If your fixed-ops doesn’t have its own marketing budget, then shame on you! Far too many dealers treat fixed-ops as an afterthought, content to spend unconscionable amounts of money on attracting new buyers without any thought as to cultivate those new buyers and turn them into loyal repeat buyers.
Furthermore, your service department is not just there to run internal tickets on your used vehicle inventory. Service, as a stand-alone, is a huge gold mine that most dealerships leave untapped.
For fixed-ops to reach its full potential, you must start to recognize and treat it as an independent and self-sustaining entity. If you haven’t already started to treat your service department as its own business-within-a-business, here are some reasons why you should start.
Studies have shown that many dealerships sales departments spend 60% (or more) of their gross profit on advertising. This should be alarming due to statistics showing that walk-ins only convert into a sale at a low 15-20% close ratio at most dealerships.
Compare this to an average of 5-7% of service department gross profit that gets spent on advertising. Ironically, what do you think the sales close ratio is for service customers who happen to need a new car? Research suggests it is much closer to 60% conversion rate as opposed to 15-20% for walk-ins. And the acquisition (advertising) cost to attract those buyers is next to nothing.
So why would you spend so much money attracting walk-ins with a such a small close ratio? Wouldn’t advertising money be better spent in your service department?
In the car business, we do a great job of getting shoppers in the door. We have worked our strategies around numbers and percentages to the point where it is almost scientific. $XX,XXX in ad spend will result in XX sales and $XXX,XXX gross profit. Unfortunately, not much effort or money is spent in cultivating those new buyers for future business.
The most effective way to retain a new buyer is to keep them coming back into your dealership on a regular basis. Fixed-ops is your number one asset when it comes to customer retention. Every time a new buyer brings their vehicle in for maintenance or service, you have the opportunity to reinforce your dealerships commitment to them and to continue to build a lifelong relationship.
Your dealership needs to have strategic marketing campaigns in place focused specifically on retaining new buyers through fixed-ops.
As mentioned earlier, fixed-ops is often an untapped gold mine of incremental profit and growth potential. If you treat service and parts as its own business (that could survive on its own without your sales department), you will start to see that the opportunity is huge.
This only happens if fixed-ops is allowed to run its own advertising campaigns with its own budget. So, if your fixed-ops doesn’t have its own ad budget, perhaps now you see why it should. And, perhaps now, you see why that ad budget should be sufficient to make a real, lasting impact on the future growth of your dealership.