Nearly 70% of active service customers are within the manufacturers warranty (1-3 year old vehicles), leaving a retention rate of only 30% after the warranty expires. The BIG question is WHY are dealers losing 70% of their active service customers when the warranty expires? 

Three Main Defection Points 

First Oil Change 

Believe it or not, a majority of customers never make it back to the dealership for even their first oil change. Crazy, right? Well its true and there are a couple of good reasons why. 

1. Poor email acquisition practices. Statistically, dealers are capturing less than 50% of their customers emails at time of sale. Meaning even if they are trying to get them back in for service, they only have 50% of their active service customers with which to try and connect. 

2. Customer Disengagement. With the first service intervals for newer vehicles becoming increasingly longer (some being as much as 10,000 miles), many customers have already disengaged due to excessive, untimely and non-relevant monthly email communications. So even if a customer is sent an email invite, chances are its being deleted rather than opened. To put things into perspective, the industry average email open rate is 10% - 15%. For example, if a dealership has 8,000 active service customers and assuming an email capture rate of 50% (4,000) at best the dealership is connecting with only 600 (4,000 x 15% = 600) of their active service customers. 

If a dealership is serious about capturing more service opportunities, they must have a dedicated solution for connecting with customers when it pertains to vehicle maintenance. This is the only way a dealership will be able to effectively reach their service customers. It cannot be done via newsletters or blanket email service specials. It must be OEM Specific, delivering the right message at the most accurate time. 

Tires 

Did you know 78% of customers maintain their vehicles where they purchase tires and 60% of customers do not even know their dealership sells tires? 

Customer Tire Statistics (NADA) 

15% of the vehicles in your service drive need tires 
75% of customers purchase tires from the 1st person that recommends them. 
78% of customers maintain their vehicles where they purchase tires 
40% of customers know their dealership service department sells tires 
80% of customers state they would “likely” purchase from their dealership 

If a dealership is not letting their customers know they sell tires and connecting with customers at the right time who need tires, there is a great chance the customer will buy tires elsewhere along with their future service work. 

End of Warranty 

This may be third on the list, but its one of the highest defection points. This is a critical time in the ownership life-cycle when a customer needs to make a big decision and when the dealership should be stepping up to provide their customers with options. This is the perfect time for a dealership to invite their customers in for a complimentary inspection and a great opportunity to explore available options. 

Every complimentary inspection produces one or more of the following: 

1. Creates up-sell opportunities for the service department. 

2. Opportunity to sell an Extended Service Contract. This increases loyalty and keeps the customer coming back to service in the future. 70%+ of customers will purchase their next vehicle where they service if taken care of. 

3. Sell a new or pre-owned vehicle. The customer upgrades their vehicle and the dealership takes in a Premium Trade. 

As you can see, there are a number of reasons why dealerships have customer defection issues and the biggest reason I have found is communication. 

What are your thoughts?

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Comment by steven chessin on May 25, 2015 at 2:03pm

Gale - I agree that service brings customers back but I can't agree that "anybody" can sell cars. The perception customers have is that dealer service is only for warranty work so extended warranties must be sold or more CPO warrantied cars.  

Comment by Gale Ekern on May 19, 2015 at 5:13pm

Most manufactures require a 75-95% Email capture rate on RDR's   50% is weak....Anybody can sell cars...service is what brings them back and retains customers thru their performance

Comment by DealerELITE on May 15, 2015 at 4:54pm

Thank you for sharing 

Comment by steven chessin on May 15, 2015 at 1:06pm

Any idea of the adjusted stats after factoring how many customers no longer have the car they bought ? Maybe the customers moved ? All lease customers ? There are many variables.

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