Challenge
According to a recent study by the Automotive Aftermarket Industry Association (AAIA), vehicle repairs cost an average of 34% more at a new car dealership than at independent repair shops. They argue that this is leading to 11.7 billion dollars of excessive costs annually to consumers.
A large import dealer located in the southern United States decided to address the issue of being cost-competitive—without sacrificing profitability. The first part of his challenge was to utilize a cost-efficient means of keeping his name in front of customers and enticing them back into the dealership, despite perceived higher cost.
The second part of the challenge was to retain new customers. Being cost-competitive is great, but really showing the value of the dealership is the key to turning one-time customers into regular customers. What value proposition could the dealer create that would justify perceived higher cost?
Approach
The dealer sent a mailer offering a $19.95 oil change. The shop is the number one store (of that particular manufacture) in that region in paid-customer work. On subsequent mailers, the dealer continued to offer the $19.95 oil changes. To sweeten the deal, he chose the rock-bottom price of $9.95 to put on a lost customer postcard, which was mailed at the same time as a regular mailer that featured the $19.95 oil change.
(Customers are considered to be lost when they have not visited the dealership in 24 to 36 months.)
To overcome the second part of our challenge, the difficulty in retaining customers, the dealer turned his focus to branding his dealership as having great value and strong personal interaction. This dealer has eight technicians, most of whom are master technicians. Each technician performs an oil change and a multi-point inspection. If he sees a problem, he assumes the role of a consultant and shows the customer. He will either take the part up front or pull the car around. Allowing the customer the courtesy of a visual inspection and presentation of damaged parts/systems fosters credibility. If the technician can tie the work to performance or safety concerns, he will further increase the likelihood of an upsell.
Side benefit: The customer can gain exposure to the entire dealership and perhaps that customer will buy a car from the dealership in the future. The relationship begins at your service department and the goodwill continues.
Results
The dealer brings in over 10 million dollars in revenue per year. His one-time customer visits are high (which is true of each dealer in his region), but the number of customers who visit five or more times per year is still higher than his competitors’ in the region. In one case, his average of customers who visit five or more times is almost eight times as much as another dealer. In fact, his customer count, number of visits and revenue are all highest in his region.
