Dealership Service Department Best Practices To Boost Revenue
Every dealership wants to increase its profitability. But how do you do it? Increasing profitability is not always a matter of selling more vehicles. Instead, the best path to boosting dealer profit margins might be right under your nose: the service department. The service department is one of the most overlooked profit centers at a dealership. Focusing on dealership service department best practices can increase efficiency, boost customer satisfaction, and ultimately drive profits. This blog will outline how to enhance dealer profitability by optimizing your service department. So, How to Increase Dealer Profitability?
AI for car dealerships, like Pam, can help you achieve these goals. Pam can help you learn about dealership service department best practices, boost operational efficiency to increase dealership profitability, and enhance the customer experience to improve satisfaction and profits.
Understanding The Value of The Service Drive for Dealerships
The service drive has become one of the most valuable assets for car dealerships in today’s evolving automotive market. As new vehicle sales face headwinds due to affordability challenges and production variability, dealers are shifting focus to where customer loyalty and long-term profitability often begin: the service lane.
The Service Drive Is More Important Than Ever
Recent data from S&P Global Mobility shows that the average vehicle age in the U.S. hit 12.5 years in 2023, the highest on record. Consumers are holding onto their vehicles longer due to higher new car prices and economic uncertainty. This aging fleet naturally leads to increased demand for maintenance and repair, resulting in more traffic for dealership service departments. At the same time, the U.S. light-duty aftermarket continues to grow. In 2022, aftermarket revenue jumped by over 8.5%, with early 2023 estimates forecasting an additional 5% or more in growth. This creates a lucrative environment for dealerships to expand their service operations and capture a larger share of that growing market.
The Service Drive as a Gateway to Loyalty and Sales
But the value of the service drive extends well beyond maintenance revenue. It plays a critical role in the broader dealership ecosystem by serving as a gateway to customer retention and future sales. Customers who regularly service their vehicles at a dealership are far more likely to return for their next vehicle purchase, making the service lane a frontline tool for building customer conquest and loyalty. With the right strategy, dealers can convert routine service visits into deeper relationships that cross-sell additional services, accessories, protection plans, or even lead to trade-in conversations that bring customers back into the sales cycle.
A Strategic Approach: Aligning Sales, Service, and Marketing
To unlock the full potential of the service drive, dealerships must move beyond treating it as a standalone department. The most successful dealers integrate service with their sales and marketing strategy, creating a unified approach that personalizes communication, anticipates customer needs, and promotes long-term engagement. Using service data to identify upgrade opportunities and determine the optimal timing. Automating follow-ups for:
- Maintenance reminders
- Recalls
- Lease-end planning
Offering loyalty rewards tied to regular servicing. Training service advisors to identify buying signals and collaborate with sales teams. In an era of longer vehicle ownership and evolving buying habits, the service drive is no longer just a back-end operation; it’s a central profit driver and a powerful point of customer engagement. For dealerships, investing in their service strategy means not only increasing short-term revenue but also cementing long-term relationships that fuel future growth.
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8 Dealership Service Department Best Practices To Boost Revenue
1. Hiring the Right People
The hiring process plays a crucial role in building an outstanding service department team. When selecting candidates, look for individuals with excellent communication skills, problem-solving abilities, and a customer-centric mindset. Conduct thorough interviews and assessments to ensure candidates possess the necessary skills and temperament to excel in a service-oriented role.
2. Training for Success
Once you have assembled your team, invest time and resources in comprehensive training programs. Provide regular training sessions to enhance technical expertise, customer service skills, and product knowledge. Ongoing training not only boosts employee confidence but also equips them to handle complex customer issues with competence and professionalism.
3. Fostering Teamwork and Collaboration
Encouraging teamwork and collaboration within the service department fosters a positive working environment and improves overall productivity. Implement team-building activities, encourage open communication, and create opportunities for cross-training and knowledge sharing to foster a collaborative and inclusive work environment.
When individuals work well together, they can leverage each other’s strengths to serve customers better and resolve issues efficiently.
4. Streamlining Workflow
Streamlining workflow processes is essential for optimizing efficiency. Identify bottlenecks and areas of improvement within the service department and implement protocols to address them.
Establish clear roles and responsibilities, set realistic targets, and monitor performance regularly. Leverage automation tools and software to streamline administrative tasks and enable employees to focus on providing excellent customer service.
