Our new customers increasingly have a relationship with the small screen on their mobile devices -- not the people on the other end of it. Cost and convenience are becoming the ruling factors for decision-making. How can we deal with this reality?
In this race to the future, we have a head start. Customers drive to our dealerships every day with cash in their hands, willing to spend money on service and parts.
Unfortunately, we don't think about these customers in terms of a potential long-term relationship. We think of them as today's paycheck.
A service adviser looks at the customer as two-plus hours per repair order. A service manager sees the key to this month's gross profit target.
A parts manager hears that a customer needs a part and says: It will go on my next stock order. Not: How can I get this part today, to develop a loyal customer?
We need to reset our thinking. It's not about today's sales target or this month's gross profit, although dealers often manage that way. It's about how many customers will come back to us in the long term.
The daily metric we should be looking at is not how much gross we made, but how many customers came through the door. As with sales, if we get traffic we can figure out how to convert it to revenue.
Yet few dealers measure actual vs. potential traffic in service. Pressure on today's gross generates bad behavior, which discourages future visits from today's customers.
We do crazy stuff. We give away oil changes for the first few service visits, and make up that loss by charging high prices for later services that drive customers away. Our customers will pay $29 for an oil change in Year 1, but they won't pay $500 for recommended 30,000-mile service. It's too easy to comparison-shop.
The business model for the future: Leverage today's service customers. Keep them coming back for three to five years, when you can trade them into a new vehicle.
And while you're at it, build a robust service rental-car program. If car sharing becomes a big deal, you must get in the game.
Your loaner car program is your entree, and it can be a profit center. There are lots of other advantages to a robust loaner car program, such as time-shifting big service jobs to a second shift.
Generating showroom traffic is difficult and expensive. You have good traffic every day in service, but for most stores it consists of relatively new buyers with a low potential to trade.
Most dealers capture on their service drives about 35 percent of vehicles that are 3 years old or older. If you could increase that capture rate to 45 or 50 percent, what would that do to your new-vehicle sales and your overall profitability?
Monetizing the service drive means taking a holistic view of service traffic and building a sustainable business model that includes sales, service and a rental-car business. It's not about gross profit; it's about the volume of customers coming through the front and back doors of the store.
That model will keep you relevant. It's what continues to motivate me as I think about what I want to do next in this industry.