Prepaid Maintenance Plans (PPMs) have been used as an auto dealer customer retention tool because paying up front for services is a guaranteed way to get customers back into the service lane. However, the pricing and structure of many PPMs administered by third parties have not made the program very profitable for the dealership, and more importantly, for the customers.
The new generation of self-administered, self-managed PPM plans offer benefits beyond customer retention, one being more revenue. For example, PPM customers frequently purchase additional retail parts and labor services that boost profitability, immensely. Encouraging PPM repair orders by upselling an additional $150 to $350 of retail business adds serious value to the bottom line. Additionally, plugging a basic three-product PPM plan into each of the 600 units sold each year can generate more than $1.3 million in total service revenue, even after factoring in a 55% utilization rate, plus additional plan costs.
So, given these upsell profit opportunities, why are some dealers’ experiences with PPMs disappointing?
Many have said that customers simply won’t buy these plans. However, when those programs are examined, it is clear why customers wouldn’t be interested. The plans were loaded with services of low value to the customer, yet priced profitably for the dealership. This is unfortunate, as the nature of these plans versus the dealers’ inability to sell the plans cost them service business.
Redesigned PPM programs offer a wide range of products and services and are completely customizable to each dealership. Completely software driven, these programs manage once time-consuming tasks like plan registration, service claims and premium submissions, leaving the dealer worry free. Because these programs are completely controlled by the dealer, any reserve or forfeiture is immediate and becomes a part of their profit.
So, as a dealer, should you be gaining retention or revenue? The right PPM will deliver both.