Article taken from October 2004 GM Profit & Protection warranty newsletter
In 2002 warranty work accounted for almost $16 billion or 20% of all service and parts department revenue, according to the National Automotive Dealers Association.
Warranty work has begun to decline. Routine scheduled maintenance now accounts for 57% of the service business, in comparison to 47% in 1999, according to a J.D. Power & Associates survey of customers’ service experiences for the first three years of vehicle ownership.
The Big Three: Ford, Chrysler, and GM, have all reported double digit declines in warranty repairs for each of the past two years. Kudos to the manufacturer for improved product quality, and increases in customer satisfaction and vehicle sales. Warranty waste appears to be in “recession”.
A success for the manufacturer has created a void for the dealership service department. Better manufacturer quality means fewer repairs, especially those repairs typically covered by the factory warranty. Service department revenue must still be generated, but how? It is no longer possible to depend upon the manufacturer’s warranty for a large percentage of service revenue.
Many dealers are turning their attention to capturing more customer funded routine maintenance and customer retail business in hopes of offsetting the loss of warranty business.
What can a dealer do to establish new retail opportunities? Look closely at your current service business; are there opportunities there that currently are being sent to sublet vendors? Reinvent your dealership; consider establishing an automotive accessory business to provide consumers with numerous upgrade options, such as window tinting, paintless dent repair, spray-in bed liners, tires, chrome wheels, and mobile video installation.
Progress…the way the world is heading can be risky to the dealership, but in the long run, a means to generating revenue as well as gaining a new and exhilarating customer base.
If a customer is treated right, the dealership will gain a customer for life, a customer that potentially will provide the dealership with excellent retail opportunities.
Regardless of where the customer purchased their vehicle, or why they chose to leave their selling dealer, treating them well at your dealership is imperative to encouraging a new customer to stay for maintenance and future new vehicle purchases.
Emphasis must also be placed on maintenance at the dealership, such as drive-in lube facility, tire sales, service advertising, and simplified service schedules. The opportunity is there for the dealership to go after the customer pay business, rather than allowing the customer to go to independent oil change shops, tire stores or repair facilities.
Provide training within the dealership that focuses on improving the customer pay part of the business, as well as processes for customer retention. Several manufacturers are establishing training programs to instruct employees on how to improve the service and parts business.
Customer retention techniques may include:
- Performing an inspection & quick service history review at the time of service write up.
- Expanding service hours to evenings and weekends.
- Posting prices on a service menu board.
- Tire sales.
- Stocking small but essential maintenance parts, such as wiper blades and oil filters.
Create an incentive at the time of new vehicle purchase to encourage the customer to return to the dealership for not only warranty repair, but retail services as well.
The dealership must not give the customer any reason to go
anywhere else for their service needs.
© J&L Warranty Pros™
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