The True Value of a Lifetime Customer to Your Dealership from Kelley Blue Book

THE TRUE VALUE OF A LIFETIME CUSTOMER TO YOUR DEALERSHIP How to Maximize Efficiency, Increase Loyalty and Drive Revenue through Your Service Center Now

In today’s constantly changing and shifting auto industry, one thing has remained the same for all dealers—the ability to turn your service center into a profit center.

And it starts and ends with understanding the true value of a lifetime customer.

Whether you’re a Dealer, GM, Principal / Owner, Service Department Leader, Technician, New or Used Car Sales Specialist, or Acquisition / Appraisal Manager, we all know that there is a big difference in acquiring a new customer verses retaining an existing customer—especially when it comes to your service center.

But once you have that ideal customer, most dealers wonder what are best practices to keep that customer coming back?

That is the big question today, especially with shifted customer expectations and behaviors. And when you put some of this guide’s best practices to use, you’ll gain the three things we hear time and time again that all dealerships and service departments place as a priority: efficiency, loyalty and revenue.

With recent studies showing that your service center is most likely responsible for 50%[1] of your dealership’s profits, it’s time to take a closer look at how you can turn your service center into an even bigger profit center by understanding the true value a lifetime customer has at your dealership.

Source: 1. 2021 Cox Automotive Service Industry Study.

LET’S DECODE THE

TOP 3 WAYS

TO DETERMINE THE TRUE VALUE OF YOUR LIFETIME CUSTOMER TO TURN YOUR SERVICE CENTER INTO A PROFIT CENTER The lifetime value of a customer extends well beyond the initial sale and drives straight into the service lane. In order to maximize efficiency, increase loyalty, and drive revenue, let’s look at some recent data from Kelley Blue Book and Cox Automotive, to show you how to leverage those insights to develop a winning service and repair strategy that will maximize internal efficiencies and drive your business forward.

1

The Real Revenue Importance of Service After the Sale Pages 4 - 10

2

Solutions to the Problems Dealership Service Centers are Facing Pages 7 - 9

3

Putting a Multipronged Approach in Action to Drive Profits Pages 10 - 13

1 THE REAL

REVENUE IMPORTANCE OF SERVICE AFTER THE SALE

We all know there’s a big focus at dealerships around the initial sale of a vehicle, but what about after the sale—and especially considering current inventory challenges?

RECENT STUDIES SHOW THAT OVER 50% OF A DEALERSHIP’S PROFITS ARE COMING FROM THEIR SERVICE CENTERS[1]

50

%

Yes, you read that right. With recent studies showing that over 50% of dealership profits are coming from their service centers, today’s successful dealer has shifted their focus and strategy to also include fixed ops and service after the sale.

Changed consumer behaviors calls for changed dealer focus It’s just as important to revenue, if not more so, especially with so many macro-trends and challenges dealerships face, as well as navigating changed consumer behaviors.

Consumer behaviors have not only evolved over the last few years, but show a shifted level of expectations and set of preferences that all point to convenience and ease. If dealers don’t change behaviors to match the demands of today’s consumer, not only is a current or future sale at risk, but also their service department’s profits. The lifetime value of a customer extends well beyond the initial sale and drives straight into the service lane, and that is where dealers should be looking for revenue opportunities.

Source: 1. 2021 Cox Automotive Service Industry Study.

Just How Important is

SERVICE

AFTER THE SALE? 71% OF CONSUMERS HAVE DEFECTED FROM DEALERSHIP SERVICE

BY THE 5TH YEAR OF VEHICLE OWNERSHIP.[1]

71%

That’s a staggering number and it’s important to look at the “why” behind it. From a supplyand-demand imbalance and consumer purchasing delay to decreased purchaselocation loyalty and extended service lane wait times, opportunity is wide open. The strong possibility exists to gain new clients, and now is the time to ensure you are doing everything you can to retain your existing ones.

By increasing the overall dealer focus and strategy, marketing, and training within your service center, you’ll help keep and convert the consumers who move through your service drive into a lifetime client—keeping your dealership out of that 71% statistic.

Next, let’s look at a more promising stat when it comes to opportunities for revenue at your dealership.

74% OF CONSUMERS ARE LIKELY TO PURCHASE THEIR NEXT VEHICLE FROM THE SAME DEALER IF THEY RETURNED FOR SERVICE.[1]

74%

This is an equally staggering number. When it comes to revenue, this statistic demonstrates there is a large amount of opportunity in the service drive. It’s important to re-evaluate how your service leaders, techs, and staff are taking advantage of those opportunities when they present themselves.

