Why masked employees may put customers at ease

Rose Kacoyannakis usually takes her 2010 Chevrolet Cobalt to Midas and an assortment of other independent repair shops for brakes, tires, oil changes and other regular maintenance. With her car long out of warranty, she doesn't even consider taking it to her local Chevy dealer for service. But that changed last fall when a metal fuel line began leaking.

"With the fuel leak, I wanted Chevrolet to fix it," says Kacoyannakis, a retired landscape architect who lives in Hudson, Mass. "They know about this issue. There was a partial recall on Cobalts back in the day about fuel lines rusting out."

Kacoyannakis did query a local garage about doing the repair. But when the shop couldn't obtain genuine General Motors repair parts, she deposited the car, with just 63,000 miles under its wheels, at her Chevrolet dealership for the repair.

Even though the bill was likely more than she'd pay for the same job at an independent shop, Kacoyannakis felt the warranty covering parts and labor, plus having her car fixed by a pair of factory-trained hands who had performed the job before, was worth the extra money. The repair bill totaled $707 — $448 for labor, $259 for parts.

Kacoyannakis represents what could be a potential gold mine in service department profits in the years ahead as the population of 6- to 10-year-old vehicles swells to historic proportions. Every year from 2010 to 2016, new-car sales in the United States increased. According to the Automotive News Data Center, just over 106 million new vehicles were sold in those post-recession years.

Now, with the miles piling up (Americans drive about 12,000 miles per year), wear, tear and time are taking a toll on vehicles sold in the immediate post-recession years. High- profit, customer-pay repairs as a result of worn-out transmissions, leaking radiators, faulty starters and alternators, clogged fuel injectors and bad sensors will be more common in the nation's aging vehicle fleet. But without a targeted marketing plan aimed at customers of these older vehicles, dealers are likely to continue seeing much of this potential business being flatbedded right past their service drives and into the bays of independent garages.

When a vehicle's factory warranty expires, the nation's new-car dealers lose seven out of every 10 customers to independent repair shops, fast-lube businesses and tire stores, according to a 2018 Cox Automotive service industry study.

It's hard to put a dollar figure on that, but here's what keeping customers coming back to the dealer means to Ford: "If we can move the average age of retention one year, it would result in a 25 percent growth in our business," Frederiek Toney, Ford Motor Co.'s customer service division vice president, told Fixed Ops Journal.

The main reason potential service customers drive past the dealership where they purchased their vehicles, fixed ops experts say, is because they believe dealers charge too much.

"Of the top five reasons customers stay away from dealerships for service, four of them have to do with price," says Jim Roche, vice president at Cox Automotive.

But Roche says a closer look at the data shows many dealers are competitive on price with independents but that consumers have not gotten that message.

Toney says all automakers need to work to combat the perception that dealership repairs are more costly than independent shops.

"We as [automakers] have to do better and offer menu pricing that gets into the total cost of the repair and helps fight back against this image that we are too pricey, too inconvenient and not transparent," Toney says. "If you want to be competitive as a dealer, you've got to make yourself competitive in the marketplace."

The challenge for service directors is to reconnect with drivers of older cars with specific marketing materials that show dealers are competitive. There is no template that guarantees success.

Universal Nissan in Orlando tracks the age and mileage of vehicles brought in for service. Once a vehicle has been on the road for five years and reaches 100,000 miles, it becomes part of the store's Legends program. Legends customers automatically get a 10 percent discount on parts and labor. Tom Kane, Universal's service director, makes sure his customers know about those discounts through digital marketing.

The program has shown year-over-year growth since it debuted in 2017, but Universal, like many other dealerships, spends most of its advertising on sales, not service. Kane believes automakers could help service directors win back business from independent shops if they allocated more advertising dollars to service.

"As the parts and service director of a Nissan service department, I can't go on TV and radio," Kane says. "But the manufacturers could. And that is one of the things I think they really miss out on. If you look at the marketing dollars spent in selling a new vehicle versus promoting service, automakers are really addicted to this month's sales. But service is where we are keeping customers."

Automakers have specific information on units in operation for each market that could be leveraged for service department marketing. But it is not clear if this is routinely done.

Fixed Ops Journal asked service experts what advertising messages would most appeal to those drivers of post-recession vehicles who have drifted away from dealerships for their maintenance and repairs.

Although conveying pricing vs. the independents is a key component, service directors should also focus on the other value-added spiffs the store offers that most independent shops can't match. Convenience and familiarity are two examples, says Roche.

"Dealers should remind the consumer that vehicles are complex," he says. "When you buy a product that is complex, you inherently associate [service] expertise with whomever you bought it from. You go to Best Buy, talk to them about a TV, they know something about TVs. 'We have the know-how. You bought the product from us.' Leverage that."

Says Ford's Toney: "People need to understand that we have trained techs with the proper certification. It's about the value, not the total cost. We need to get the message out about the ingredients in the value proposition," he says.

Some of that added value, he says, doesn't show up on the repair bill but includes use of a loaner vehicle or shuttle service, a customer lounge with Wi-Fi and factory-backed parts.

Ads should also convey that the dealer has the right parts in stock, extended service department hours and menu pricing.

Service directors winning back customers who bought vehicles in the post-recession years hold many of the keys to success in the front end of the store, too.

A recent Cox study showed that service is directly tied to new-car sales. Customers who use the dealer's service department are twice as likely to shop that dealer for a new car as customers who get their vehicles serviced elsewhere.

Says Roche: "Dealers more and more are becoming aware that if you are not doing the service, you are much less likely to sell them their next car."