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.
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adding additional revenue to the bottom line of the dealership. "(BHPH) customers don't pay very often when their car breaks down. (PPM) works really great for us." - Andy Swanson of UsedCarXpress in Minneapolis-St. Paul, Minn. to get that engagement with the customer, trying to get that fuzzy feeling with them … those are the types of things that really, really do (retain customers)." Those amenities weren't typically found in the old-school programs. Common services that may be offered in PPM through a dealership today include: • Lube, oil and filter changes, including synthetic oil • Tire rotation and pressure check • Alignment check • Replacement of wiper blades • Multi-point vehicle inspection • Fluid top-off • Nitrogen-filled tires • Body repairs • Cleaning and detailing • Discounts on parts, service and accessories • System flushes • Air filter replacement • Wiper blade replacement Much has changed to let the dealers take full advantage of PPM. "The best part is, the customer comes back," said 22 Monica Peck, co-owner of Hare Chevrolet, which utilizes UltraCare. She said in mid-November that the northern Indiana dealership had sold more than 750 PPM plans since inception of their program in October 2011. "It's had a huge impact on us," Peck said. "Retention is the key. You're keeping (customers) out of your competition's service lane." As proof, she said that in 2012, retention of new-car owners' service was up, as were repair order numbers at Hare Chevrolet. "In order to survive, a dealership has to be able to service what they sell," Reed emphasized. That includes used cars. Reed is a big advocate of offering PPM on pre-owned vehicles, as those buyers are twice as likely to defect to another dealership for service or buying their next car. Joe Lescota, director of dealer development for NIADA, said more independent lots are gravitating toward offering service, and pre-owned dealers are just as likely to reap the same rewards from the service department as franchise dealers. Tony Troussov, director of training at Automotive Development Group in Minnesota's Twin Cities, said the PPM his company offers also has BHPH clients. "Customers don't pay very often when their car breaks down," said one of those customers, General auto dealer monthly Manager Andy Swanson of UsedCarXpress in St. Paul, Minn. Swanson said Easy Care, the free three-year maintenance plan attached to every sale from the large BHPH lot, helps keep cars on the road and customers happy and allows him avoid costly repossessions. "It works really great for us," Swanson added. Besides the morphing of PPM from stiff and clunky programs to sleek and innovative packages, several ancillary factors also seem to be driving the uptick in their success at retention and profits. Service lanes, typically the bread and butter of dealerships, have felt the squeeze from a reduction in warranty and recall work as cars have become more reliable, particularly as newcar sales continue to rise since bottoming out at the height of the Great Recession in 2009. Competition from independent service providers such as quick-lube shops and tire outlets has also hurt. "They're getting into the pockets of dealers," Reed said of the aftermarket stores. This combination of factors is fueling the growth in dealership retention programs like PPM. More than a retention tool Depending on the structure of the PPM, spoilage may be retained by the dealership, Besides service retention and an increased likelihood of selling a new car to the PPM recipient, the packages offer more immediate benefits to retailers. In fact, PPM sold at Hare Chevrolet in the first 13 months of the program generated $144,000 in upsells, according to Peck. That's an extra $136 spent by customers outside of the PPM contract each time they visited the service lane. That amount of upsell at Hare is not atypical, according to Gorun, who said his clients average about $127 in upsells per PPM visit. He referenced a San Antonio dealer who tallied $29,000 in upsells for October 2012 alone with 94 percent of customers on a PPM visit purchasing something at the store. Another store, which he would not name, amassed $505,000 in upsells off the 6,300 repair orders generated by its PPM. "It drives customer loyalty and retention, but it