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Is your dealership servicing the vehicles you sell?

November 24, 2010

The average dealership retains less than 35 percent of its service market potential. Determining owner base Annual new-unit sales x 5 years = Owner Base Determining service potential Owner base x 12 hours x hourly rate = Total Potential The vehicles a dealership sells represent the dealer's service market potential, a number easy to calculate.

First, determine the owner base, which represents most of the potential repeat service customers plus the dealership's new-vehicle customers. (See box.) Then, multiply the owner base by the average number of service hours (including warranty) that customers require over a five-year period and the hourly rate. According to current industry data, today's average new vehicle will require 55 to 60 hours of labor during the first five years of ownership for proper care, maintenance and repairs.

The total potential on an annual basis, therefore, is 55 to 60 divided by five-11 or 12 hours per owner. (See box.) How does your potential annual service compare with your actual annual service total? The average dealership does not attain his potential. In fact, the average dealership retains less than 35 percent of its service market potential. How to retain more of the potential? Shop the competition Surveys show that consumers perceive non-dealer service to be cheaper. In reality, most dealership prices for common maintenance services are competitive. Shop the competition-independent general repair shops, gasoline stations, tireservice centers, mass merchandisers, service specialists (exhaust, transmission, etc.), quick lube shops and parts chains with service bays.

Determine exactly what they charge-including for parts-for such services as lube/oil/ filter, tire rotation, front end alignment, front disc pads replacement, and air conditioning system service. Then make a "Competitive Pricing Board" that charts their prices and yours. Display the chart at your dealership and in your advertising, mailings and menus. Give a copy to every customer. Prove to your customers that you're not just the place for factory-backed warranty service. Your dealership is the place for all vehicle services. From "A Dealer Guide to the Three Ps of Effective Service Management," by the NADA Management Education Department. To order a copy, call 800-252- 6232, ext. 2.