Are You Overlooking Your Dealership’s Biggest Profit Generator?

October 7, 2019 / For the Manager / 0 Comments /

According to a 2017 Toyota report, the average profit margin on a new car sale was 6 percent. By contrast, the profit margin for a repair order was 56 percent. In a world where new car margins are shrinking, dealers have all the more reason to focus on promoting their service business.

 

Aside from the profit margin, parts and service is the secret to a high fixed absorption rate. If a dealership’s fixed operations can produce enough income to cover the business’s operating expenses, then all of the other profit-makers go straight to the bottom line.

 

The average fixed absorption rate is 57 percent, according to a June report by the National Automobile Dealers Association (NADA). Raising this rate gives dealerships a safety net that allows them to weather any economic climate. However, the marketing dollars that most dealers spend are almost all aimed at selling a new or used car, not at growing the service end of the dealership.

 

Here are three ways you can up the flow of traffic through your service center, and improve your fixed absorption rate in the process.

 

Service Lane Coupons and Specials

Step one toward marketing your service center is to create a coupon and specials page on your website. This page should consist of custom, enticing offers that will drive customers to action. Avoid using factory templates or generic offers. Make your offers aggressive and stand out to entice a customer.

 

In addition to providing valuable offers, include a link to schedule an appointment on the coupon page. You can also link to your service center overview and to any other relevant pages.

 

It is recommended to include a printer-friendly button, along with instructions for mobile redemption for ease on the customer.

 

Paid Search for Service

Google found that 25 percent of all automotive searches are parts, service, and maintenance related. Paid search advertising is your chance to capture this digital traffic.

 

While many dealerships are familiar with advertising specials for oil changes, there are more profitable ways to use paid search. This tool gives you the chance to become relevant for services that people don’t always equate with a dealership.

 

For example, advertising tire specials is a smart way to let shoppers know that you are as competitive as standalone tire shops with pricing and that you have a value proposition to make by offering specials/deals on new tires.

 

Facebook Lookalike Audiences and Retargeting

The third way that dealerships can market a parts and service center is with Facebook’s lookalike and retargeting features.

 

Lookalike audiences take an existing audience and match it with users who have similar attributes. This can be based on sources like your current customer list, people who click on your ad, or those who visit your website.

 

Retargeting uses an invisible website code called a pixel to track shoppers who visit a specific web page. A good way to use this feature is by tracking users who visit your service specials page. Then, you can retarget those users with service-specific ads that they will later see on Facebook and Instagram.

 

When advertising is relevant, it’s at its most effective. And social media ads are exceptionally skilled at getting the right ad in front of the right audience.

 

The Secret to Dealership Financial Security

Marketing your parts and service operations is a simple and cost-effective method for generating big profits and increasing your fixed absorption rate. The higher this rate is, the greater the peace of mind your dealership and its employees will enjoy.

 

Get ahead of the competition, and don’t neglect the goldmine waiting in your service lane.

 

Bonus: More On P&S Customer Behavior

One big advantage of digital marketing is that customer behavior is easy to track and measure. Here are a few pieces of data to keep in mind with parts and service marketing:

  • 1 in 3 vehicles on the road today will need significant service or repair by 2020.
  • 75% of consumers used a search engine to look for information on P&S.
  • 44% searched for pricing information.
  • 51% watched an online video to learn about a P&S center.
  • YouTube receives 82% of P&S video traffic.

 

These insights come from STRONG’s exclusive partnership with Google. For more dealer marketing data and insider knowledge, attend the Digital Marketing Summit this October in Austin, TX.


About the author

John Paul Strong: As owner and CEO of Strong Automotive Merchandising, John Paul Strong brings more than two decades of advertising experience to the table. He is the author of Next Day Traffic and leader of 115+ employees servicing more than 250 clients across the country. In 2018, John Paul was listed in the Birmingham Business Journal's Top CEO Awards and 2013's Top 40 Under 40.


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