A particularly progressive service manager at a suburban Detroit BMW dealership once told me that it was the job of the sales staff to sell a customer their first BMW, but that it was the job of the service department to sell them their 2nd, 3rd, 4th, etc. For someone with such an interest belief in service-related initiatives, it isn’t surprising that this dealer is award winning and enjoys at or above 100% absorption rates through their service lane.
The service issue is an interesting one for the average
dealership. Even though it is a huge profit center, it has become almost taboo
to discuss it (and heaven forbid strategies for maximizing it). To place some
empirical evidence on the subject, the average dealer generates roughly 12% of
their overall revenue from fixed operations, but that same number equates to
nearly 50% of their profits. On top of that, Google estimates that nearly
one-third (some 80 million) of all North American internet users have searched
for an automotive part or service within the last year.
Clearly this is a crucial area, especially when you consider that the overall expected number of new vehicles sold during 2007 will be well under 16 million total.
I had another opportunity to see the service world, less
from an industry news standpoint and more from the dealer perspective recently
when my wife tried to start our late model sedan to find little more than some
faint clicking and dim internal lighting. Usually I look forward to this type
of situation to gain some more consumer experience in how people are treated
and what you might expect when dealing with a specific brand after the sale.
I can authoritatively say (as many, many people can) that as different as one dealer is to another, so are the different brand strategies when it comes to fixed operations.
This particular incidence went from replacing a battery with
a dead cell (outside of warranty) to the tune of $249 to an oil service (as I
had requested, with synthetic oil) to replacing the CV boots (one was torn) and
wiper blades (the entire assembly needs to be replaced, not just the rubber
insert). Total bill, $975. Only after disclosing my connections to the industry
and this companies US headquarters did they decide to apply a $100 service
coupon found on their web site (which I happened to be aware of).
Now, before jumping to conclusions, I would concede that some of this work was justifiable. Maybe not the second CV boot and certainly not the wiper blades, but batteries only last so long (though can be easily replaced outside the dealership) and we were due for an oil service. Did the total bill need to really be a thousand dollars? Not a chance.
I have stopped short of requesting quotes from independent garages (or competing dealers), partly because I really don’t want to know what they would charge. The real question though is at what point does the cost of service not only drive a customer away from a dealership (50% on average after two years of ownership with new car), but away from the brand altogether?
Using
those same industry connections mentioned above, we were able to first procure
this vehicle at a substantial discount. After what I consider above average
frequency and cost of service, repair and maintenance over its life, however, I
feel like I have given back several thousand dollars worth of that savings. In
terms of what we owe on the vehicle, we are still in the black, at least on
paper, but that doesn’t take into account both this past service record as well
the upcoming service costs for required maintenance (timing belt and water
pump) that I know will eventually show up.
Now, for those of you saying, that is what you get for going to a dealer, the last little piece to the puzzle is that the vehicle was recently cited with a recall campaign. Of course, it may be possible that I would have gotten the same bill from all other dealers and that they would all agree that this work was required, but this recall was what got me there vs. going to an independent.
The recall turned out to be just a minor brake light fix,
and I don’t for a second think that this company is using minor recalls to try
to coax consumers to the dealer (vs. and Indy), but that this vehicle required
this much work says something more about my choice in vehicles rather than
dealers.
Just think of what it must be like for someone without an industry connection, who may be upside down in their car, who is also faced with some significant out of warranty work. To some degree this is an obvious issue, but OEMs must be very cognizant of the dealer level fixed operations and their respective reputations. A dependable vehicle isn’t so only because it requires little service overall, but also how the service goes down when it is necessary.
Clearly, some brands do this better than others and have convinced the majority of their dealer networks to place customer service over their own profits. It is one thing to try and help your dealers through fixed operations programs (and some companies even go as far as to design their cars. So that they can really only be serviced by their dealers), but there is a flip side to that coin. Your dealers might be doing the best job in the world, but if the car simply requires too much work, you run the risk on not only pushing away the dealer, but your brand in general.
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