ASK YOURSELF THESE QUESTIONS: • Do you have a protocol for when a repair is higher than expected and the customer asks if they are better off buying new?

• What experiences and advantages are you offering at your dealership if someone has their car serviced with you to stand out from the competition?

• How easy is it to book a service appointment with your dealership and do you connect with customers in their preferred method; ex. text, apps?

• Are you outsourcing some common services when your appointment availability is stretched thin or offering pick-up and delivery services?

These are just a few of the important things to look at so that your dealership can begin to laser in on just how important service is to revenue.

Source: 1. 2021 Cox Automotive Car Buyer Journey Study.

We mentioned this before, but now let’s take a deeper look at the most important statistic of them all that we uncovered in a recent Cox Automotive study.

DEALERS DEPEND ON SERVICE FOR 50% OR MORE OF THEIR OVERALL PROFIT.[1]

50%

It probably is no surprise to dealers that fixed ops profitability is over half of their gross profit.

However, it generally only represents a small percentage of their marketing spend, and is an even smaller area of focus when it comes to ROI and optimization of consumer acquisition cost and market share.

It’s time to take the actions required to turn your service center into a profit center. A fixed ops focus in your service department at your dealership offers stability in revenue as the automotive industry experiences challenges on the sales side. Additionally, with a strategy of acquiring and retaining lifetime customers through your service drive, you will have planted seeds that will continue to grow— no matter what bumps happen within the industry.

Now that we know service contributes quite a bit to the dealership’s overall revenue, we highly suggest you closely examine those different types of service revenue streams.

RETENTION DRIVES REVENUE There’s a big difference between acquiring a new customer versus retaining an existing one, especially in and for your service center.

Retaining your service customer can result in many positive things for your dealership. It can lead not only to increased service profit, but also to the best and most accessible inventory you can acquire.

You know these customers and you know their cars. By maintaining that relationship, it keeps your dealership top of mind when making service appointments, but they’ll also always be your best advertisement when asked for a recommendation or to discuss their most recent experience.

A new customer is more expensive and harder to acquire than retaining an existing one, and involves a great many more people in the process.

The top two reasons consumers take their car to dealerships for service is because the dealer knows their car and they’ve had prior experiences at the dealership. This highlights the need to focus on existing customer relationships to ensure you provide the best possible experience when you acquire a new customer. The goal is and should be to keep them coming back.

DRIVING TRUST SO YOU CAN CLOSE DEALS

Source: 1. 2021 Cox Automotive Service Industry Study.

Source: 2. 2020 Cox Automotive Service Industry Study.

From acquiring inventory to generating new service and sales opportunities, did you know that Kelley Blue Book is the #1 most trusted third-party automotive brand?[2] And we’re to help you grow your business.

Kelley Blue Book® inventory and trade-in solutions help dealers create a seamless and profitable trade-in experience.

Our tools help you acquire high-margin inventory and drive transaction-ready shoppers to your dealership, while also delivering a seamless trade-in process that helps customers shop with confidence throughout their car-buying journey.

2

SOLUTIONS TO THE PROBLEMS DEALERSHIP SERVICE CENTERS ARE FACING When dealers are looking to maximize efficiency, increase service customer loyalty and drive revenue, identifying some of the common problems service departments and dealerships face is an important first step. We’ve outlined some of the top problems we uncovered in Cox Automotive’s 2021 Service Industry study and have provided proven solutions to help you drive your business forward.

PROBLEM #1: LOCATION One of the top five problems Cox Automotive’s 2021 Service Industry study showed is that dealerships get push back on location – in fact it was the #1 reason why customers who buy a car don’t return to that dealership for service.

Now, we know right now because of inventory shortages, car buyers are willing to travel a little further out than previous years. But, for the majority of purchasers who’ve bought from you, your dealership is typically close enough that the customer could make the decision to service their car with you, if you can offer time savings and conveniences so that they don’t look at location as a hurdle. As we shared before, with recent studies showing that over 50% of a dealership’s profits are coming from their service centers, focus should also be on service after the sale at dealerships. It’s just as important to revenue, if not more so, especially with so many macro-trends and challenges dealerships face, as well as navigating changed consumer behaviors.

SOLUTION #1: VEHICLE PICKUP AND DELIVERY What is an easy and popular solution that we’re seeing more and more of at dealerships and service departments? They’re offering pickup and delivery! This is a wide-open lane currently, as fewer than 60% of dealers currently offer pickup and delivery.

However, 89% of customers said they are more likely to choose one dealership over another based on having pickup and delivery available!* That’s a big number – revealing it’s not so much the location – but the conveniences the service department offers them.

