Auto Dealer Monthly Magazine is the daily operations publication serving the retail automotive industry. This automotive publication serves dealer principals, officers and general managers with the latest best practices.
Issue link: http://autodealermonthly.epubxp.com/i/99735
on dealer service retention," reported DMEa's vice president of strategy and analytics, Doug Van Sach, in a press release detailing the survey results. But there is still ground to be gained. After all, 25 percent of plan-holders only sometimes utilize their benefits—though they are free or are already paid for—using aftermarket service in the interim. An additional 10 percent never put the maintenance packages to use and rely completely on aftermarket upkeep. While some dealers and service department managers may think such spoilage (unused maintenance service revenue) bolsters their bottom line, Gorun believes that PPM purchased but not put to full use is wasteful for both the car owner and dealership. "A dealer used to want a higher forfeiture rate," he said. "That's really the old-school mentality. Now you want your forfeiture rate as low as possible." Van Sach's statements announcing the results of DMEa's survey reiterate that belief. "We think it's (to) a dealer's benefit to encourage people to use PPM," he said. "With nearly 3 in 5 consumers reporting they are likely to continue servicing at the dealership after their plan expires—compared to average dealer post-warranty retention rates of 22 to 40 percent—these programs can more than double service business that typically bleeds to the aftermarket, while also having a profound impact on retaining the young, traditionally dealer-averse, service shoppers' business." Retaining "dealer-averse" 20 auto dealer monthly "(PPM has) had a huge impact on us. Retention is the key. You're keeping your (customers) out of your competition's service lane." - Monica Peck of Hare Chevrolet in Noblesville, Ind. drivers aged 35 and under, or millennials as Martinez calls them, is key to the success of PPM, according to the DMEa marketing officer. Also known as Generation Y owners, these drivers are nearly twice as likely as those over 35 to have a maintenance plan—31 percent versus 18 percent, respectively. Almost threequarters of those under 35 utilize their plans for all of their owner's manual-prescribed service during the term of the package. "This tool helps with the millennial customer," Martinez said, primarily by allowing dealers to maintain contact with this important demographic. Traditional service department loyalists tend to be 45 or older. These customers develop a long-term relationship with a particular dealership. Ironically, this age group (driven by brand, expertise and trust) is least apt to purchase PPM, though they are most likely to use the same service lane for all regular maintenance work. Conversely, consumers less likely to operate based on loyalty are typically younger than 55—particularly millennials, according to previous DMEa findings. They are driven by tangible factors such as price and convenience, hallmark traits that fuel retention. By allowing both competitive pricing and convenience, PPM can allow dealerships to retain the elusive patronage of youth and sow the seeds of loyaltybuilding relationships with Generation Y consumers. "It's not a huge money-maker for us, but it brings people back to the dealership," said Tim Nadvit, finance manager at Ganley Honda Superstore in North Olmstead, Ohio. "We are not just trying to sell to one person. We're trying to sell to the whole family." The Honda store is one of 25-plus franchises in the northern Ohio Ganley Auto Group that offer PPM through Fidelity Warranty Services. The program is offered for both new and used models as well as for customers who migrate to the store for service on vehicles purchased elsewhere. Nadvit said the Honda store is retaining about three-quarters of its new-car lease customers in its service lanes and about 65 percent overall, including buyers of pre-owned vehicles. While prepaid and complimentary maintenance programs have proven effective at keeping customers coming back to the service lane, 86 percent of drivers who return for regular maintenance are also more likely to purchase their next vehicle from the same dealership. Martinez said the strongest correlation occurs when car owners fully utilize maintenance plans. OEM maintenance plans It is now somewhat common for automakers themselves to offer pre-pay or no-cost maintenance plans to customers as a supplement to the factory warranty. "The driving factor behind this is to build loyalty for sales and service," Kevin Reed, president of Momentum Automotive, said of offering such plans. Reed is both a distributor and user of UltraCare. Looking at the 2012 modelyear, 15 leading automakers offered complimentary maintenance plans for terms ranging from six months to seven years or 5,000 to 87,500 miles on the road, according to Edmunds.com research. Most often, the courtesy packages on specified new vehicles cover routine service spelled out in the owner's manual and can be cashed in at any of the OEM's