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High and low-end estimates of US automotive retail sales volume for 2009 are apart by a factor of 2+ million units.  But none dispute the likelihood that ’09 will make the grim figures of ’08 look rosy in comparison.  When coupled with the generally slow traffic seen in dealership service lanes in recent years it would seem that new vehicle retailers are sailing into an unprecedented perfect storm of empty dealership showrooms and deathly quiet “back of the store” operations.

The undeniably gloomy short-term future for auto sales does not necessarily spell the end for retailers.  Aspen’s work studying the use and service histories of millions of private vehicle owners suggests that a way to a lifeline for new vehicle dealers should be within reach: nationally, vehicle service business will spike during the sales downturn.  The trick will be for dealerships to:

1. Understand the source and uniqueness of this new service business;
2. Recognize why much of this new business is inclined to look to the aftermarket instead of a dealership;
3. Appreciate the advantages of the tools already in-house that can help to shrink consumer resistance to the idea of returning to a dealer for service.

The Good News
In the first place, simple math predicts that the gross number of service visits will grow by large volumes this year and beyond.  Per the least optimistic ’09 sales projection the US new vehicle market will have shrunk by almost seven million units, off from the peaks achieved just two and three years ago.  The population of driving-age adults increases every year, there has not been a significant increase in the rate of scrappage, and public transportation policy has essentially gone unchanged for 15 years.  Lower new vehicle sales volumes and the end of broad-based leasing will mean that the average age of vehicles in the driveway will grow as owners keep rather than renew their household fleet.

A Little Bad with Your Good News
Older vehicles simply require more service and maintenance.  Parts wear out.  More mileage thresholds are crossed.  Tire tread depth is worn below George Washington’s chin.  The older the vehicle, the more likely it will need to be serviced in any given week or month, and an aging fleet will likewise need the tender care of the wrench and scope.  Our study of vehicle service data across many OEMs and many years has shown that the average vehicle in today’s fleet requires fewer repairs than those of the fleet of five and ten years ago, but you can bank on the likelihood that number of repairs for vehicles will always climb higher as the age grows older.

But older vehicles and their inevitable need for proportionately more service are also those least likely to be service by a dealership, let alone the selling dealership.  None need to be reminded that a swarm of competitors and DIY options eat into dealerships’ share of the service wallet, but the rate at which owners abandon dealerships is almost perfectly aligned with the age of their vehicle. 

Bottom line: as vehicles are most likely to need progressively more and more service owners are less and less likely to return to their dealer.

There are many factors explaining why owners turn away from dealerships over time, but after ruling out owners who physically move away the single greatest reason is the belief that dealership service is a poor value.  Consumers articulate this belief in a variety of ways, but it is fair to summarize the problem as a state of affairs where trust in the selling dealer is overcome by the belief that the value and convenience of alternative service providers is better.

Plugging the Leak & Winning Them Back
The challenge is to capitalize upon the coming growth in vehicle service marketing even as history predicts that the coming wave will inclined to side-step today’s dealerships.  A two-part solution is recommended.  Neither part in itself will guarantee full service bays, but our data and experience tell us that they will increase the likelihood because the solution leverages distinct advantages possessed by dealers, not by the chains and the aftermarket. 

Solution – Part 1: OEM Branding
In a well-run service department no one is guessing when a problem is diagnosed or installing a part because your department is integrated with training and standards of the factory.  No generic service chain can offer the same expertise because they do not have the manufacturer literally embedded in service department in the way that a dealer can claim.  Promote the fact that the fastest path to a vehicle being fixed right is by entrusting it to people who truly understand the vehicle and have the right support.  The right training and the right parts are messages that have resonated with consumers across many spectrums, and the expectation is that when utilized they will continue to be a draw.

Part 2: Personalized Service Marketing Communications (CRM)
Winning back and retaining service business means overcoming the misaligned perceptions of dealership value previously mentioned.  We have found that communicating with owners about vehicle and their needs is far more effective than generic one-size-fits-all marketing, even if that message features the OEM branding discussed earlier. 

Effective service marketing hinges upon knowledge of the owner.  When the vehicle was purchased; how much was paid and the term; which services have been tendered, etc. are all important points to consider.  Service history data may be scattered at shops all around town, but detail related to how the owner bought the vehicle as well as your own insider knowledge (there’s that OEM advantage, again) of service issues give the dealer the ability to do much better than merely guess at what service and maintenance needs will pop up on a vehicle at any given point in time.  Drive train will start making a funny noise at 80,000 miles?  Gently reach out to your owners around that time and suggest that they visit the folks who know and care the most for a vehicle check up.  No need to shout “Your tranny is about to start shaking loose (unless it is, but that’s another matter)!” but a “just checking in” message at the right time may land the business that you know will go to someone else if you don’t speak up.

An aside about personalization:  some personalization (also known as CRM) beyond not addressing your customers as “occupant” is better than none at all, so do what you can.  In the real world many dealers and OEMs routinely have great success by applying statistical models and pulling out important insights about customers. 

Here’s an example: Two owners may look identical in terms of what they drive and how they paid, but the right tools should be able to able to determine which of the two will be buying a 100,000 mile tune up and which will be upgrading to a new vehicle.  Aspen can help you to identify the right messages for your customers by using your own data if the personalization seems too daunting of a task.

To sum up, 2009 will be a challenging year for dealerships.  Whether or not it is known as The Famine or The Year of the Service Department will be decided one dealership at a time.  Line up the right service marketing plan and it may not be you that has to skip dinner!