Driving customer retention in fixed operations: Transparency is critical to retaining service customers

To maximize customer retention in fixed operations, few things matter more than transparency. But what exactly does that mean and how can dealers ensure they’re providing it for customers? Here Brad Kokesh, Chief Revenue Officer at TraXtion, a leader in tire and wheel-alignment technology that helps generate revenue for dealerships, offers some compelling insights – including an explanation of why tires eventually will replace oil changes as a “gateway service” that brings consumers to service drives.

Q: Transparency in service department clearly is a virtue. But can you quantify its impact on dealerships’ bottom lines in terms of revenue, customer retention, etc.?
 

Brad Kokesh: You need to measure the right metrics once transparent processes are engaged. Identifying opportunity and providing technology-driven data to support recommendations allows customers to make informed repair decisions. Quite simply, comparing conversion rates of recommended service versus sold service over time will measure effectiveness of any process or technology. It’s estimated that the auto-care industry will surpass $400 billion in annual consumer spending by the end of 2025. However, since 2021, franchise dealerships have lost 5% of that business – or $20 billion – to aftermarket independent and retail providers. On average, that is $1.1 million in lost revenue per year, per franchise dealership. If dealerships can repair the leaks in their retention buckets by proactively enhancing the experience through transparency, we’ll reduce our customer-acquisition costs and leverage a more loyal customer base going forward.

Q: Once a dealership has the right people and processes, what technology tools can help create a more transparent relationship between the service department and customers?
 

Kokesh: Customers are begging for technology that enables the dealership to share detailed information regarding their vehicle’s condition and safety. This is one of the reasons OEMs have added so many onboard diagnostics. By using photos, videos and clear communication, dealers increase transparency and convey professionalism and honesty. Show – don’t tell – customers what work is required. If something isn’t required, let the consumer know that, too. It builds trust.

Customers turn to social media and YouTube to educate themselves about different aspects of their life every day. Educate them in the service drive to help them understand exactly what repairs are needed and explain what’s in it for them: improved safety, better reliability, extended vehicle lifespan and so forth. There is technology that can do this for service advisors. Transparent, actionable information that educates the consumer builds trust and keeps them coming back.

Q: Apart from finding employees with the innate personality and character that make for a transparent service drive, what can the dealership itself do to encourage these behaviors?
 

Kokesh: There is a meaningful connection between retention and revenue in the service drive. On average, customers keep their cars for more than 8-10 years. That’s a 7% increase since 2018. But most dealerships, spend more money on and put more effort into customer retention on the variable side than on fixed operations. On average, service advisors work with customers two to three times per year for repairs and maintenance, while your salesperson is waiting on that 10-year cycle for an opportunity.

The average price of service visits at dealerships have increased almost 45% since 2021, which makes pricing and repair transparency even more important. Dealers need to deploy efficient and consistent processes that create customer value, rather than rely solely on pay plans, seasonal contests or an employee’s personality. They should incentivize service advisors and technicians based on what drives consistent revenue and enhance the consumer experience to drive retention. The result of not changing anything today is very costly tomorrow.

Q: Does the emergence of the electric vehicles (EVs) present new challenges to the service department in its quest for greater transparency and customer service?
 

Kokesh: Fundamental differences in EV models will require more education for dealers and customers alike to understand expected maintenance and service needs. Typical items like oil and fluid changes will no longer exist to spur consumer visits to service drives. Instead, tires will become the new “gateway service” for dealerships. We all know EV tires cost more. And because they wear quicker, due to the greater weight of the vehicles, they will require more frequent replacement. It becomes even more important now for dealers to become the knowledge center for how tires should be matched to specific brands and models. Today, consumers are drawn to the cheapest tires or the ones in stock when they make their decisions. Become the trusted expert around the wheel for that customer, and you will watch retention climb.

Q: What are the best practices that make for a transparent service experience?
 

Kokesh: Let’s be honest: Offering customers phone chargers and Starbucks coffee doesn’t build trust. When it comes to the consumer experience, pricing and technology both play critical roles. Most dealers think that the top reason consumers defect is due to price. That’s one of the largest misconceptions in business. The average cost of a dealership service visit in 2023 was $258, while that same visit to an aftermarket provider was $249. Dealers enjoy a distinct advantage: A warranty period that draws visits to their service drives. This leads to another assumption, that factory-warranty expirations cause defections. Although this is impactful, there are other factors that make this an opportune time for customers to find a new service center, such as tire replacement. Most factory-issued tires are due for replacement around 30,000 to 40,000 miles. If you drive past any tire wholesaler, you’ll typically see a line of cars getting free tire checks. It’s one of their methods of conquest – and it really works. Once those customers defect from dealerships, they don’t return until they are ready for a new vehicle – again, about once every 8-10 years.

When it comes to tires, dealers miss opportunities for revenue and consumer retention. It’s not the tire markup alone, but the entirety of “around-the-wheel work” that occurs when tires are rotated, aligned or replaced. Adopting technology to analyze the condition of tires, then communicating the results to customers in easy-to-understand language spurs a conversation between service advisors and consumers without creating the perception of an upsell. And it’s just as important to let consumers know when their tires are good as it is to inform them when they may need to be replaced in the future. Transparency, education and predictive wear technology work together to build trust and retention.

ABOUT THE PANELIST

Brad Kokesh
Chief Revenue Officer, TraXtion
Kokesh is a highly respected leader, motivator and speaker in the automotive industry, with more than 27 years of experience in dealership retail and software as a service (SaaS). He joined TraXtion’s executive team in 2023 and leads sales and marketing efforts. To learn more about TraXtion, visit www.TraXtion.com.