Build Planned Retention Program and Drive Service Volumes
If you’re serious about growing customer retention and service sales, perhaps it’s time to put into play a strategy that many dealers point to as a winner – a prepaid maintenance plan, commonly referred to as a PPM.
As its name suggests, this retention tool leverages prepaid or discounted essential maintenance services that a dealer gives to buyers or sells at an appealing price, to connect them to long-term use of your service department. Unlike similar OEM-branded plans, this kind of retention offer should be redeemable by customers only at your dealership.
The right plan, promoted, managed, and administered the right way, can drive customer retention (from customers using the programs) and generate increased customer-pay upsell dollars per repair order flowing from plan use.
Setting Up and Managing the Program
If you’re looking to build and manage such a program yourself, you’ll want to set up a number of key process basics as foundational:
- Assemble an appealing combination of three to four products – a mix of LOF, tire rotation, alignment, or wiper services. Discount their package prices by as much as 45 percent – or give plans away as an incentive to start buyers servicing at your dealership. Remember, the value is in its ability to create downstream service revenue. Some dealers are enjoying as much as a 60 percent lift in fixed ops parts and service sales by using these plans.
- Market this value-add to customers via mailings and point-of-sale materials, and have every employee trained on how to present the plan, how it works, and its value with confidence to every customer.
- Remind plan holders on a regular basis — at least quarterly — of plan value to encourage them to stop into your service department.
- Establish a fund reserve — a managed pool of the monies you collect from plan sales (or which you have set aside for give-away programs) — that will fund plan products and services as they are redeemed or used by your customers at your dealership. Only the states of California and Colorado regulate these plans, as they consider them an insurance product, and the funds must be administered by a third-party. Dealers in other states may manage reserve funds as they see fit – or charge plan activities to a unique internal ops code.
- If you have a BDC or outsourced service calling to set service appointments and make reminder and follow-up calls, update these resources regularly as new plan holders are added. You’ll increase plan usage – and extend upsell opportunities – by periodically reminding customers holding these plans to use them. Likewise, have educational materials developed about your plan that you can provide to new customers, to help them see the value and benefits in your program.
- Provide usage reports to your customers. The report should show their plan usage and the dollar savings they’ll realize by not paying retail for those services. The plan also reminds them to use plan benefits more frequently.
- Create management reports. These should show: new business driven by the redemption of services in the program; who are the dealership’s more active users (perhaps you’ll see an opportunity to send reminder marketing materials to less active plan holders); and what the ROI is on your plan investment.
Accountability is Key to Success
This reporting may prove one of the most challenging tasks when building your planned retention program. A paper-based plan is feasible — some of you may remember that before computers we all tracked business key indicators this way — but look to your IT expert to develop these reports to simplify the chore.
This accountability/reporting feature should track the number of plan holders in use, as well as their activity rates and frequencies; did customer-pay upsell revenue result from a plan redemption and how much was that RO increase? From what department did the plan presented to the customer originate? Who are the personnel responsible for putting plans into customers’ hands?
Finally, you need to have, at minimum, the following best practices in place. If you already manage a plan, perhaps you’ve allowed these practices to lapse, so this should prove a helpful review:
- Be consistent – put a process in place, so every buyer is given a quick tour of the service facility – the shop and not just the lounge – and set the customer’s first service appointment!
- Get post-sale marketing in gear right away. Send out service invitations, and include coupons or other incentives, to get plan holders thinking about their first service, even if it’s several thousand miles or months in the future. Send regular reminder mailers, to stay front and center with your plan holders.
- Train and incentivize service advisors, so they upsell confidently and comfortably. Teach them how to develop a rapport with customers – and to go out of their way to warmly greet the customer. If the customer left earlier service details with an appointment setter, make sure advisors are notified– it kills trust when customers are asked multiple times why they’re in for service.
- Sell tires. Retain customers by being the first provider to suggest new tires might be in order, and demonstrate why buying tires from the dealership today has great value for them.
- Buy trades in the service lane. Signage in the lane and in the wait lounge, informing customers that you want to buy their trade, does work. Put sales associates on the lane to ask customers if they might present them with a trade-in offer. In turn, compensate service and advisors for the work found on that customer’s vehicle; consider this investment early completion of your recon processes’ mechanical/parts phases.
Profits Speak Volumes
If all this sounds challenging, it is! Fortunately, software is available to automate, simplify, and manage PPM retention programs, provide accountability for the investment, and help management identify opportunities for improving the process.
Professional PPMs can lift first-year retention by as much as 85 percent and second- and third-year repeat business by 65 percent. On average, dealers using software-driven plans that automate, structure and bake in accountability generate up to $70 customer-pay upsell per repair order. If I can help, please contact me.