To non-dealership folks and those not well acquainted with the automotive industry, selling cars might seem like the most significant revenue generator and the most profitable part of the whole operation. After all, the lots are lined with tons of cars (well, at least they used to be).
But while it does make up a large percentage of dealership profit, the service center actually contributes to dealership gross profit more than you might think:
"So where does the majority of a dealership's profit come from? It's not from car sales, at least not directly. It's from the service and parts department, which accounts for the other 49.6% of the dealership's gross profits, according to NADA." (Edmunds)
That percentage is nothing to sneeze at!
Thinking about it, it makes a ton of sense. Customers drive through the service lanes far more often than they buy cars, so it stands to reason that dealership service departments are a constant source of revenue stream and profitability if done right.
So, how can one make the service lane even more profitable than it currently is?
4 Ways to Boost Service Lane Profits and Increase Customer Satisfaction
Higher profits don't just come from price increases (although, that can help). Instead, think about things you can do operationally that will encourage higher productivity, customer satisfaction, and customer retention/loyalty. These tips can give you a way to increase the strength of your fixed operations and not just get more customers, but keep customers.
Make your process streamlined, simple, and low-pressure.
Convenience is king in this new digital age. People dread the service lanes much like they dread the dentist. It's going to cost them money, and they might have to wait for a while. Try to ensure your check in process is as painless as possible, and remove any friction points from the assessment.
Consider equipping your service advisors with tablets where information can be entered quickly and any prompts are a lightning-quick button press. Quick walkarounds with the customer and their vehicle to ensure you're being attentive to their needs can go a long way with trust-building. Make the process to schedule service for their next visit as easy as possible. Make things easy, easy, easy.
And, ease up on upselling too much. If you've adequately explained a potential issue and fix for a customer, and they see the value, they will agree to an upsell/additional service. Customers are wary of service shops and mechanics overselling repair orders and other services. Be honest, and show what you see, but back off when the customer is firm. Sometimes, a customer just wants a consistent and reliable place to get oil changes; and that's OK.
Include signage about trade-ins and try encouraging more sales.
Okay, so Sales has a hand in this one but: this can in turn lead to better customer retention and overall profitability. And, your departments kind of feed into each other, if you think about it! Your service centers see a lot of traffic, from existing customers and potential new customers alike. Planting a seed to think about trading in and getting into something new could entice some customers ready for change.
Given the current climate of a car chip shortage, your salespeople are probably hurting for some inventory, so this can be a huge win for not just the service department, but for sales and the overall health of the business.
As long as you do your due diligence, and do right by the customer in delivering exceptional service in the service drive, your service drive customers could, with a little subconscious and passive encouragement, be thinking "the dealership that treated me so well could earn my next auto sales!"
Implement a system of consistent communication, follow-up, and reminders.
One of the biggest contributors to stress and fear is not knowing something. Think about how a customer is waiting for their vehicle to get repaired, the thing that is a key part of navigating their life and day-to-day, and not getting updates on it. Engage your customers that have their vehicle in for a service appointment, calling them with any important updates or finds during the repair, and let them know what to expect timewise with what you know about the current service schedule.
Consistent follow-up, post-service, can further show care and attentiveness and that you value the customer's choice to work with your business. Something as simple as:
"Thank you for choosing My Dealership! It was a pleasure working with you. Please let us know if you need anything else for Your Vehicle. Just in case you want to address the XYZ we explained, here's X% or $X off of the service. Let us know! :)"
It's a personable incentive that adds value and shows you care. Go for it! This brings us right to our next point:
Service reminders. The modern customer is so busy that it is very hard to track and manage appointments. Giving consistent reminders is a huge advantage, helpful to the busy consumer, and is a value-add that will keep customers thinking positively of you and your dealership service.
Incentivize Your Service Technicians
It's time to give bonuses! That might worry quite a bit of you, because in the short term; that looks like you giving away more money. But, check out what this joint Harvard Business School and Yale School of Management study found:
"Spending on short-term incentives rose to a median of 6 percent of operating profits, up from 5 percent in 2015." (The Society for Human Resource Management)
The thing about incentives is that they don't need to be that much. Tack on $20 to a tech's hourly rate in the short-term and watch their productivity potentially take off. You can get creative with incentives, like a tech competition in the short-term as well. Think about it, make a modest bonus budget, and see what happens!
Service Departments Are More Than Just Fixed Ops
Your service lanes are more than just maintenance bays, they can be tools to foster customer loyalty and prime the dealership for future selling success. If you focus on making your service lane incredibly convenient, and provide enough of a difference between you and your local competitors, you can see your revenue and profit soar.
Fill Up Your Service Lanes With ActivEngage
ActivEngage can help make your service lane scheduling check in process smoother, and help capture more online customers with out ServiceConnect integrations with top service scheduling providers Xtime, TimeHighway, DealerSocket, and GM Online Service Scheduling (GMOSS).
In addition to service scheduling integrations with our live managed messaging, we also offer a wide array of other dealership enhancing tools and solutions, like: