Paragon Honda, Paragon Acura and Aberdeen Chrysler Center have managed to do what many dealerships cannot: consistently sell extended-service contracts to customers whose factory warranties are expiring or have expired.
Their success has hinged on finding and reaching out to customers who fit the expired-warranty profile.
"The biggest thing in contacting a customer is having a plan and a reason to contact them," says Brian Benstock, general manager of Paragon Honda and Paragon Acura in New York.
Many dealerships struggle to sell extended-service contracts to customers whose factory warranties are up. But these three stores do it well in part because they have invested in software that combs their databases for customers who are coming to the end of their warranty or are already out of warranty. They also have hired or assigned employees whose only job is to make these sales happen by approaching customers either when they're in the service department or through follow-up phone calls.
"We couldn't have done what we've done without a process," says Toby Doeden, general manager of Aberdeen Chrysler Center in Aberdeen, S.D.
It helps that these dealerships have the resources to implement a process that includes software and a special team. Not all stores can afford to do that.
One reason dealerships often fail in selling extended-service contracts in the service drive is because they rely on service managers to pitch the contracts at the point of service, dealers and service contract providers say. Often service managers lack the needed sales skills. And even if the dealers offer spiffs on each sale, service managers still lack the focus to sell service contracts aggressively and consistently.
Benstock's stores sell an average of 18 extended-service contracts a month at an average retail cost of about $1,600, he says.
It might not sound like much for a business that sells about 10,000 new and used vehicles annually for both stores. But five years ago, before Benstock bought the software and implemented his process, he was haphazardly selling one to three extended-service contracts a month, he says. "We were getting those customers through happenstance," Benstock says. "That certainly doesn't replace a business plan."
So in 2007 Benstock bought software from AutoAlert in Irvine, Calif. The software scours his database to generate three kinds of alerts: sales, equity and warranty expiration.
Benstock expanded his business development center and today has 21 employees to monitor the alerts. They call the customers identified by AutoAlert to pitch service contracts and other products.
The software costs Benstock about $2,000 a month, and he says it's worth it. "It really gives us a reason to contact the customer," Benstock says. "The service contract and loyalty go hand in hand. It's a great retention tool."
And compared with the cost of TV advertising or full-page newspaper ads, Benstock says, this delivers more guaranteed customer response.