9th July 2017
By Chris Saunders
Following the introduction of new VED (Vehicle Excise Duty) rules earlier this year, the UK automotive market has experienced a notable reduction in new vehicle sales. As reported by the Telegraph, the number of new cars being driven off dealers’ forecourts plunged by 20% in April and has continued to fall in the months after.
For many franchised dealers, it’s likely that the effect upon new vehicle sales will have had a knock-on effect on profits. This can be compounded by the number of cars dealerships have been forced to pre-register by manufacturers.
Although it’s likely that the market will bounce back, such figures are a stark reminder that dealers can’t (and shouldn’t) rely on vehicle sales alone as their main source of revenue. To this effect, it’s important to remember that aftersales activity plays just as much of a role in profitability, indeed the typical service department makes up 50% of a dealership’s overall profits! Arguably, a strong output from a dealership’s workshop can actually be used as a way to counteract a dip in vehicle sales. In our annual report, released in June, we revealed that franchised dealers across the UK missed out on an average of over £99K in lost “red work” sales during 2016; proof, if ever it was needed, that profits are there for the taking and aftersales are a lucrative and important source of revenue.
With this in mind, here are our top 3 best-practice tips to help you optimise aftersales performance:
- Deploy eVHC technology to boost conversion rates
All too often, franchised dealers underestimate the value of aftersales as a source of revenue; more worryingly, servicing departments are failing to sell red and amber work, despite identifying areas for repair. In our annual report we revealed that the average UK dealer missed out on £99,200 worth of aftersales revenue in 2016 by failing to convert 46% of red work identified during the health check process. Across the UK’s 4,900-strong franchised dealer network, this equated to a total lost sales figure of £486 million.
Incorporating eVHC technology into the servicing process offers a way to reverse this trend, mainly because it helps to improve communication and levels of trust between dealerships and motorists. Systems such as autoVHC enable service teams to provide customers with a thorough overview of car examinations, showing precisely what repair work is needed and why. Such transparency allows for a greater upsell opportunity and higher conversion rates on Red and Amber work. Systems that include enhanced parts and labour pricing functionality are particularly beneficial here as they enable service managers to demonstrate how costs are calculated, thus allaying any concerns relating to overcharging.
The ability to scrutinise aftersales activity is key to ensuring revenue opportunities are not being missed. autoVHC now includes a performance dashboard which allows users to configure their own targets and use these to evaluate business performance for key metrics such as vehicle health check completion rates and the average percentage of red work sold per vehicle health check.
- Affordable repairs and servicing
When faced with an upfront bill for servicing and repairs, many motorists will naturally look for a cheaper alternative; and this usually means a loss of business to independent or rapid-fit outlets. To counteract this, more dealerships should consider working in partnership with auto finance companies that can offer interest free financial solutions for repairs and servicing. As well as allowing customers to spread costs over a manageable time frame, instalment financing plans enable dealerships to sell more red and amber work following vehicle health checks.
- Show flexibility and convenience
The ability to offer a same-day repair service is, generally speaking, the main pull factor for fast-fit outlets, and something which is lacking in the franchised dealer sector. This then begs the question, why aren’t dealers doing more to match this offering?
It’s common practice among dealers to book out their workshops to full capacity. While this may seem like sound business sense, it does little to meet customer expectations for speed and convenience. An all-out drop-in approach to workshop operations would not be practical, however dealers would benefit from retaining a small portion of the day for unscheduled work; an 80-20 split for example. This small alteration to workflow organisation demonstrates flexibility and offers a more convenient setup for customers who may want to complete urgent repairs on the day they have been identified (or even drop-in for non-urgent repairs when they have time). Customer satisfaction and the loyalty it breeds helps to keep repair work within the franchised sector and, during times when car sales are at a low, can be crucial to making aftersales more profitable.Blog