The service department has always proven to be a major driver of profitability for dealers of every size.
Even so, current market dynamics are increasingly emphasizing both the short and long-term value of the drive.
The Growing Aftermarket Opportunity
According to S&P Global Mobility, the average age of cars and light trucks in the U.S. reached an unprecedented 12.5 years in 2023, increasing by more than three months as compared to 2022.
At the same time, the S&P Global Channel Forecast, in collaboration with the Auto Care Association and MEMA Aftermarket Suppliers, projected significant growth in the U.S. light duty aftermarket in 2022, with revenue increasing by more than 8.5% from the previous year. Early forecasts anticipate a revenue increase of 5% or more for 2023.
This represents lucrative short-term opportunities for dealers to generate revenue from repair orders. Although revenue opportunities are still high, they are rapidly declining after reaching record highs.
Opportunities Beyond Repair Orders
Today, the drive is no longer just a service center – it’s a conduit to conquesting, customer engagement and loyalty, especially as high interest rates and inflation have many customers second guessing their next purchase decision.
Dealers need to take a data-driven approach to identifying and engaging the right customers – not only those who need service but also those who present a strong inventory acquisition or future sale opportunity.
These opportunities are split into two basic camps: customers who currently service with your dealership and prospective service customers who don’t.
For customers in a dealership’s service portfolio, service loyal and service unsold buyers represent an invaluable opportunity for dealers to connect the dots between their sales and service departments. Customers who are already servicing with you are much more likely to buy from you and are low-hanging fruit for your conquest and retention efforts.
Taking a data-driven approach is critical. Being able to filter through this crowd of customers and prioritize your best opportunities will greatly increase the efficiency and effectiveness of your process. Personalizing your engagements based on data-driven insights will lead to further improvement in this area.
Strategic Alignment for Service Drive Profitability
Of course, not every service customer will be ready or well-qualified to purchase. This is why a successful service-to-sales strategy ultimately hinges on understanding customer history and buying motivations, presenting the right offer at the right time and maintaining consistency across touchpoints.
Every touchpoint should build off the last, starting with the first customer communication. This requires dealers to take a targeted and proactive approach, engaging customers before they’re in the service drive with personalized messages tailored to their unique situation.
Sales and marketing teams need to leverage their CRM, DMS, maturity manager, equity mining and sales platforms to proactively identify and pre-qualify service-to-sales prospects before their appointment.
This also requires sales, marketing and service departments to work in tandem to strategically align their efforts across teams, supported by staffing, training and incentives to help motivate the combined team.
By breaking down the barriers between departments, dealers can provide a seamless customer experience that nurtures prospects from the drive to the showroom and fosters long-term loyalty.
Service Drive as the Bedrock of Profitability
As the market shifts, the service drive continues to be a consistent source of dealership profitability. Aside from generating profit from ROs, the service drive serves as a hub for customer engagement, loyalty building and sale conversions.
By strategically building their own service-to-sales pipeline, dealers of all sizes and OEMs can fuel their service drive’s profitability while simultaneously nurturing customer loyalty – and outperforming competitors.
For more service-to-sales tips, check out our recent webinar on-demand: Crack the Code: Fueling the Service Department.
