Digital Transformation of Car Service

Preamble

Recently published article on digitalization of the auto industry was mostly about car sales and has received interest. This part is dedicated to the service department.

The auto industry is transforming. The pandemic has accelerated the already ongoing changes in some existing processes and, unwittingly, has become a catalyst for the development of new ones.

Somehow it happened that the digitalization of auto retail is perceived as a change in processes and technologies associated, by most part, with car sales. There are opinions that car sales are more dynamic and more prestigious than car service, which is often associated with something boring.

However, if we pragmatically consider the importance of car service on the profitability of dealerships in general, it is difficult to overestimate the significance of the service department.

The purpose of this publication is to provide an overview of the importance of the service department, as well as outline some of the best practices and trends in digital transformation, so that this information can be considered and taken into account in the individual business strategies of dealers and auto manufacturers.

The major portion of the data in this article is based on previous works (including books, presentations, interviews and public speaking engagements) of Jim Roche

Significance of service for dealerships

Before delving into any efforts to optimize service, it makes sense to clearly understand the importance of the service department for dealerships in general.

Growth in new car sales has stalled in recent years, and margins from both new and used cars have been falling steadily.

At the same time, the total revenue from the service departments was steadily growing.

In addition to increasing the share of revenue from the service department compared to the sales department in recent years, it is important to understand the direct reflection of the service department operations on the sales themselves. Customers who have visited the service department in a past 12 months are more than twice as likely to return to that dealer for their next car purchase.

It is also necessary to understand that significant unrealized opportunities remain in the car service industry. Of every three visits to the service, dealerships account for only one. Simple math - out of 100% of new car sales, during the life cycle of this car, one way or another, dealers lose 70% of their customers for service.

Customer experience

The main driver of customers back into service department is a positive experience. The price of services is not even included in the five main reasons for the client's return to the service.

A positive customer experience can also be an additional reason for customers to come back to purchase next car from the same dealer or the same brand.

The service can become a cure for the low level of perception of the car itself. Customer retention will be the same for “great car + mediocre service” and “mediocre car + great service”.

Understanding of loyalty

To meaningfully approach the complex strategy of the service department, it is necessary, first of all, one ought to understand the concept of “customer loyalty”.

This concept is beautifully described in the book "Fast Lane" by one of the leading experts of auto service Jim Roche. An authorized Russian translation of the book was recently published by the Russian specialized publishing house "Koroche, Dealer". A chapter from this book that focuses specifically on the understanding of customer loyalty and satisfaction is cited below, along with the accompanying graphics.

An Apostolic Moment—When Loyalty and Satisfaction Converge.

I’ve devoted this chapter to dissecting loyalty and satisfaction because I think it’s important for dealers and their service directors and managers to deepen their understanding of these distinct concepts, and then bring them together in a way that can benefit their businesses.

My favorite illustration of the loyalty/satisfaction convergence fittingly fits in a four-square model:

The model depicts your best customers—the Loyalists who?like doing business with you, and as they become more loyal will want to buy more from you and tell their family and friends about you—as “Apostles.” Every business could use more Apostles, but the reality is that they often make up a small segment of the overall base of customers you serve.

Next, you have Hostages. They aren’t satisfied customers, yet they return to your service lane because they don’t have another alternative—like the customer highlighted at the outset of the chapter. You may be the only dealer for miles, or perhaps they feel obligated to get their money out of an extended warranty or pre-paid maintenance purchase. Hostages will defect at the first opportunity, but you can convert them to first-level loyalists.

Mercenaries may be satisfied customers, but don’t assume they’re loyal. They aren’t. They’re usually price sensitive. Your competition can grab them with coupons or discounts. They defect for the next best thing. Mercenaries are tough to retain, and typically represent the lowest priority for your loyalty- building efforts.

Defectors no longer do business with you—they have left you for the competition. Don’t mistake the same-size square in the model for the portion of your customer base that defected from you. They left because they weren’t satisfied and you failed to light their loyalty spark. Defectors who become Terrorists are real trouble. They are?a nightmare for any business. These customers had a negative experience (or experiences). They’re the ones who long for public opportunities, in conversations on and away from social media, to tell everyone about their bad experience with you. It’s this subset of customers that only a sufficient cadre of Apostles can effectively quell or silence in the public sphere.

Now, here’s the key question that should arrive from this deep- dive into the distinct concepts of loyalty and satisfaction—What should a dealer or service department director/manager do?

In my view, the connective tissue between the highest levels??of loyalty and satisfaction—the Apostles—come from the experience you provide your customers when they come to your service department.

The good news is that once you’ve aligned your people, processes and technologies to provide a world-class experience, you begin to treat all of your customers better. You increase your chances of converting Hostages to Loyalists, and minimizing the number of Defectors. You might also make some Mercenaries think twice about chasing a seemingly better offer for service work than yours.

It’s also worth noting that Loyalists, especially Apostles, give you an opportunity to sell more, at higher margins, than any other group.

