Monday, December 16, 2013

Retain and Conquer Through Packages

Service retention and customer conquest are top of mind for OEMs and dealers. There’s a good reason why – the aftermarket consistently siphons customers away from dealers once the vehicle warranty or complimentary maintenance period is over. Oftentimes even earlier.

One major driver here is cost. The 2013 Carlisle Consumer Sentiment Survey shows that not only is the aftermarket much better than dealers at providing a reasonable charge for parts and labor, but, more importantly, it is also better at informing customers of the total service cost up front. New vehicle owners’ first service interactions with the dealer typically occur while the vehicle is under warranty or a maintenance plan and the cost of service is obscured

However, once customers begin to pay for service out of their own pockets, they are hit with sticker shock upon receiving their first service quote. No wonder they soon gravitate toward the aftermarket.

Service packages are one way to combat this issue. Packages, or service menu items, have an out-the-door price, including both parts and labor, for a specific service event (e.g., front brake pad replacement) or several service events (e.g., oil change and tire rotation). Service packages are an inherent part of aftermarket business models. Walk into any Jiffy Lube or Midas, or check out the Pep Boys or NTB websites – package prices are displayed for all to see. Sure, these packages often include fine print such as “some vehicles ineligible” or “pricing as low as”, but for the most part, they are used to draw customers into the shop and provide a straightforward menu of options. Customers like the transparency, and even if the final RO turns out to be more expensive than it would have been at the dealer (i.e., because of upselling, vehicle ineligibility, etc.), the customers will never know because they won’t have given the dealer a chance.

OEMs can borrow from this aftermarket strategy to help win back and defend their business. With the proper design, pricing, and marketing, packages can achieve the following:
  1. Transparent pricing
  2. Consistent pricing
Both objectives can increase customer satisfaction. How? Pricing transparency leads to higher levels of customer trust. Customers can shop services and draw apples-to-apples comparisons between dealer offerings and those of the aftermarket. If packages are created correctly, their prices should be consistent within the dealer. Theoretically, every dealer employee should know the package prices and be able to quote them instantly (or after a quick reference). This saves time for the customer, and avoids a situation many OEMs complain of – employees at the same dealer quoting different prices for the same service.

Some progressive dealers already package price their service offerings on their own. However, this is often a daunting process, especially if it has to be done manually. So what can OEMs do? Help dealers design, price, and market packages.

First, many OEMs provide dealers with aftermarket mystery shop data to help them establish competitive price points for their services. More advanced OEMs also provide dealers with tools to help them create and quote packages, especially for factory scheduled and other competitive maintenance services such as oil changes, filter replacements, and brake services. These tools allow a dealer to look up a customer’s vehicle (by VIN or by selecting vehicle specs) and view all the services that should be performed at that time (or even previously declined services), the associated parts and labor units, and the dealer’s pricing. The dealer can then generate a service menu, review it with the customer, and create a final quote by selecting the services the customer has chosen.

Once a dealer has a set menu of package prices, service marketing can be much more efficient and targeted to directly compete with aftermarket service offerings.

Bottom Line: OEMs should take a page out of the aftermarket playbook to win back and retain their service customers. OEMs can help dealers bundle their most competitive services into packages, including both parts and labor, and charge a single out-the-door price. Dealers will be more transparent and consistent in their service pricing, and that will mean more satisfied customers.

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