With free services, 'business is exploding'

Priority Auto Group's customers sometimes ask the same question: "What's the catch?"

How is it, they ask when buying a new vehicle, that the dealership group's stores can promise them free oil changes for the life of the vehicle, along with free towing services, free state inspections, a lifetime engine warranty, free car washes and a guarantee to replace defective parts as long as they own the car?

And all of that at no up-charge to the transaction price of the vehicle. It is not a special package -- it simply comes with the car.

So what's the catch?

"There's really no catch," says Stacy Cummings, CFO of the Chesapeake, Va., group. "We don't inflate the price of the vehicle to cover it. It's not hidden in the purchase. We just look at it as a cost of doing business -- and more important, as a cost of winning customer loyalty."

Free oil changes are nothing new. Complimentary vehicle inspections are now common. What Priority has done is build its brand name on the line "Priorities for Life," which bundles the cost guarantees together.

"It has absolutely helped the company grow," Cummings says. "Our service business is exploding.

"Service growth has to grow through loyalty," he says. "If you can get a customer to come in three times, they're your customer for life. And that's what every one of our stores focuses on -- keeping people wanting to come back when they need something."

Priority ranks No. 52 on the Automotive News list of the top 150 dealership groups based in the U.S., with new-vehicle retail sales of 18,454 in 2015. Same-store revenues from vehicle sales and fixed operations both rose 10 percent in 2015.

The group has grown aggressively. Priority started in 1998 when Dennis Ellmer, the president of Kline Chevrolet and Kline Toyota in Chesapeake, acquired those two stores and renamed them Priority Chevrolet and Priority Toyota.

Ellmer's group has grown to 19 new-vehicle franchises around the Chesapeake Bay area of Virginia and in North Carolina. It owns 15 Acura, Chevrolet, Ford, Honda, Hyundai, Mazda, Nissan and Toyota dealerships. Late last year, Ellmer acquired Charles Barker Infiniti in Virginia Beach, Va., as its newest store and converted it into Priority Infiniti. The group also has three Scion franchises, which it will now refocus as Toyota ends that brand.

Each store is managed locally by a general manager with sole accountability for the operation.

The original Toyota store in Chesapeake had eight service bays when Ellmer acquired it. He expanded it to 24 bays. In 2008, Priority constructed a new building for the dealership, and that one has 72 service bays.

Since it embraced the strategy, Priority has watched other dealers and even manufacturers adopt parts of the concept, some tiptoeing, some temporarily and some more fervently than others.

"We happen to believe it works, and it's the right way to do business," Cummings says. "Other retailers have been a little skeptical, and some who have gotten into it have gotten back out. We have no intention of stopping." 

Representatives from Toyota Motor Sales U.S.A. approached Priority six years ago to learn more about the success the group was having with lifetime coverage at its stores. Out of those meetings, Toyota crafted its own ToyotaCare cost-free maintenance program. ToyotaCare provides two years of free 24-hour roadside assistance and two years or 25,000 miles of regular maintenance, including oil changes and tire rotations. 

Originally, Ellmer called the plan Priority Plus, and it limited the amount of maintenance and engine work coverage to 25,000 miles. But one day in a meeting, Ellmer challenged his managers out of the blue, Cummings recalls. 

"He said, "What would you think if we made it coverage for life?'" Cummings retells the proposal. "It was startling at the time -- but it worked."

Customers often assume the Priorities for Life package is an add-on that their salesperson has tucked into the purchase price. They will ask how much lower the price is if the care package is deleted. 

The salespeople will explain that there really is no markup. Cummings says: "When we explain that this is just something that you're getting at no charge, it's a nice moment." 

Priority also zeroed in on the industrywide problem that female customers sometimes hesitate to bring their vehicles into a dealership for servicing. Two years ago, the retailer began offering free manicures on Wednesdays at all stores. Priority recruits local salon employees to provide a manicure to anyone who wants one. Its Priority Toyota store in Chesapeake additionally offers hair styling -- free. To give male customers equal time, the dealerships provide free shoe shines for the asking. 

The dealerships operate cafes as well as big-screen movie theaters at several of the stores, with recent movies to watch. 

"We sometimes inform a customer that their vehicle is finished, and they will ask if it's OK to finish watching the movie," Cummings says. 

Bringing customers back to the store for their free regular maintenance does have a revenue upside as well as a customer-satisfaction benefit. The stores maintain a running service record on each vehicle, using green-yellow-red color coding to chart the condition of key components, such as brakes and tire treads. 

Service reps go over the vehicle printout with the customer at each visit and point out any issues that are moving into the yellow category. 

"We don't try to sell them on the work," Cummings explains. "We just want them to know that there is something they need to be aware of. 

"It's not something they need to worry about on this visit. It might not be something they need to worry about on the next one, or even the visit after that," he says. "But sooner or later, we want them to know it will need to be addressed." 

Giving customers months of advanced warning makes the routine expenses that are not covered under the Priorities for Life plan more palatable because they have been expecting them, he says. The service rep will show them the past five vehicle reports by way of reminding them that the expense has been trending toward them. 

"Back in the day, people had a rapport with the dealership where they bought their cars and with the people who serviced their cars," Cummings says. "We want to get back to that."