Are You and Your Staff Living the Three-Year Business Model?

Roll the calendar back ten or twelve years…we were all younger and better looking, right? What else was different? Warranties were shorter; vehicle quality was relatively poor (compared to today’s standards), global competition was much less and internet communication was in its infancy.  New vehicle customers kept their vehicles three to four years then traded.

This was the period that I will refer to as the three-year business model. The customer buys a new vehicle, brings it in six or eight times for warranty repairs, we clobber them over the head with a $300 – 15,000 mile service and a $600 – 30,000 mile service, then they trade the vehicle and the cycle starts over with them or another customer. This business model worked just fine at that time.

Roll forward to 2017. A customer buys a new vehicle and drives it nine to eleven years. The customer visits the dealership three to five times over the first three years, if at all. The customer is very informed with access to unlimited information at their fingertips. The customer is going to spend on average, over $5,000 in repairs between years three and nine. The problem is seventy percent of the time, they are not spending this $5,000 with the dealership. Why? Because their “perception” is the dealership is too expensive, inconvenient, and/or they just can’t be trusted.

So, what causes these perceptions?

Too expensive

Most dealership service managers have worked hard to make sure that their prices are in line with the competition. But what happens when a customer calls or visits the dealership because their check engine light is on? Many times we’re quoting them $100 or more for diagnosis, yet they’re getting coupons from our independent service provider competition, who offers to scan their system for free. What is this doing to our customer’s perception? How much does it really cost you to do a free “scan” when statistically over ninety percent of customers will leave their vehicle with you for repairs? What happens to the customer’s perception when a dealership quotes them $600 to do a modified 30,000 mile service and someone else quotes them the factory required service for much less?

Inconvenient

How good is your scheduling system? Can you do an oil change in thirty minutes? How is your shop’s productivity? Are you turning away work even though your technicians are not producing? How often do your appointment customers have to wait to be written up because there are too many appointments set for the same time or the customers don’t show up at the correct time? Do you offer extended hours and/or Saturday service? Do you need to?

Trust

In our informed society, we have the ability to research anything. Google the terms “auto maintenance” or “fluid flushes” to see what kind of negative information that you find. California has legislation warning against “wallet flushes”. When a customer has a concern or a doubt about maintenance that your advisor is recommending, the owner’s manual or manufacturer’s website will become their Bible. When the factory requirements are not what the advisor recommended, the trust is lost. Now, this is not to say that some additional services couldn’t be strongly recommended by your dealership, so present it that way. We never want to give our customer a reason to lose trust in us.

If you address these areas, you are more likely to see improvement in customer retention resulting in your dealership getting a much larger portion of the $5,000 in repairs from year three to year nine. This will be called the nine-year business model.

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