Today, we welcome back Jim Roche, Vice President at Cox Automotive. In this segment, Jim discusses the latest additions to his book “Fast Break“, the new Kelley Blue Book Auto Repair Guide, and other exciting things coming up at this year’s NADA Show. To find out more, stop by their booth #2821C.
Jim Fitzpatrick: Hi everyone. Jim Fitzpatrick with CBT News. We’re so happy to have with us an old friend of CBT News, Mr. Jim Roche. I know that you’ve seen Jim Roche here on our network before. It’s always a pleasure, Jim. Thanks so much for spending some time with us this morning,
Jim Roche: Jim, it’s always good to see ya and although it’s a little late, happy new year.
Jim Fitzpatrick: That’s right. Happy new year to you as well and yeah, at what point do you stop saying it, right? Is it the 15th, is it the 30th? Are we going to do that into February? I never know but anyway, thank you for that. It is always good catching up with you because you’re where the rubber meets the road in this industry with regard to fixed ops and the service department and such. Let’s talk about that a little bit. Obviously, we came off of another great year in retail automotive with the SAAR of around 17 million vehicles. I think it was a little less on the retail SAAR but nevertheless, an overall good year. What were some of the trends that you saw coming out of 2019 as it relates to fixed ops and some of the things dealers were doing to maximize their profits back there?
Jim Roche: Well, as you pointed out, Jim, number one, it really has been a soft landing in terms of going into a downwind part of the cycle as you point out with vehicle sales and we came in around 17 million, but that might’ve been void a little bit by more fleet sales at the expense of retail. Nonetheless, I don’t think anybody is crying about it or saying, “Well, wow, please, let’s have another year like that,” right? The trends that we’re seeing that play into that, number one, are margin compression, which we’ve talked about before, it’s just getting harder and harder to make money selling cars, particularly new and the role that fixed ops plays in that.
Jim Roche: According to NADA in 2018, fixed ops was only 12% of total dealership revenue, but it was 49.6% of total dealership gross profit. That trend is going to continue. I think generally speaking, what we need to see dealers doing more and more is improving the experience so that they keep their loyal customers in service. As you know, if you’re loyal throughout the service period, we’re much more likely to buy that next car from the dealer.
Jim Fitzpatrick: That’s right. There seems to be a much bigger emphasis on getting that customer back into the service drive after you’ve delivered a car to them. In the past, it was kind of, and I can speak from my own experience, you’d sell a car as a sales manager or as a GSM and you really weren’t focused too much on whether or not they brought the car back for service. It was kind of like a nice to have, but not a must to have with regard to profit. In fact, it was an area that I didn’t get paid on as a GSM at the time or a new car sales manager, so I didn’t really have a dog in the hunt as they say. It was kind of a yeah, come on, bring it back, but there wasn’t a big effort made. Now it’s really all about how do we get those customers that we’ve sold cars to, to bring their vehicles back and their family’s vehicles back to our service drive, right?
Jim Roche: Oh, absolutely. I mean, I think what you just described, guys like you and me fondly referred to as the good old days, right?
Jim Fitzpatrick: Right.
Jim Roche: Now, and you really touched on an important part of it, there’s got to be an incentive to the folks who are working on the variable side of the store to make that handoff so that you get that customer from the first visit and get them ingrained in coming back to the dealership. It really is true. Even though we’ve been saying it for years, that sales sells the first one but service will sell the rest of them.
Jim Fitzpatrick: Last year at NADA we discussed your new book, Fast Break. This year, you’re going to be debuting a new chapter. What’s it about? What inspired you to add to the book?
Jim Roche: Sure. Well, Fast Break was all about creating loyalty by delivering a technology-enhanced experience to the consumer, but as we worked through 2019 we noticed a couple of interesting data points that came out of Cox Automotive Research. We already know that after five years of ownership, only 29% of consumers are still returning to the dealership for service. We’re losing more than seven out of 10, right?
Jim Fitzpatrick: Isn’t that crazy?
Jim Roche: Of the top five reasons, four have to do with price, so hold on to that. Then when we looked at the research, we saw that dealers, service prices, particularly the competitive items, are at parody. There’s not a price disadvantage. If consumer’s saying, “I’m leaving because of price,” but dealers’ price is the same, then what’s broken? We concluded that two things are broken. One is awareness. Dealers aren’t because they’re not price transparent, they’re not telling consumers that they’ve got a great price, but then in some cases it comes down to trust. Even if you tell people my prices are the same, maybe because of bad habits going back into the past, consumers say, “You know what, I’m not sure that I believe you,” so we bring that to the surface in the new chapter and we talk about some methods that you might be able to use with third parties to reestablish to bridge that trust, put out price transparency for service and get those consumers coming back.
Jim Fitzpatrick: Yeah, that’s a very good idea. Our competition is in the industry are places like Walmart or Jiffy Lube or Bob’s Automotive Repair Shop or what have you. At the end of the day, what they don’t have is they don’t have a multimillion-dollar showroom and lots sitting in front of those service bays. Just the mere fact that the consumer looks at the dealership and says, “Whoa, that place is going to be expensive to go into,” and because we make such a good presentation there, but it just looks like money, versus going to someplace that says, “Hey, we’ll change your oil for 99 bucks or 75 bucks or whatever the number is,” and you can kind of see the bay, there’s nothing too fancy about that, right?