It gets even more interesting when you look at this statistic uncovered by a recent Cox Automotive study… 87% of those that have access to and used a pickup and delivery service when offered by the service department said they were highly satisfied with the service they received.* This shows an increased satisfaction rating compared to customers who bring their cars to your dealership to have them serviced.

It’s also important to share that 51% of those that took advantage of a service like pickup and delivery also had more services completed than they would have if they’d taken in their vehicle themselves. Talk about efficiency, increased customer loyalty as well as additional revenue opportunities!

So, if you offer service pickup and delivery – wonderful!

Think about ways to enhance it even further. But for those of you that only minimally offer, or don’t yet offer vehicle pickup and delivery, the numbers speak for themselves. It’s time to take a closer look at how you can start offering it at your dealership and service department.

Another problem almost every dealership faces, not just in today’s changed times, but really for quite a while, are general perceptions or beliefs related to pricing – specifically when servicing their car at the dealership.

PROBLEM #2: PRICING

Some of those perceptions and beliefs are: • They will be overcharged.

• The charge for parts and labor at the dealership isn’t or won’t be reasonable.

• They are being charged a premium to service their car at a dealership.

• And although many of you are probably not surprised by these beliefs we uncovered in our study, there is a way to blast past those outdated misconceptions and beliefs.

SOLUTION #2: INCREASED SERVICE PRICING TRANSPARENCY Being transparent in your pricing is not only helping change old, often untrue beliefs, but it’s giving customers the ability to make choices based on real information, not just best guesses.

Additionally, it’s helping increase service customer loyalty, trust, and ultimately fixed ops revenue, and it highlights the advantages of having your service performed with highly trained technicians and factory parts.

One of the advantages to today’s mostly online world is increased transparency. And that increased transparency is leading the customer to see that they don’t always have to pay more for service from a dealership.

Brake Pad & Rotor Replacement Fair Repair Range

$255 - $300 Includes parts and labor

Important Info & Definitions

Valid for Zip Code 30342

The Kelley Blue Book Fair Repair Range TM is an example of how at Cox Automotive we’ve taken our vision and commitment of transforming transparency in the auto industry. We took 200 million repair orders and provided transparency in service pricing for each make, model and market-specific location.

When potential service customers see the side by side with tools like the Kelley Blue Book Fair Repair Range TM, and see your transparent pricing for services, it becomes very clear the difference is typically not as much as they thought.

Now let’s take a look at something that probably all of us are feeling: customers in our recent Cox Automotive Buyer Study have shifted preferences in how they want to communicate and book services… especially after the last 2 years!

PROBLEM #3: SHIFTED CUSTOMER PREFERENCES Customers have different preferences, and dealerships, especially service departments, have some shifting to do in how they communicate with customers before, during, and after the service. Gone are the days of preferring face-to-face, phone calls and email as the only ways of communicating and booking services.

SOLUTION #3: INCREASED DIGITAL INTERACTIONS So, what do customers prefer? Digital interactions!

Based on the most recent Cox Automotive Car Buyer Journey, consumers expectations and preferences have shifted, and we’re seeing the digital interactions replacing personal touchpoints around service visits—phone calls, face-to-face, and emails are all declining — while text message, apps and dealership website communication are all increasing.

The following digital interactions give you the ability to not only quickly and conveniently connect with your customer, but give you the increased visibility to stay top of mind.

Let’s look at the 3 main ways consumers prefer to be contacted as well as how you can and should be interacting with your customers to help with retention.

Text messages: A quick and easy way to keep your customer aware before, during and after they have service completed – especially when it comes to need to know information and reminders.

Apps: Allows customers to easily book and see what upcoming maintenance schedules are due, or what warranty recalls they have.

Whether you just have a basic app, or a super sophisticated one, it allows the customer to communicate and stay in touch with you, and you with them.

DRIVING TRUST SO YOU CAN CLOSE DEALS

Website: It’s important to take another look at your dealership’s website and make sure your service offerings and promotions are accurate and what your dealership and service department do to stand out is front and center. They can also handle several things such as bookings to reminders, which will increase the chances your client will keep coming back to you.

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With Service Department and Vehicle Advertising, we also enable you to reach consumer-ready consumers and inmarket car shoppers with advertising that aims to keep service bays full and sales floors busy.

3 PUTTING A

MULTIPRONGED APPROACH IN ACTION TO DRIVE PROFITS

Whether times in the auto industry are complicated like the last few years, or humming along smoothly, successful dealers and service centers know that they must take a multipronged approach. What’s a multipronged approach? It’s a plan and strategy that ties both your marketing department and your fixed ops initiatives together in order to maximize lifetime customer value and drive profits. Now is the time to take a closer look at some examples of a multiprong approach in action that can help turn your service center into an even bigger profit center.

