by: Mike Gorun
One of the advantages of Pre-Paid Maintenance Programs (PPM) is that they span the generational gaps. Regardless of which generation consumers happen to be in, none of them like surprise repairs, or other expenses. That’s why dealers focus on payments – and not price – when selling cars.
Consumers want fixed expenses. When it comes to millennials, they tend to be saddled with all sorts of debt including those credit cards they eagerly accepted while in college, and the student loans they end up with in order to launch their careers. Older generations are at, or close to, the point of fixed incomes from retirement plans or social security. Peace of mind that their vehicle is covered, and they are protected against any unexpected repairs, is perhaps more valuable to these consumers than ever before. That’s why many service industries have navigated to fixed price service plans.
Consider cell phones. The big rage nowadays is the “All-inclusive price” plan. Consumers simply choose a carrier and have all the service they need for a fixed amount. I’m sure you’ve seen the advertisements and commercials. Why are these plans so attractive? I would argue that it’s the fact that consumers don’t like surprises or variables in their monthly expenses.
PPM programs are attractive for exactly the same reason. They provide car buyers with peace of mind that their monthly vehicle expenses will remain the same and that their vehicle will be reliable.
However, while these items may be missed (or declined) in the finance office, there is a perfect opportunity that many dealerships miss to pursue them later in the service drive. Just because someone said “No” in your finance department, doesn’t mean that they will say the same thing later. Lots of factors are in play when buying a car – emotions are high, anxieties overpayment could be in play, and exhaustion from being at the dealership for several hours could also be part of the problem. Once the sun comes up and all of those factors settle down, a consumer could perhaps have a clearer view of the advantages of a PPM.
Recent research suggests that almost 65 percent of dealers are ignoring the opportunity to offer dealer-branded PPM plans to current customers that visit their service lanes. While many offer OEM branded plans in the F&I department, the service lane is generally overlooked, not only as a selling opportunity but as a chance to re-engage hundreds of customers for a guaranteed period of time. Dealers are in fact losing two-thirds of their possible customer service affinity as well as potentially missed revenue measured in millions of dollars.
Really? Millions of dollars left on the service drive floor? Yes. It is so simple.
There is no argument that PPMs significantly raise dealer service retention. It is in fact documented that many dealers experience a retention rate of over eighty percent among those customers who purchase a PPM. So, why are so many dealers’ service retention numbers so much lower than that — anywhere from 30 to, in rare cases, maybe 60 percent? That’s a huge loss in retention and potential profit.
In my thirty-five years in the automotive business dealers have shared many different rationalizations as to why they choose to overlook the potential of PPMs in service. While many of the reasons are beyond sensible business logic, such as “I can’t handle any more service business,” or “My advisors are too busy to sell anything else,” they all escape the fact that, as a dealer, they likely see more customers in the service department in two months then they sell in new vehicles in an entire year! Yet only about 35 percent of franchise dealers offer service drive PPMs today.
It really is simple, but it takes a good eye on both new and used vehicle buyers in your service drive. Just like any other service lane up-sell, it should be positioned as an additional customer advantage on top of what the dealership is already doing, and should be included on all service product menus. By including it on your service menu it serves as a tool for your advisor to sell other services by utilizing any discount the plan may offer on the service the customer is contemplating purchasing during that visit.
Don’t be afraid to keep discussing the benefits of pre-paid maintenance with your customers – whether you sold them the vehicle or not – as it only serves to benefit both your dealership (by maintaining a customer relationship) and the customer.
Bio: Mike has a variety of professional automotive and business development credentials having of 18 years of operational management experience on the OEM side with Ford, Nissan and General Motors. As a true Internet pioneer, Mike combined his knowledge of wholesale and retail dealership operations with emerging internet technologies and created CarSmart.com in 1994. Later acquired by a publicly traded corporation it was the largest automotive internet acquisition at that point in time. Mike is a graduate of the University of Wisconsin with degrees in Industrial Education and Process Engineering.