There’s a lot of anxiety right now, but you already knew that.

It’s been said — and I, for one, agree — that you’re not as good as you think you are when things are going well and you’re not as bad as you think you are when things are going bad.

That being said, in order to maximize the current situation, it’s a matter of how quickly you can adjust. It’s a good trait to have, but it comes with a caution: Moving too fast without considering future consequences usually ends up costing you more in the end.

Take a look at the last five years. Pre-pandemic, the industry was pretty much on cruise control. Then our world was flipped — upside down. We all went through everything from lockdowns, inventory shortages, employee losses and shipping stoppages. Dealers were thrown into panic and went into survival mode. Through those tough first six months, dealerships were just hanging on for dear life.

Thoughts, however, quickly changed. Dealers went from survival mode to asking the question: How can we (at least) not lose money? The industry found itself in a place where there was still consumer demand, but there was a supply shortage.

Owners quickly realized this created an opportunity to profit, not only in sales but also in service. And they did what they tend to do; they went for the short-term gain. The situation went from survival straight into a feeding frenzy.

You may get upset reading this, but the facts are the facts.

The years during the pandemic and shortly after are some of the most profitable years for dealerships on record. How did the industry do it? In sales, supply and demand added up to charging premiums above and beyond the suggested retail price on new models, and a 20% to 30% increase in used car pricing. In service, it meant bumping up the labor rate. The national labor rate, according to NADA Year End 2020, was $120 an hour; by year-end 2023, it was $173.

The effect of all this is coming back to challenge the industry once again. The loyal new car customers who came to your stores during this time who were charged a premium are now trying to come back during their normal trading cycle of every three to four years.

They’re now facing a used-car market evaluation that is correcting itself — it’s down 15-20%. These loyal customers, who paid above average for their car when it was new, are now being told that the same vehicle is worth less than they expected. In service, loyalty has dropped 3 percentage points in the last two years. The national average for a new car customer becoming a loyal service customer is down to 16%, according to Cox Automotive.

So, the big question: How do you win them all back?

In economic down periods, some good things are often created out of necessity and otherwise they wouldn’t have taken hold. In a recent turn, dealers finally realized that if the sales and service teams worked together — instead of against each other — everyone wins. This will be the solution to our current situation. Customers today are looking for a more consumer-friendly, consistent experience, throughout the dealership.

In sales, it’s going to take a real effort to recognize these customers when they show up at the dealership. Make sure you do whatever it takes to make the deal happen and keep them in your family. Most important, sales and service need to work together to maximize the overall customer experience across the dealership. Use these simple gestures:

  • Making sure everyone is aware when a loyal customer is in the dealership.
  • Making sure employees go above and beyond to say hello.
  • Thanking them for being there.
  • Walking them back to service or up to sales, and not just pointing in the right direction.

Working as a team will create additional profits without sacrificing customer loyalty. After all, the fastest-selling, most profitable inventory is HOMEGROWN from our best new-car customers trading them in on their next new purchase. And our highest hours per RO is from the loyal customer who knows and trusts service there.

When you keep these customers loyal to both sales and service, it drives them to return, and the cycle keeps going. That’s when everybody wins!

–Just The Fax

By Robert Grill, Carfax Senior Partner Development Manager

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