Jim Roche: That’s right, but here’s what’s one of the other interesting things that’s happening is we all know that the average price of vehicles is going up and up. That’s primarily driven by how much technology is going into the vehicles. Thanks to the media, consumers know that, right? There’s between on average 30 to 50 computers on board and more and more we’re seeing sensors arrayed throughout the vehicle, so consumers hear more and more technology. When they see the dealer and a sophisticated facility, more and more they should be correlating that to, “Wow, it’s not a simple mechanism anymore. Vehicles are really complicated and the dealer has the technological knowhow to work on those.” That increasing technology creates anxiety and consumers but fundamentally, what we found is that when consumers need to get their vehicles serviced, they ask for questions. They say, “Look, tell me what I need to do when I need to do it, and here’s one of the keys. Who’s qualified to do it and about what should it cost?” If you can answer those four questions and again, there’s price transparency in there, then you can win those consumers back.
Jim Fitzpatrick: Yeah, I agree. I agree. Talk to me about how consumers are reacting to the newly introduced auto repair guide.
Jim Roche: Sure, so Kelley Blue Book has added a new section to its site that’s called Auto Repair Guide, and it was constructed to answer the four questions I just mentioned. Tell me what I need to do, when I need to do what, who can do it and about what it should cost? Kelley Blue Book is a 90-year old brand, it is the most trusted brand in consumer automotive. That’s a way to use a third party to bridge that trust back to consumers. We’ve launched that in pilot for 90 days. At the end of 2019, we saw about 1.6 million consumers came into the site, which is a great number and that number has been steadily rising. Throughout the 90-day period through now, about 39,000 consumers clicked on a button that said start an appointment with the dealer. We’re really seeing some interest. We’re also seeing some really good interest from consumers about looking up recalls. About 85,000 vehicles were looked up on the site to see if they had a recall. Interestingly, almost 25% of those were completed at a dealership. A focus and emphasis and interest from consumers on recalls, but great numbers across the board.
Jim Fitzpatrick: That’s fantastic. Are dealerships seeing more new or existing customers in their service departments?
Jim Roche: Yeah. It goes back to what we were just talking about you’ve got to generate that loyalty and about 57% of the consumers who come back to the dealership through Kelley Blue Book are new to that dealer. They’ve never been there before, so 57% so a slight majority. There’s plenty of existing customers coming back, but more than one out of two are new to the dealer.
Jim Fitzpatrick: Wow, so what are the new features that have been added to the Auto Repair Guide?
Jim Roche: Well, Kelley Blue Book Auto Repair Guide, we’re constantly building it out. It’s brand new at kbb.com, and think of it in two sections. There are features for consumers and there are features for dealers. The latest features for consumers include, we’re always expanding the number of repairs and the pricing and we’re adding maintenance. Not only can you look up, I need to change my oil or I need to get my brake pads replaced, but shortly you’ll be able to look up, I need my 15,000-mile service, my 30,000-mile service.
Jim Roche: We’re working with our partner Xtime to provide easy appointment scheduling and the capability to look up recalls now is not only by VIN but by license plate, because it’s hard for most people to remember their VIN. On the dealer side, at NADA, we’ll be introducing something we called the Premium Subscription, and the Premium Subscription will feature a dealer. It will include dealer ratings, pictures of the dealership, a list of amenities that you have, say a WiFi or an espresso bar, graphic representations of the dealerships and an exclusivity for premium dealers for their brand in a particular geographic area.
Jim Fitzpatrick: What advice would you offer dealers on attracting new customers to their service departments through Auto Repair Guide?
Jim Roche: Whether or not you want to use Auto Repair Guide or not, I think dealers have to get online with price transparency.
Jim Fitzpatrick: Yeah, for sure.
Jim Roche: I mean the fundamentals, if you’re going to transact on the internet for anything, Jim, forget about if it’s just automotive for anything, consumers want to know a couple of key things. They’d tell me, “What do I need, when can I get it, and what does it cost,” right? Who buys anything or transacts online now if you don’t know those fundamentals? A key is dealers getting service price transparency. Get them on your website, get them in your marketing material. The second thing, I think you just need to consider is if you think that maybe you’re challenged by creating loyal customers because of awareness or trust, look to a third party like kbb.com to help you bring those customers back in and then you’ve got a new shot at impressing them and retaining them.
Jim Fitzpatrick: Talk to us about why your booth at NADA. Do you know booth number off-hand?
Jim Roche: Yeah. Thanks for asking. It’s 2582C, 25 82 Charlie. KBB will be in Cox Village right across from Xtime, and we’ll be talking about a couple of things there. Of course, I’ll be there. I’ll be handing out copies of the book with the new chapter. Would love to see as many of your audiences come by and get a free book.
Jim Fitzpatrick: That’d be great.
Jim Roche: Then let’s talk about service. We’ll also be talking about ICO and as I said, we’re in Cox Village and Cox Automotive every year, we’re introducing some pretty new and interesting things in the automotive world.
Jim Fitzpatrick: I know, I know. For the viewers, the dealers and managers that are listening to us have this discussion about how to grow your fixed ops department in 2020, stop by and say hello to Jim and talk to him about some of the exciting things that they’re doing at Xtime, because I think it’ll blow you away and of course, pick up a free book. We will you autograph the book for them?
Jim Roche: If anyone asks, I’m happy to do it. I’ve got one for you too, Jim.
Jim Fitzpatrick: There you go. I’m going to come by and get it. Mr. Jim Roche, senior vice president of marketing and managed services at Xtime. I want to thank you so much for your time. It’s always a pleasure. Our viewers get so much out of your visit here on the show.
Jim Roche: Jim, thank you. It’s always fun and I look forward to see ya in Vegas.
Jim Fitzpatrick: Thank you. I’ll see you out there.
Jim Roche: Okay.
Jim Fitzpatrick: Take care.
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