Ever think about the efficiency, or lack thereof, of your loaner fleet? What would happen if you could improve efficiency by 15%? What about 40%
A leading South Florida automotive group was experiencing significant expense managing a sizable service loaner fleet. The dealership’s loaner policy was to offer all longstanding customers use of a loaner vehicle at no cost regardless of the scope of service and to otherwise offer loaners to all customers whose service will likely extend beyond one hour.
In an effort to improve efficiency and increase CSI , the dealership installed RedCap’s web and app enabled service valet technology and used RedCap’s driver network to pick up and deliver loaner vehicles and bring customer vehicles in and out of service at one of its dealerships. During the periods examined, the RedCap program improved loaner fleet efficiency by 40%, increased average RO value by 18%, and nearly 80% of the customers who were offered complimentary service valet chose to use it.
The dealership experienced the same cycle of loaner fleet challenges as most, if nearly all, others do in the industry. Nationally, the average loaner out time is 3.5 days, while the average RO labor time is two to three hours.
What accounts for this extraordinary discrepancy in valuable time?
If the repair takes three hours why does the customer have the loaner for 3 or more days?
The root problem is that the customers control loaner availability. Not knowing when a loaner will be returned to the shop, BDC is unable book an appointment for a customer waiting for service. Once a customer arrives back at the dealership with a loaner, the dealership relinquishes control of the loaner to the next customers’ scheduling whims, causing the next round of customers to wait for a loaner. The process continues in a negative feedback loop each time the dealership turns over control of a loaner to a customer.
Value Propositions Tested
When executed properly and consistently, service valet shortens the average loaner out time. Rather than have customers pick-up loaners at their convenience, the dealership delivers loaners closer to the time of technician availability. On the back end, the dealership delivers the customer’s serviced vehicle and picks-up the loaner nearly immediately after the time service is complete rather than having the customer drop off the loaner at their convenience, which is at least one half day later and usually longer. The main objective of the pilot was to prove this efficiency gain.
Further, the dealership had worked hard over many years to make the customer experience at the dealership pleasant thereby giving the service team (and sales team) an opportunity to develop a relationship with the customer and sell more products. Management was concerned about the possibility of RO values decreasing if customers did not visit the store and SAs did not get the opportunity to upsell. Therefore the pilot also had to show no diminution in RO value for customers who chose to use service valet.
Finally, the dealership wanted to know how many customers would accept the offer to use complimentary service valet. If only a small fraction of customers were interested in the service, it would not be practical to continue the program or roll it out to other customers at the auto group’s other dealerships.
Methodology & Results
RedCap integrated with the dealership’s dealer management system (DMS) and automated text/email delivery of both front-end and back-end invitations to the customer. With integration, SAs and BDC expended no time or effort to inform customers of the service valet offer. RedCap trained the BDC and each SA on the best practices to incorporate into their interaction with the customer, including effective talk tracks. RedCap also works closely with the service director to communicate corporate objectives and oversee proper execution at the SA level.
Loaner Out-Time Analysis
RedCap examined 804 loaner records between March 3, 2015 and July 6, 2015. RedCap picked-up and delivered the customer’s vehicle and exchanged it with a loaner on both the front-end and back-end of the transaction for 176 of the loaner records (executing 352 total rides out of the total sample set). Of the remaining 628 loaner records, the customer came into the dealership to exchange vehicles. The results were significant:
Loaner Turnaround Time Improvement
Loaner out time for customers using RedCap was 2.91 days compared to 4.11 days for customers not using RedCap. Loaner cycle time was reduced by approximately 1.2 day, or over 40%.
RedCap attributes the efficiency gains largely to absolving the reasons for delays: (i) customer is legitimately busy and is unable bring back car in a timely fashion, (ii) customer enjoys driving loaner more than their own car and takes advantage of opportunity, or (iii) customer prefers to put mileage on loaner rather than their own vehicle.
RO Value Analysis
RedCap expanded the data set to conduct the RO value analysis to cover all ROs between the dates of January 1, 2015 and July 31, 2015. During this period the dealership created 6,446 RO records, of which 432 ROs included RedCap service. Again, the data shows significant positive results. The mean RO value for customers using RedCap was $439.90 compared to a mean RO value of $371.47 for customers not using RedCap. RedCap’s service value yielded an increase in RO value of approximately 18%. The RO lift almost always covers the cost of the RedCap service, if the dealership were to provide the service complimentary.
Average RO Value Increased
Based on anecdotal evidence, RedCap attributes the revenue lift to certain classes of people, particularly women and non-car enthusiast men. These groups generally prefer to make buying decisions related to auto service over the phone. They feel less susceptible to the “hard sell” and are more agreeable to suggested repairs when at their home or office equipped with a loaner that has been delivered to them at no charge. The customer feels they are being valued and treated fairly and is therefore more amenable to suggested repairs.
There is also the issue of time. The dealer tries to encourage customers to wait in the “nice” waiting area rather than sending them out with a loaner. As a result, waiting customers who are proposed an upsell tend to focus as much on the time it will take as the cost. This does not occur when a customer has left the store with a loaner.
Along with the data points discussed above, RedCap examined ROs between the dates of March 3 and July 6, 2015. During this period 759 customers were offered complimentary service valet. Not surprisingly, 601 customers, or 79%, accepted the offer and had their vehicle returned to them in exchange for the loaner. Clearly, when offered complimentary service valet, at least for the return of the vehicle, the vast majority of customers prefer to have their car serviced without having to come into the dealership.
The direct impact of the RedCap program left management primarily with two compelling options with what to do its newly discovered resource. Management could decrease the number of loaners in its fleet or it could offer more customers access to loaners. In this case the decision between saving money and increasing CSI was a welcome decision to make. The group’s senior management has since offered service valet for both the front-end and back-end of the customer transaction at all of its four dealerships.
The RedCap program influenced management’s thinking even beyond the service drive and loaner efficiency. Management is considering its capital assets and thinking hard about turning the traditional auto retail environment on its head. Instead of having customers visit the dealership, bring the dealership to the customers For its next out-of-store experience project, the company is considering bringing new vehicles to its customers, wherever and whenever its convenient, for a test drive.
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