CONNECTING THE DOTS FOR YOUR SERVICE CUSTOMER When thinking of a multiprong approach, it’s important to look at your customers that are regularly coming into your dealership or center for service. The majority of these customers are considered high value lifetime clients, and drive profits well after their initial purchase or service appointment. Additionally, you will likely have many chances to interact with this customer, in many different ways, among several team members.

It’s time to make sure your dealership is connected from the top down on how to approach potential needs that might arise for your service customer, in order to match that to some of the key initiatives at your dealerships.

Keeping the car and getting it serviced—or purchasing a new car—are essentially the two different ways the customer conducts business at your dealership. Not only do dealerships have a big interest in keeping this customer for service, but also for their next trade-in and vehicle purchase! And it calls for a multiprong approach across every department and staff member in your dealership to make sure this happens.

Example of an Expensive Repair: When service customers have an expensive repair, what are they thinking, considering and asking their service advisor or tech for advice on? They’re typically thinking about should they, or should they not, hold onto the vehicle longer.

They’re also probably communicating with not only the service department, but also the new or used sales department, on several items such as: • Are there new cars available and what do they cost?

• If there are limited new cars available, can a new one be pre-ordered for them?

• What does the new car pre-order process look like?

• What is their car’s current value new and are their incentives?

• What is their trade-in value?

Now is the time for you to ensure your dealership has a consistent strategy of what to say across ALL departments, as well as how to connect the customer’s needs with offerings and incentives within your dealership and service center.

TAKE A CLOSER LOOK AT THE IMPORTANCE OF EFFICIENCIES Because many of those conversations with lifetime value customers, especially service customers, both start and end in the service drive, another multiprong approach should be to focus on efficiencies. What type of efficiencies? Ones that can and should positively impact employee satisfaction which then leads to increased customer satisfaction!

Having seen almost twice the usual traffic on Kelley Blue Book over the last year or so, it’s no secret that customers are looking at that vehicle sitting in their garage. And they’re wondering if it’s the right time to trade in.

They know there’s a demand for vehicles with chip and inventory shortages and they know their car is probably worth more because of these micro-economic circumstances. Tools like Instant Cash Offer have been very successful in engaging with your customers, giving you the ability to connect with transaction-ready customers, to improve efficiencies by having the ability to acquire the inventory you need, while also lowering acquisition costs.

That same customer on Kelley Blue Book is probably also wondering if it’s the right time to start looking for a new car.

Other tools like iRecon and xTime are all about making jobs that have to be done at the dealership to service and sell cars more seamless, efficient, and manageable.

Keeping you stocked with the inventory you need, when you need it, driving efficiencies. When you lift your service, you have the ability to raise your revenues.

THE BIG PICTURE FOR THE ROAD AHEAD Customers’ preferences and priorities have shifted over the last few years, and instead of viewing these as challenges, with the top tips we shared, as well as multiprong approach, there is a wide-open road for opportunity and further innovation.

When you incorporate new ways to maximize your efficiency, increase loyalty, and drive revenue through your service drive, then connect them to the other departments and priorities within your dealership, you’ll not only have a bigger picture of how to increase profits, but you’ll also gain lifetime value clients along the way.

Even with today’s challenges in the industry on the sales side, your service center offers many possibilities to gain and retain lifetime clients. Now that we know the difference in acquiring a new customer versus retaining an existing customer, how to take a multipronged approach, as well as decoding the importance of service after the sale, you understand the impact it has, and could have, on your dealership’s revenue for a more secure road ahead.

DRIVING TRUST SO YOU CAN CLOSE DEALS Ready to build car shoppers’ trust in your dealership through transparency with Kelley Blue Book’s® values?

Our valuation and management tools help you integrate our trusted values into your dealership website and vehicle listings. By aligning with our valuations, you can deliver deeper and more market-reflective information to your appraising and valuation activities.

Kelley Blue Book® Price Advisor creates that trust through transparent pricing, allowing you to move beyond the pricing discussion and spend more time understanding what your customers want.

CONSUMERS TRUST KELLEY BLUE BOOK, SO THEY’LL TRUST YOU!

72%

#1

84%

of new vehicle buyers use Kelley Blue Book tools to research and shop for vehicles.

Kelley Blue Book is the #1 most used third-party automotive site to research and shop online.

of used car shoppers use Kelley Blue Book tools during their shopping process.

Have questions or want to learn how to leverage some of the features mentioned?

Contact your Cox Automotive Territory Sales Manager.

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