The Experts Speak: Pre-Paid Maintenance Plans

Dealers love the “breakage” fees that come from under-used Prepaid Maintenance plans (PPM) but did you know that PPMs, when used by your customer, can play a major role in retaining consumers and maintaining their loyalty?

Mike Gorun, CEO at Performance Loyalty Group, says, “Dealers have been slow to embrace the retention and income possibilities of PPM.” And Mike Martinez, CMO at DMEautomotive, explains, “[PPM] is one of the most powerful loyalty tools at a dealer’s disposal.”

So why isn’t PPM getting the attention it deserves when it comes to customer retention (keeping your customers coming back) and loyalty (getting them to stick)?

A study, which polled 2,194 vehicle owners who had their car serviced over the course of the previous 12 months, found that 56 percent of those participating in a PPM plan are likely to return to the dealership for service even after their plan expires. And for those who used their plan for all maintenance during their contract, 62 percent report they are likely to return after the expiration of their plan.

Average dealer post-warranty retention rates only reach about 22 to 40 percent. PPM programs “can more than double the service business that typically bleeds to the aftermarket,” said Gorun. “Even a PPM plan given away for free would more than pay for itself by the end of its contracted term” due to the likelihood of vehicle repurchase and continued service at the dealership.

Service departments are one of the best ways to not only drive retention but also seize the most wanted (and needed) treasure of dealerships, customer loyalty. And with the rise of technology and shift to the digital world, dealers can finally identify a loyalist, swing loyalist and disloyalist walking through their dealership, and therefore target their most wanted customers.

“In the last 10 years everything has gone electronic and is integrated in to the DMS (dealer management system), it’s all automatic on the back-end side. It makes it very easy for the dealer,” said Gorun.

Using these tools (such as PPM and loyalty plans) is less expensive than traditional advertising and marketing efforts, but also more effective at keeping customers around, said Martinez. And with PPM plans being customizable, dealers can add basically anything their customers want, need or value – ultimately increasing revenue from all ends and lowering costs for the dealer.

In the words of Joe Lescota, Director of Dealer Development for NIADA, PPM plans are a win – win for both dealers and customers. “It’s a great way to keep customers and avoid the high cost of gaining new customers.”

To learn more about the benefits of a Prepaid Maintenance Plan please read, “Prepaid Maintenance Drives Retention, Profits” in Auto Dealer Monthly’s January 2013 issue found here:

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