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Why your service department might be your Brexit insurance policy

Why your service department might be your Brexit insurance policy

28th February 2019 


By Chris Saunders 


Times are tough for UK dealerships. The latest figures from the SMMT show a small 1.6% decline in year-for-year registrations in January 2019 (albeit an increase in new electric car sales). Meanwhile, figures for the whole of 2018 showed an overall drop in new car registrations of 6.8%, for a total of 2.37 million units sold.


The reasons for this are complex. The slowdown in the Chinese economy and general anti-diesel rhetoric coupled with active measures to reduce diesel emissions have affected a number of manufacturers. And of course, the elephant in the room is Brexit. Uncertainty around the post-Brexit economy and political situation has already been cited by Nissan as an aggravating factor in its decision to shift manufacture of the new X-Trail to Japan. That uncertainty is just as pronounced amongst consumers, many of whom are choosing to hold back on big-ticket purchases until they have more confidence.


It would be foolish at this stage to make any concrete predictions as to the state of the new vehicle market post-Brexit. All we can really be certain of is uncertainty.


But it might still be possible to insure your dealership against some of that turbulence.


Fine tuning your servicing approach


Aftersales services can account for up to half of a dealership’s overall profitability. That’s a significant chunk for any business, but a particularly stark one when the other half of profitability is coming under pressure. The more a dealership can develop its service approach to meet customers’ needs and deliver tailored, high-quality support, the more it can build its loyalty and develop recurring strands of revenue. Even in the most challenging economic times, vehicles still need servicing and MOTs – in fact, challenging economic environments can make such events more frequent, since they are a more cost-effective choice than buying a brand-new vehicle.


As such, since the post-Brexit landscape looks increasingly unpredictable, savvy car dealerships would do well to develop these additional strands of revenue now. But where to begin?


The foundations to a solid aftersales service are the core elements outlined above – basic servicing and MOTs. Dealerships should focus on making these as attractive as possible, and then marketing them powerfully. With MOTs and core services convenience is king, so offering opening hours to match commuters’ journeys to and from work, drive-in appointments ‘while you wait’ and online booking mechanisms can all help put the customer first. Of course, ensuring that core parts are always in stock is essential too.


From a marketing perspective, many dealerships do not do enough to maximise value from their existing customer lists. Email and social media campaigns can be a quick and cost-effective way for dealerships to reach thousands of past customers quickly, and yet are not utilised by many businesses. Price-based promotions, such as offering a follow-up service or repeat MOT at a reduced price, are more common but can still be showcased more effectively. The retail sector is a great innovator when it comes to customer loyalty strategies and plenty of ideas can be borrowed from that industry, whether points-based programmes that build up to winning a free product or service, or referral schemes that offer a reward when a family member or friend makes an appointment.


Developing Aftersales Offerings


Next, dealerships should consider how they can offer value-added services beyond these core offerings. This could be as simple as ensuring a better experience for drivers who wait on the premises for an MOT to be completed – free coffee and a comfortable place to sit can go a long way. Or, it could involve more sophisticated value-added services, from different levels of cleaning, valeting and upgrading, to classes and guidance for drivers on aspects of vehicle care. Developing corporate partnerships with businesses that have entire fleets of vehicles to maintain is another strategy, and one that could mean large aftersales revenues for years to come. Being creative about pricing structures and open to staged payment models is another useful strategy to consider, particularly for costlier services and appointments.


The impact that Brexit will have on vehicle dealerships across the UK is unknown, though turbulence seems to be a good bet. With a strong risk of new car registrations continuing to decline, forward-thinking dealerships should act now to maximise their alternative sources of revenue, and build a comprehensive aftersales offering.