Customer perceptions about the cost of repairs, lack of price transparency and underutilization of digital marketing may pose a threat to dealership service profitability.
A study commissioned by Cars.com and conducted by research firm GfK surveyed more than 800 vehicle owners, and found that uncertainty about repair costs is a major hurdle for dealer fixed-ops departments.
“With the average age of vehicles on the road increasing, and inevitably going off-warranty, dealers are being challenged to acquire and retain service customers,” said Barbara Mousigian, vice president of product at Cars.com. “Since consumers do not have a good sense of repair costs, they are suspicious of pricing and tend to look elsewhere for a trusted service provider. By promoting price transparency and highlighting dealership quality and convenience online, dealers have the opportunity to build trust with shoppers and ultimately win their business.”
According to the study, more than half of consumers believe dealership service departments are the most expensive service option, regardless of repair type. They think that independent repairers are the least expensive option.
"There is a big disconnect between the dealers and the consumer during and after the warranty period," says Jack Simmons, manager of dealer training at Cars.com.
While other studies have tracked dealership loyalty and how it can vary based on age, the Cars.com study found that service preferences were fairly steady across a spectrum of drivers. The respondent pool was evenly split between men and women, and there was a mix of vehicle types (from small cars to SUVs) represented. "The perception about dealer price was the same, regardless of demographic or age, and regardless of which type of vehicle they owned," Simmons says.
Dealers haven't done themselves any favors by making it difficult to determine service prices. "We all have a tendency to think that if we don't know how much it will cost, then it's probably too much," Simmons adds.
That concern about price is important, given the lack of initial preferences most drivers have when looking for a repair shop. According to the survey, 43 percent of shoppers had no preference of service provider, while 27 percent preferred dealerships, 18 percent preferred independent shops, and 13 percent preferred national chains.
Transparent pricing, online presence are critical
In terms of evaluating potential service providers, price guarantee/warranty and technician certification level were the most important factors, followed by online consumer reviews. According to Cars.com, service departments could potentially draw more customers by promoting their online reputations specific to service.
"Consumers are looking for price transparency, trustworthiness, and online reviews, and the fixed ops part of the industry is lagging behind the front end of the store in terms of their understanding of consumer behavior," Simmons says. "Most dealers are continuing to do things the way they've always done them, and haven't recognized the consumer shift in terms of how they search for service and repair, versus the old days of signs and coupons. The fixed ops side of the business has not migrated their marketing activities online."
Simmons says dealerships should have more information about pricing and performance online to attract the large group of uncommitted customers.
"You need prices online to show how competitive you are, and online reviews of the service department," Simmons says. "Consumers are making decisions regarding price point and service based on peer recommendations, so it's critical to get those reviews going. It's just as advantageous to the dealer to create a culture in fixed ops so the customer can come out confident that they are dealing with a trustworthy provider, and they are a good place to do business with after the warranty expires."
Many dealers barely have an online presence, so customers shopping for service in the post-warranty period have no idea whether or not the dealership can provide them with a competitive price.
"Consumers are savvy enough to check out what everybody else is offering, and if the dealers don't have their information available, they are overlooked," Simmons says. "When we looked at local Google searches, there has been a 400 percent increase on service and maintenance items. Dealers typically don't even appear in the organic results, because they aren't savvy enough to be playing in that sandbox."
Dealers do maintain an advantage by promoting technician certifications.
"One other big thing that came out of this study was consumers want to know that they are working with certified technicians," Simmons says. "If you tell them you have certified techs, they will feel more confident about the service. If you give them a price guarantee, the dealer consideration almost doubles."
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