Bottom Line Benefits Drives Retention and Healthier Service Volumes
By: Ryan Williams
We all know that having skin in a game keeps our attention. Freebies, though nice, often don’t. How many of the tchotchkes you picked up while touring the convention hall at NADA this year made it from the convention center to your hotel room to your office?
For many, free things have less perceived value. Likewise, some believe that prepaid maintenance plans that are given away by dealers to new and used car buyers have diminished or no value.
The fact is, most PPM plans are packed with value – oil changes, alignments, rotations, and other routine service maintenance items. So there IS value – the car buyer didn’t pay a nickel for a benefit-rich plan they received gratis from the dealer. The problem is that many free plans are given away, but the dealer makes no further effort to remind the recipient of the plan’s value to them or to encourage them to take advantage of those services at the dealership.
No one needs dictate to dealers they have to give plans away. Whether the dealership created the prepaid maintenance plan internally or uses a service’s product, the dealer should always have a choice whether to give the plan away or charge a fee. I’ll talk about that decision a little later in this article.
I challenge both dealers and providers who say “free” plans fail to generate returns for the dealership. Here’s why. Customers often toss giveaway plans into the glovebox, where the value of the plan is forgotten about and the services are never used.
But the problem is not that the plan was free.
This scenario can and will happen to any plan, even ones you charge the customer for, unless the program includes point-of-sale materials for the dealership and post-vehicle-purchase marketing and promotion to stimulate plan use. Ideally, your program should provide holders some reporting functionality, so they can monitor benefits usage and the dollar savings.
If you’re building such a plan internally or sourcing from an agency or vendor do not launch the program without having the front-end and follow-up reminder support to drive greater plan awareness and usage. If your plan usage level is below 65 percent, it’s time to re-evaluate and take the steps necessary to change how your plan works.
Before we dive more deeply into this essential component of a plan’s success, the reader might want to review the prior two articles in this three-part series on why and how PPMs can increase customer retention and service dollars.
In my first article, “Why Service Customers Buy Prepaid Maintenance,” I noted that not offering customers prepaid maintenance shortchanges both the customer and your business. Well-designed plans appeal to many buyers, and though most plans get into customers’ hand through F&I, 25 percent get there via an upsell-oriented service advisor. Some dealers opt to give them away to buyers – realizing their value to the dealership is downstream – future service expenditures and business retention.
In “Build Your Own Planned Retention Program and Drive Service Volumes,” I offered a multi-step plan for designing and managing a home-built plan and discussed some unique challenges for the dealership who prefers do-it-yourself solutions. That article noted that software is available to automate, simplify, and manage these programs, provide accountability for the investment, and help management identify opportunities for improving the process.
I noted that dealers using our program enjoy, on average, first-year retention lift by as much as 85 percent and second- and third-year repeat business by 65 percent. On average, dealers using this software approach to automate, structure and bake in accountability generate up to $70 customer-pay upsell per repair order.
In this final article, I want to share best practices for ensuring plan use and benefits redemption. Putting a plan into action is essential, whether you design and administer a prepaid maintenance plan in-house or source it from a plan provider – and whether you sell it at a discounted rate to your customers or give it away (at least to vehicle purchasers).
- Use dealer-brand banners or posters on vehicle rooftops, sales desks, in the customer lounge as silent sales staff for your plan.
- Make it easy for customers to redeem services and track their usage. Compile that data monthly and communicate via mail or email to plan holders – and/or create a dealer-branded website for the dealership where customers can review their services and redemptions, and if the plan is points-based, where they can review their points balance or rewards balance.
- Train service advisors – have them get familiar with program details and how it works – and hold them accountable – to determine if the customer has a plan, and if not, present the plan and its benefits. If the customer has an existing plan, the service advisor should retrieve it so remaining benefits might be applied to the day’s service expense if any.
- Create dealer-branded, customer-specific loyalty cards that are mailed to new plan holders; use first-class mailing to convey the value of the contents of the envelope.
- Create or insist your provider provides high-quality mailing pieces and dealer-branded collateral to help continue building awareness and keep customers returning to your shop for necessary routine maintenance services.
Last, be sure the plan you choose or implement yourself has built in accountability control. A program lacking specific reporting functions isn’t a plan. Unless you can track plan distribution, redemption, upsell and other revenue-generating outcomes, the plan is merely a guess. That is not how you run your business nor how you should run a prepaid maintenance plan, not with the ROI they can generate.
By implementing professional PPMs, dealerships can dramatically lift first-year retention by as much as 85 percent. Take a close look at how your program is performing and how your dealership is promoting the plan. Is your PPM program, on average, generating up to $70 customer-pay upsell per repair order? If not, it should be. If I can help, please contact me.