This is why some dealers provide amenities for their most loyal customers: separate customer lounge, discounts on services, loaner cars and the like. They understand the investment is well worth the return they’ll generate from this special set of customers.?

The customer loyalty model described above is equally valid for car manufacturers. Customers by default are “Hostages” of car service in franchised dealerships for the period of the factory warranty, after the expiration of which, customers often “desert” to independent service stations.

Customer centric service model

Historically, the sales model in dealerships [be that car sales department or the service department] has often been transaction-oriented. That is, the task, whether it is a car purchase agreement or a repair order, was to achieve the maximum income from a specific transaction.

With the advent of the Internet and especially smartphones, consumers unwittingly gained control of the market and the transactional model lost its effectiveness. The emphasis has been shifted to a customer-centric approach, where the customer is at the center, rather than a specific transaction. The customer-oriented approach includes the transition to fundamentally different business processes, covering all the main areas of the dealership's service department.

A customer-centric approach increases customer satisfaction and, thereby, customer retention, which in turn, increases the attendance of the service department. Thus, the customer-centric approach allows application of the customer-centric sales model, simplified below.

A customer-centric approach, together with a customer-centric sales model, ensures the most stable growth model for the current period and for the foreseeable future.

Dealer’s view

Moving to a truly customer-centric service model requires significant changes in business processes and technologies. Are dealers ready to take on serious financial and organizational commitments?

More than half of all dealers consider customer retention [not just one of, but] the top priority.

More than 90% of dealers believe service experience is more important than repair itself

That being said, 85% of all dealerships believe their current systems do not provide a superior car ownership experience.

Dealers understand that the transition to a new reality will provide them with the competitiveness they need to survive and succeed in the short and long term. Based on this, we can confidently assert that if dealers are provided with an understandable and accessible model for introducing a new approach, they are ready for changes and, accordingly, for the associated with them necessary efforts and commitments.

It is reasonable to assume that many dealers are actually enthusiastically awaiting change, and some are already making efforts to implement a Customer-centric model of interaction with clients.

Power of moments

When building a customer-centric service model, it is worth taking into account that at all steps it makes sense for the dealership to think over all aspects and try to provide “WOW” moments, since they will be the ones remaining in the client's memory.

Best practices

This section describes some of the best practices of the service department, requiring insignificant financial investment and a limited need for additional personnel training, as well minimal transition to fundamentally new business processes and technologies.

The first service appointment - is one of the simplest and most overlooked best practices. In fact, this is the client's acquaintance with the service department, immediately after buying a new car. This simple procedure can raise the initial loyalty to the dealership's service department by almost one and a half times.

Free service clinic - is an excellent tool for increasing the level of trust between the dealership and customers. Regular clinic service allows:

? Introduce customers to service department, service writers and technicians

? Show customers that the dealership cares

? Make the service clinic interesting, invite the management

? Offer maintenance packages

? Listen to the customer's needs and concerns (how to replace the spare tire, add fluids, etc.)

Convenience in the service department. High customer expectations top the list of trends. Dealership management says high customer expectations are the biggest factor influencing service operations. Accordingly, the convenience of the service waiting area plays a key role in customer satisfaction with the service as a whole.

Advanced technologies

This section describes some of the service department advanced technologies, requiring financial investments and the need for additional training of personnel, as well as the transition to fundamentally new business processes and technologies.

The goal of the dealership is profitable growth.

As outlined above, the goal of the service department is profitable growth. There are three areas of control in which this can be achieved:

1. Increase the number of customer service visits

2. Increase sales per each customer visit to the service

3. Reduce the operational cost of the service department as a whole?

Seamless service experience

Consumers have become accustomed to the emergence of companies in the sales and service industry that offer superior customer experiences - a seamless process from choosing a product or service to buying and receiving it.

One of these companies is Amazon. If the car service business was like Amazon, it would generally look like the slide below.

Service department myths

To understand which specific technologies will be the most effective within the framework of the concept of a Customer-centric service model, one must first understand the bottlenecks. Let's look at some misconceptions - four service myths.

MYTH # 1. Most service customers are only available early morning

Research shows that while 7-11 am is still rush hour for service appointments (62% of the total), 38% of appointments occur at other times.

MYTH # 2. Price transparency is not important

Consumers want to be aware of pricing. 71% of customers are most concerned with a transparent quote when making appointments, and 55% of car owners are more likely to come for service to a dealership that provides an online cost estimate.?

MYTH # 3. Dealership service is more expensive

It is important to understand and communicate to customers the perception of price versus market reality. Do dealership customers find dealer service expensive? And, of no less importance, is the dealer himself aware of his real competitiveness in his main market?

Research data shows that each market is different in factors that influence price:

• Franchise
• Rural versus urban market
• Types of competitors in the aftermarket
• Density of competition

?It is becoming increasingly important for a dealership to better understand its unique market and then learn to use the “price” to its advantage.

