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Most OEMs offer complementary or paid maintenance plans. Ford has its ESP plans, while Toyota offers ToyotaCare. BMW Ultimate Service, Experience Buick and others are also available. Some of these plans are backed by the OEMs themselves, others are developed by dealerships, while many are administered by third-party providers.
According to DMEautomotive (DMEa), one in four U.S. vehicle owners have a dealer/OEM prepaid or free service plan, and 56 percent of them are likely to continue servicing at the dealership once the plan expires.
That's not to say such plans are a slam dunk for dealerships. According to the report, 25 percent of respondents were only using the plans for some of their covered services, regardless of whether the plan was free or pre-paid. That means those customers are still spending their maintenance dollars away from the dealership, which DMEa believes could be an indicator of the lack of convenience associated with dealership service centers. A significant percentage of plan holders were also either not being "consistently engaged" by their dealership, or were not finding value in their plans. Nine percent of respondents reported they had not used their plan at all.
"People who buy prepaid maintenance will still use the aftermarket," says Mike Martinez, chief marketing officer at DMEa. "Prepaid maintenance is actually a very effective tool for the auto dealer, but this can cut both ways. The same types of plan could be an effective tool for the aftermarket if they put these programs in front of their customers in the way they present their other services. It's a fantastic way of maintaining the customer, but only if you can get the customer to use it."
Martinez added that by allowing customers to under-use the plans, dealers were leaving some money on the table. "They may sell the program, but they don't talk about it enough," Martinez says.
"It’s imperative that dealers and OEMs offer free and prepaid programs, because more than half of all consumers currently under one indicate they will stay with the dealership post-plan,” adds Doug Van Sach, vice president of strategy and analytics at DMEa. "Our data did contain some surprises: one in four customers still stray from the dealership while under a plan; and consumers who do not have all service performed under the plan are significantly less likely to continue servicing at that dealership. So, if dealers or OEMs imagine that under-plan service taken elsewhere just means more profits — or that they don’t need to worry about keeping these customers very close and satisfied until plan expiration — this data clearly shows that those beliefs need some revising."
Improved customer loyalty
Younger vehicle owners (under 35) are more likely to have a plan (31 percent) than those over 35 (18 percent), and are more likely to have all maintenance done under the plan and at the dealer than their older counterparts. The younger demographic is much more finicky and disloyal when it comes to service, so in this case the prepaid plans could have a significant pay-off for the dealerships in terms of long-term loyalty with younger customers.
Plan usage and satisfaction levels roughly align. The majority of those with plans are either "extremely satisfied" (22 percent) or “satisfied” (47 percent) with the plan. Those that use the plans for all scheduled service at the dealership report the highest satisfaction ratings, with 75 percent being either “satisfied” or “extremely satisfied.”
How often consumers use the plan, and whether or not they exclusively service with the dealer, correlate with higher loyalty. According to the report, 62 percent of those that use their plans for all service are likely to stick with dealerships, and nearly two times more consumers in that group are "very likely" (30 percent) to return to the dealership, compared to those that only have some maintenance performed under the plan (17 percent).
Because the impact on retention is high, Martinez says he expects dealers to concentrate on selling more plans moving forward. "If I were in the position of a dealer, I would want to secure each customer’s business for good by selling prepaid contracts to every single customer," Martinez says. "It's a tremendous way to maintain service loyalty for very long periods of time."
However, many dealerships haven't "put the muscle" behind selling the plans. "There's a long way to go for this market," Martinez says. "One of the big surprises of this study was that so many owners don't have a maintenance plan, even though they have been around a long time."
There is a potential downside for dealers — the fallout if the service is not executed well. "If you sell it, you have to make sure it's a great product," Martinez says. "You have to have excellent processes and terrific technicians that are going to deliver a great experience. Even if they prepaid for it, if they have a bad experience, the customer won’t come back."
