading us to what is the easiest step in your action plan.

Action step 1: Backstory

Share specific customer information with the service representative. The sales team gathers personal information (lifestyle, habits, interests, etc.) to help create a relationship with the customer and build a personal connection to the vehicle. Providing this information to the service representative in advance will help build a comfortable transition in step 2. Example: “I hear you’re considering a towing package for your boat. I was looking into a new Lund Pro-V”.

As consumers in car-buying mode, we put up our guard. Why? Because at every step in the process we anticipate being sold. So during this transition you may also want to develop a standard elevator pitch for the service department. Think of it as a simple benefit statement that conveys comfort, confidence and purpose and everyone in service knows. Then build your personal connection with the backstory!

Action step 2: Personal Introduction

A major challenge with the introduction is timing. Approximately 55% of deliveries take place after service has closed. To quickly brainstorm on overcoming this logistical issue, here are a couple of options:

1. Create a standard e-mail hand-off template that is sent to your service department from the sales consultant. Include the customer’s name, number, backstory highlights and we-owe information. The service department may then assign a point person to make the “scripted” welcome calls. If the showroom is not trained to schedule their first service appointment, now is the opportunity. I would recommend associating a financial reward to the team for every first service appointment scheduled.
2. Offer vehicle personalization before F&I. According to SEMA, the aftermarket segment reached $36B in 2014. The demand is clear and progressive dealerships have implemented a process and dedicated resources to capture their share of vehicle personalization. Accessory purchases create revenue for sales, parts and service. Plus, it’s an ideal opportunity for that first service appointment to install the accessories…even if it’s a floor mat!

For example, the top 100 dealerships that offer personalization and manage orders using our process and technology have presented 371,296 accessories year-to-date (thru July 28). One of our top customers sold 1,798 accessories to 1,119 customers with a conversion rate (view-to-sale) of 40.3%. That process generated $1.1M in sales with a 56.7% profit margin while creating 1,119 opportunities to introduce the customer to service for installation. And if you offer installation…chances are you can schedule their first service appointment to retain them for a lifetime.

Action step 3: The Relationship

I read a great article in the Automotive News entitled Building a brand in the service department. It’s centered on a Honda dealership within the Boston market. To separate themselves from the competition, the owners created a unique, customer centric offering called SilkoCare. Their program provides tremendous value to the customer, establishing a long-term relationship while securing a lifetime value for the dealership. In this instance the program creates showroom traffic and repeat business.

An important fact is that relationships take an investment of your time. When the value is received by the customer for their share of that time investment, you’ll keep them for a lifetime.

“If you sell a customer an accessory, they’re going to need it installed. When you offer them installation services, they’ll need to meet the team that will service them for a lifetime.”

[1] If You Give a Mouse a Cookie, by Laura Joffe Numeroff