The examples below show that in different regions the difference between prices for the same type of repair differs between dealerships and independent workshops. Moreover, in some markets and some areas, the prices for this type of repair in dealerships are the same or even lower than in independent workshops.

It makes sense for dealerships to regularly monitor the pricing of competitors [both surrounding franchised dealerships and independent workshops] to stay competitive.?

MYTH # 4. Tablets complicate the service write-up experience

Tablets improve quality of service write-up and also have a positive impact on CSI * [* Customer Satisfaction Index].

Tablet use is on the rise and continues to deliver significant benefits.

Tablets have direct impact on customer retention.

Service appointment?planning

A seamless customer experience starts with a service appointment. Based on the information above, it becomes obvious that the online scheduling system for service appointments can become the cornerstone of the customer-centric service model.

There are two more additional factors that increase the importance of the online service scheduling system.

22% of customers make appointments online outside of business hours. In other words, the presence of an online appointment service scheduling system will reduce the number of customers who [without such a system] could be lost by not having them the opportunity to schedule service appointment at a time convenient for them, which is when the dealership is closed and a phone call is simply impossible.

It is equally important that customers who come to service department at a predetermined time [better prepared for the necessary time expenditures] spend more money for service and their overall loyalty to the dealership service is higher than among customers who came to the service without a predetermined appointment time.?

Online scheduling system

The online service appointment scheduling system offers an optimal format for interaction with clients, providing a seamless experience of a client-centric service model.

The main requirements for an effective system of online registration for the service are:?

? Ease of use - 5-7 clicks to sign up for the service

? Convenience for customers - desktop, mobile version, chat, call

? Professional and consistent advice on services and prices

? Other integrations (reviews, recommendations, promotions)

?Some of the main functions of the advanced online service appointment scheduling system from the client's side are illustrated below.

An advanced online service appointment scheduling system also helps optimizing the internal work of the dealership's service department.

Some of the main functions of the advanced online service appointment scheduling system from the dealership’s side are illustrated below.

It is important to understand that in order for customers to use the online service appointment scheduling system, they must be aware of its availability from the dealership. That is, the dealership should broadcast the ability of customers to use this convenience, using all communication channels that may be convenient for customers - via email, mail, SMS, informing customers during the purchase of a car or visits to the service, and so on. If customers do not know about the existence of such a system, they will not be able to enjoy its benefits.

Service status update

SMS customer updates during the service visit also create a superior service experience.

SMS service updates are surveyed to be the most preferable means of customer communications. However, surprisingly, a very low percentage of dealers actually use them.

It’s worth noting here that it may be very effective to use short videos to update customer on the status of car service [beyond text SMS]. These videos may also be used to demonstrate the need for certain extra services and request customer’s approval.

Mobile apps

Smartly designed mobile apps are the key to successful customer communications.

At the moment, there is fragmentation in mobile applications - dealers have their own needs [marketing campaigns, sales, etc.], car manufacturers have other needs [remote diagnostics, new models, etc.]. Creation of a single mobile application that allows combining the requirements of both the dealership and the automaker will simplify their use by customers.

Service “Menu” sales

Tablets [described above] provide an additional opportunity to use the service “menu” sales, offering customers a clear choice of services and reducing dependence on the human factor, ensuring a consistent presentation of all products.

Multipoint inspection (MPI) for 100% of service cars

Free multi-point vehicle offers many benefits:

? Average $ 110 Increase per repair order

? Reducing liability risks

? Improving customer experience

? Increased customer confidence - no frivolous sales?

Service kiosk

Service kiosks offer benefits and are incorporated into the customer registration process at dealerships. However, experts differ on the use of kiosks in the long term. The current share of the use of kiosks by dealerships is below 5% and, in fact, most of the kiosk functions can be replaced by a mobile app for a smartphone, integrated with the service registration system.

Connected service department

Connected service department technologies reduce turnaround times and improve customer experience.

Augmented reality

Augmented reality technology allows service advisor or a technician to assist with repairs and show customers the work that needs to be done.

Integration of technologies

A key aspect of the overall performance of technologies is their effective integration with all data use systems in the dealership. In other words, as data about the customer, vehicle, diagnostics, service status, and so on is received and processed, it must move from system to system, preventing the need for multiple data entry into disparate systems and interfaces. Data should be carefully mapped between disparate databases and be capable of supporting relevant sequence of business processes.

It is difficult to overstate the importance of correctly correlating data across different systems and databases.

Conclusions

Of course, both dealerships and car manufacturers are aware of the need to move to a new model of interaction with customers in the service department.

At the same time, the process is not easy - many of the technologies and business processes described above represent a full blown project that requires a thoughtful approach to ensure the expected result.

Dealerships and car manufacturers, which will be the first to intelligently develop the processes themselves and technologies to support them, will be at the forefront of a new era in the auto business and will receive strategic competitive advantages.

Author: Sergey Naumovsky

www.dhirubhai.net/in/sergeynaumovsky

[email protected]

www.autoretail.guru

www.auto-pub.ru