December 13th,  2022 Article

Service Lanes: The Untapped
Powerhouse for New-Vehicle Sales.

Measuring service-to-sales conversion performance is key.
Know how you stack up.

Every successful dealer knows that a high-performing service department has long been the key to a profitable dealership. Today, as other areas have struggled due to inventory allocation, fluctuating consumer demand, and changing customer preferences, it carries even more importance. Service departments continue to drive profitability for dealerships but, more importantly, remain the primary source to build strong, long-term loyalty with customers.

Lean in On Your Service Department
to Drive Vehicle Sales.

A common refrain in the industry is that “the sales department sells the first car, and the service department sells the next ten.” Based on our research, customers seem to agree on the central role that service has in their decision to buy their next new vehicle. In a recent study conducted by Urban Science and The Harris Poll, we found that nearly half of car buyers believe that “a service department plays a significant role in their car-buying decisions”1. This ranked only second to the importance of a test drive, where 67% of responders strongly agreed, “I would not buy a vehicle without test driving it first.”

Furthermore, an Urban Science analysis of where service-loyal customers purchase their next new vehicle proves the value of cultivating service-department customer relationships. In fact, service-loyal customers are twice as likely to come back to the dealership where they regularly get their vehicles serviced, compared to purchasing at other same-brand dealerships2.

When service department managers are held accountable for contributing to new-vehicle sales, the dealership wins. This is also true at the OEM level for VPs of the aftersales organizations. On the other hand, dealers and OEMs who take a narrow focus for their service operations — concentrating on service retention and departmental revenue growth — are missing out on the contribution service lanes can provide to new-vehicle sales.

The evidence from our surveys and recent service-to-sales conversion analyses shows that service departments need to be top-of-mind for dealer and OEM decision makers, especially now, as vehicle inventory levels continue to grow. And they are growing. As of November 2022, new vehicle inventory in the U.S. is approximately 2.8 times higher than their lowest level in September 20213.

Until today, the biggest challenge has been the inability to accurately measure service-to-sales loyalty both at a dealer and brand level. But, thanks to an innovative solution at Urban Science, we can determine where in-market, service-loyal customers purchase their vehicles — whether it’s from a dealership they service with, another same brand dealership, or another brand altogether. In other words, the old mantra, “You cannot manage what you cannot measure” becomes moot, now that there’s a way to measure the performance in the service-to-sales step of the vehicle-ownership loop.

In a recent poll, nearly 50% of car buyers “believe that a service department plays a significant role in their car-buying decisions.”

Build On the Old, Embrace the New.

While we know that customers are twice as likely to buy from a dealer where they go for service, our analysis further reveals that many dealers are even able to increase the likelihood for a new-vehicle sale from those customers by over three times4 by using a two-pronged strategy.

Strategy 1:
Increase the pool of service-loyal customer.

First, they increase the pool of service-loyal customers. They give customers reasons to come back for service by delivering an excellent experience at a competitive price. Best of all, they excel at using a not-so-secret modern weapon — service leads from connected vehicles. Research shows that customers trust telematics. Over 70% of vehicle owners/lessees think that their vehicle manufacturer or purchasing dealership should have access to this data5.

Having access to customer-vehicle telematics becomes an incredibly helpful tool for understanding the health of a customer’s vehicle. Beyond that, it gives dealers access to the specific needs of a customer’s vehicle so they can deliver relevant messages at the right time, and be ready when the vehicle comes in for service.

Customers trust telematics. And over 70% of vehicle owners/lessees think that their vehicle manufacturer or purchasing dealership should have access to telematics data.

 

Strategy 2:
Stay top of mind.

The second prong of their strategy centers on ensuring their service customers keep their dealership at the top of their list from the moment they decide to buy a new vehicle. They engage customers and provide high-quality service in the present while planning for the future by maintaining a focus on the potential for a new-vehicle sale. Technology can further aid a dealer’s understanding of where a customer is in their customer journey. It can readily identify and target in-market customers, for example, by identifying a customer’s last service event before lease expiration, and by focusing on the time-tested method of using service lanes to close the loop on customers before they shop elsewhere.

These dealers use technology to identify opportunities to present attractive trade-ins and special offers. In addition, they leverage data to create outreach campaigns to customers who owe less than their vehicle is worth.

From our recent study, we found incentives are still an incredibly effective way to get customers behind the wheel of their next vehicle. The good news: Incentives don’t have to be big to have a big impact. Our research shows that raising an incentive from $35 to $250 only increases consideration by eight percentage points6. Proper incentivization can get consumers to act faster, plus it creates an opportunity to further build on a dealer’s relationship with their customers.


A Final Word About Dealership Service.

It all comes down to human nature. Switching brands is easy. Ending a relationship is hard. The more dealers can do to make service a valuable experience for the customer, the harder it will be for them to shop around when it comes time to purchase their next new vehicle.

Science as a Solution.

Since our founding over four decades ago, our proven, scientific approach to dealership planning has continued to improve and evolve. It’s an approach that stays ahead of the technological curve to help improve the performance of dealership networks — and it continues to be the industry standard.

Let us show you how we can leverage the power of science to your challenges. If you’d like to talk to someone at Urban Science about how you can create a robust service strategy to help your dealership better close the loop on new-vehicle sales, call or email me.

Piermichele Robazza
Global Practice Director
pmrobazza@urbanscience.com
+1-248-231-1218

1. “Powering Thriving Dealerships with Dealership Service” Urban Science Insight Lab.
https://www.urbanscience.com/insightlab/dealershipservice/

2. “DataHub Stats,” Urban Science® DataHub™

3. Urban Science using data by JD Power and the Urban Science® DataHub™ | New Sales

4. “DataHub Stats,” Urban Science® DataHub™

5. Urban Science On Demand (HOD) Survey, May 2022. This Survey was conducted by The Harris Poll on behalf of Urban Science among 1500 U.S. automotive dealers aged 18 and older.

6. “Powering Thriving Dealerships with Dealership Service” Urban Science Insight Lab.
https://www.urbanscience.com/insightlab/dealershipservice/

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