“Ask Jim” is an ongoing question-and-answer series with Jim Roche, Xtime’s vice president of marketing and managed services, on the pressing topics and issues within the fixed operations world.

Question:  How can dealerships sustain profits in 2019 as the marketplace becomes more challenging?

Answer:  As we know, margin compression will be an ongoing problem in the year ahead, at a time when customer expectations also continue to rise. To address these challenges, dealerships must make a major shift from a transaction-centric model to a new customer-centric business that helps them sustain profits long-term.

Traditionally, dealerships have optimized the vehicle sale, and this practice has crept into the service department. But in service, your objective should be to optimize the relationship so that you are rewarded with many transactions throughout the ownership period. This is especially important now because fixed operations are playing a larger role in dealership profitability. According to NADA’s annual Dealer Financial Profile research, the service department now accounts for 49% of the dealership’s gross profit.

More importantly, the service department also is key to driving repeat vehicle sales. Seventy-four percent of customers who visited their dealership in the last 12 months for service are likely to return to purchase their next vehicle, according to Cox Automotive’s 2018 Service Industry Study.

There are two major strategies dealerships must implement to seize this opportunity and take full advantage of their service departments to build long-term customer loyalty.

First, they must create a more convenient and technology-enhanced customer experience. The 2016 Cox Automotive Maintenance & Repair Study revealed that 45 percent of consumers were not aware that their dealerships offered the option to book a service appointment online. By enabling their customers to book service online, extending capacity by offering longer opening hours, and offering more flexible transportation options, dealerships can attract and increase business.

Secondly, dealerships must reposition themselves as the ultimate expert for vehicles. Currently dealerships are only receiving 33 percent of service visits in the United States, according to Cox Automotive’s 2018 Service Industry Study. This gap creates a huge opportunity for growing the business.

Dealerships have a significant advantage in their capability to handle complex vehicles with factory-trained technicians, diagnostic tools and state-of-the-art facilities. They must market this strength, demonstrating their capacity to both sell and service increasingly complex vehicles. To achieve this, continuous investment in technology and training is essential to ensure customers receive the best expertise and a superior experience.

Capitalizing on this new customer-centric approach will enable dealerships to create lasting relationships that deliver repeat business and drive future sales. This new model also will serve dealerships well as we embark on an era where new mobility options, including vehicle subscriptions and self-driving cars become available in the marketplace.

Positioning your dealership as the hub of all your customers’ transportation needs is the key to success in 2019 and beyond. By marketing your dealership as the convenient point of service and sales for all mobility options, you can sustain and grow your future profitability.