Identify the parts potential in your market

With the challenge of new vehicle sales shrinking dramatically over the past three years, growing profits from other areas of the dealer’s business is essential. The parts department has long been a profit generator for dealerships, helping to cover a large percentage of the fixed expenses of the entire operation. With consumers holding onto their vehicle for as long as 71 months now, there is a new opportunity to increase customer-pay service work and parts sales.

Enter a new challenge: an increased number of consumers requiring customer-pay service work. While on the surface this appears to be an incremental opportunity, customers tend to migrate away from their selling dealer for customer pay work. This means there is great potential to lose these customers to the thriftier independent repair facilities. The key for manufacturers is to help their dealers capitalize on the competition in their area by identifying the opportunities available to sell genuine parts.

Measuring the opportunity to sell original equipment replacement parts to retail customers and independent repair facilities is just as important as new vehicle sales and retail service.

PARTS - A dealership's unsung hero

To identify your dealer’s customer-pay parts opportunity, start by gaining an overall understanding of the dealer’s area in terms of potential; examine dealership geography, including census tracts and ZIP codes. With the right metrics in place, you can help your dealers generate comparisons to determine deficiencies in parts throughput amongst local customers. By further segmenting these customers into groups based upon their service history, dealers can target the right customers with the appropriate, segment-specific communications or offers, helping them find potential parts business and increase overall dealership revenue from parts sales.

Additionally, by identifying independent repair facilities in the area, your dealers can further discover incremental wholesale parts revenue opportunities.

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FOCUS ON OPPORTUNITY

Through readily available data, parts sales opportunity can be established for both retail parts sold through dealer service departments as well as wholesale parts. Being able to establish a consistent standard for performance, based on market opportunity, will enable OEMs and dealers to focus on areas of opportunity utilizing consistent metrics.

For instance, is a customer pay service penetration of 31% of a dealer’s primary marketing area good or bad? It is impossible to comprehend the quality of that value until the relativity of that number is understood. The chart below could more easily explain how a dealer’s penetration of opportunity is lower than other key benchmarks. You may also note that the dealer’s area in this case, in total (31.1% + 15.2%), is doing fairly well compared to the benchmarks, but that is mainly due to customers going to less conveniently located dealers.

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Pinpointing the right parts opportunity and further segmenting those customers into groups with the highest propensity to visit the dealership will help dealers target the right customers with the right message. The alternative is to reach out blind to customers who may or may not be in need of parts. This can be most costly and ineffective.

With an understanding of what current dealer performance is, where opportunities exist, and which mechanisms can be utilized to obtain that opportunity, you can arm your dealers with the tools they need to defend and expand their parts business. To learn more about finding your parts potential, contact Urban Science