10 ways to drive profit in aftersales

Aftersales is the financial engine room of auto retail. As the saying goes, dealers sell the first car from the showroom, and sell the next five from the service department.

There are, however, concerns over the future of aftersales, including fewer cars in workshops due to the shortage of new vehicles, the switch from ICE to EV, and customer belt-tightening due to the cost of living crisis.   

Addressing these concerns during the latest Auto Retail Live was an expert panel of Vertu’s Robert Forrester, Ford customer service director Sarah Brettle and REALtime Communications data and insights director John Law. They were keen to stress it’s far from doom and gloom.

Absorption rates are down year-on-year

To set the picture, a clear concern for many retailers is the fact absorption rates are down 11% year-on-year, explained John. This is due to new car supply, the onset of EVs, the cost of living crisis. “We are seeing lots of extra red and amber work being identified, but conversion rates have dropped there too.”

EVs are less lucrative today – but the picture is not yet clear

“We are definitely seeing a difference with electric cars,” said John. “The average invoice is half that of a diesel. As that parc increases, it will have an impact.”

However, Robert urged caution. “It is way too early to start comparing real-world figures with ICE, because we have 30 years of ICE and sod all with EV. It’s nonsense to compare an 18 month old EV with a six year old ICE.” 

Robert “intends to still work for a very, very long time – and I will probably see this job out with ICE”. So long as retailers are able to achieve strong retention rates and penetrate older vehicles, the realistic changes in terms of aftersales is likely to be glacial.

You need video in order to be effective with aftersales

“We see a 5% increase in conversion rates with decent video,” said Robert. John agreed. “There is no doubt that those who effectively combine online, digital and video get the best interaction with customers, and subsequently the best conversion rate.” Sarah added that if your parts sales per visit is lower than the national average, it’s an idea to review your video check policy.

Your aftersales really needs to be digitalised

“With a slick online booking system,” said Sarah, “you can make things as frictionless as possible. If the customer can avoid speaking to person, through remote booking, remote check in and key drop followed by video and follow up afterwards, that’s perfect. Everything in the future must be seamless and frictionless.”

John agreed. “There’s a change in the dynamic of people buying cars – they are willing to pay more for convenience. It’s an opportunity for retailers to give people the journey that they want rather than what we dictate.”

Tyres should be a profitable part of aftersales

“Tyres will be very important,” said Robert. “If a retailer decides not to sell them, they have missed the ball, as electric cars use a lot of tyres.”

Retention is critical and retailers need to track everything

Robert urged retailers to question what percentage of their used cars go out with a retention product. “We have 169,000 people on service plans, and in November, we offered free servicing plans on all used cars sold.” Using initiatives like this, Vertu is increasing its labour sales as the average age of cars in its service departments increases – it’s now 4.6 years. 

More complex cars are a great opportunity for franchises

In the future, retailers will have more accident repair centres due to the sheer complexity of vehicles, predicted Robert. The only way to handle them will be with OEM-specific training. “The complexity around connected vehicles, their software, ADAS systems and so on, means a bright future for higher retention as EV gets more complex. Franchises will knock independents into touch.”

Franchises are thankfully getting better at retaining staff

Not too long ago, people were leaving franchises to get £1.50 an hour more from a local garage, thanks to the valuable transferrable skills franchise staff possess. “It’s been one big leaky bucket,” said Sarah. More recently, major groups have now made great strides in retaining staff, she said. “They realise it’s not just total renumeration, other things that show retailers understand the importance of employee.” Free dental care, £500 cost of living allowances and other perks really mean a lot – retailers should not underestimate them.

Contact centres drive customers; retailers convert

Vertu has 250 people in a contact centre, whose sole job is to increase customer retention in service using digital, text, phone calls and myriad other tools. “They should be able to drive traffic into a retailer – it’s their job to convert.”

Contact centres are seeing particular success in older vehicles, revealed Robert. “In H1, we had 13k service bookings from people we have never sold a car to, or had a service with us before – thanks to a conquest strategy to go and find them.”

Be wary about focusing on home servicing

Home servicing is not in any way realistic, said Robert. “It’s a complete nonsense. A technician travelling across a city between jobs seems… strange. Unless it’s significantly incremental, it’s a no-no. Unless customer willing to pay more because of the inherent inefficiency, it’s a complete waste of time.

Your action plan

• Robert: Relationships. People like to have a relationship with those who they trust. Maintain this, rather than getting absorbed with tech.
• Sarah: Training. It’s not pay that leads people to leave industry, it’s when they feel they’re not getting the training promised when they joined.  
• John: Data insights. There’s a massive opportunity in automotive. Make sure you have the right business intelligence in place to capitalise on it.  
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