By Sean Toussi,CEO and co-founderGlo3D.com
The service department plays a supportive role in sustaining dealership profitability alongside sales and other services. According to the National Automobile Dealers Association (NADA), dealership service and parts sales amounted to an impressive $142.62 billion last year, making up a substantial portion of dealership revenue.
Furthermore, Forbes reports that over 40 percent of a dealership's total income can originate from the service department, emphasizing the significance of this revenue stream, which annually generates more than $200 billion in the U.S. Despite these impressive figures, the service department, like any other division within the dealership, faces its own set of competitors and challenges, notably from independent service providers and the implications of manufacturer-recommended service intervals.
Implementing robust marketing strategies that effectively navigate these challenges is essential to maintaining competitiveness and market strength. This article will outline key strategies to enhance the service department's effectiveness and profitability.
The Importance of Data-Driven Strategies
In many dealerships, the focus on data gathering traditionally centers more on sales and marketing departments due to their direct impact on revenue. However, the service department often receives less attention in data utilization despite its significant potential for customer retention and revenue.
This oversight may stem from its traditional perception as merely supportive rather than a primary revenue source. Additionally, service data—such as maintenance histories and customer feedback—differs fundamentally from sales and marketing data.
Dealerships would benefit from prioritizing data gathering and marketing in the service department, alongside other departments, to enhance revenue generation and cultivate customer loyalty. For example, they can enhance service department strategies by using vehicle maintenance histories to send proactive service reminders and analyzing customer feedback to tailor service packages. These efforts make promotions more relevant and boost customer engagement and loyalty.
Enhanced Customer Experience
Dealerships can create a more cohesive relationship between their sales and service departments by training sales personnel to promote the service department actively. For example, sales teams could be trained to emphasize specific maintenance packages or warranty benefits during the sales dialogue, ensuring customers understand the long-term support available through the dealership's service center.
Additionally, implementing a process where sales staff schedule the customer's first service appointment as part of the vehicle purchase—perhaps including a complimentary oil change or vehicle inspection—can enhance the initial customer experience.
Another effective tactic is introducing new customers to the service department staff during purchase, fostering a sense of community and continuity. A brief meeting with a service technician to discuss maintenance schedules and service tips can build trust and clarify the service process for customers. Such strategic alignment requires thoughtful planning and dedicated training efforts, but when executed well, it enhances the overall customer experience and boosts the perceived value of the dealership's offerings.
Optimizing Local Marketing Strategies
It is more practical for dealerships to focus on service marketing for nearby areas since most vehicle services typically occur at the nearest location. This strategy and delivering positive customer experiences often lead to word-of-mouth referrals, which are highly effective in smaller, localized markets. To capitalize on this, dealerships can improve their local SEO strategies and optimize their Google Business Profile to ensure high visibility in local search results.
The service department is a vital revenue driver for dealerships, significantly enhancing overall profitability. By investing in data-driven strategies, integrating sales with service, and optimizing local marketing, dealerships can transform their service departments into powerful engines for growth. These efforts ensure dealerships meet and exceed customer expectations, boosting their bottom line.
Sean Toussi serves as the CEO and co-founder of Glo3D.com. He is an expert in new technology trends and the auto industry and is regularly featured in publications such as Forbes, Digital Dealer magazine, and UCD magazine. Additionally, he is a member of Forbes magazine's technology counsel, BoA of NY Auto Museum, and speaker at the UN economic forum, NIADA conferences, National Independent Auction Association (NIAA), and Motor Dealers Association of Alberta (MDA).