5. Leveraging Technology for Efficiency
Utilize technology to its fullest potential to enhance the service department’s efficiency. Implement a customer relationship management (CRM) system to track customer interactions, manage service requests, and maintain accurate records. Utilize customer feedback platforms to gather valuable insights and pinpoint areas for improvement.
Explore chatbots and artificial intelligence solutions to handle routine inquiries and provide quick responses to customers, freeing up time for your team to handle more complex issues.
6. Managing Customer Service Requests
Efficiently managing customer service requests is crucial for satisfying customer needs. Implement a ticketing system to prioritize and track requests.
Ensure that requests are addressed promptly and provide regular updates to customers to keep them informed about the progress. By effectively managing customer service requests, you can demonstrate your commitment to customer satisfaction and build trust with your clientele.
7. Enhancing Customer Service in Your Department
Providing exceptional customer service should be a top priority for your service department. Here are some strategies to enhance customer satisfaction and take your department’s service to the next level.
8. Understanding Customer Expectations
Gain a deep understanding of your target customers’ expectations by:
- Conducting surveys
- Analyzing customer feedback
- Tracking customer satisfaction metrics
Regularly review customer feedback and adapt your service processes and offerings accordingly. By aligning your services with customer needs and expectations, you can significantly enhance customer satisfaction and loyalty.
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Pam outperforms human agents and competing AI for car dealership solutions. Schedule your personalized demo today. Implementation takes just one day. Book a demo to boost your revenue by 20%, like hundreds of dealerships nationwide.
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The Role of Service Departments in Enhancing Customer Experience
Service Departments: The Unsung Hero of Customer Loyalty
Sales might get the spotlight, but it’s the service department that sustains the relationship. In 2024, 84% of dealers planned to increase their focus on customer experience. While digital retailing and streamlined car buying grab headlines, Fixed Ops is where loyalty is built or broken. Service touches that are more frequent, more personal, and done right are more profitable.
24/7 Appointments and Scheduling
Customers expect to book service quickly, easily, and on their terms, day or night. Whether they’re online or on the phone, the process should feel effortless. Your website should feature a prominent “Schedule Service” button, with a mobile-friendly interface that allows customers to select times, describe their concerns, and even choose a loaner.
On the phone? Don’t leave customers on hold or stuck in a call loop. Tools like Pam, the 24/7 AI receptionist, ensure that every call is answered, appointments are booked, and leads are nurtured automatically. It’s not about replacing people, it’s about backing up your team with technology that never sleeps.
Inform With Video
One of the most significant service friction points? Confusion. A customer comes in for a tire rotation and leaves with a $1,200 quote for things they don’t understand. That’s a trust killer.
Video builds transparency. Techs can record personalised walk-arounds, explain findings in simple language, and send the video via text. When customers see what’s wrong and hear the “why” from a human, they’re more likely to approve the work, feel informed, and rate the experience positively.
Accurate Repair Orders
Nothing erodes trust faster than a bill that jumps mid-repair. Often, it comes down to miscommunication at check-in. That’s why a clear, detailed write-up is critical.
Train your Service Advisors to walk with the customer to the vehicle and ask clarifying questions. Don’t just write “noise from front end.” Ask: Is it at low speed? When turning? When braking? That detail improves diagnostics and shows the customer they’re being heard, not rushed.
Avoiding the “Unavailable Parts” Trap
Customers assume you’re ready when they arrive. If parts are missing, and they’re stuck without a car for days, that confidence can disappear fast. Get ahead of the problem.
Advisors should review the appointment book two to three days in advance and confirm part availability. If something needs to be ordered, call the customer in advance and reschedule. Proactive communication beats reactive apologies every time.
Service Updates and Status Visibility
Lack of updates is one of the top complaints in service. Advisors are busy, but customers are anxious, and silence only exacerbates the situation. According to research, 78% of customers cite a lack of updatess as one of the most frustrating aspects of their service experience.Modern tools can automate updates via text, triggered by technician notes or vehicle movement. Real-time vehicle tracking can even send notifications as the repair progresses. These updates create clarity and confidence, making the process feel seamless, even when delays happen.
Key Marketing Tactics For Dealership Service Departments
Many dealerships still rely on traditional marketing tactics to attract customers to their service departments. Don’t dismiss these strategies as obsolete just yet. They can be effective in getting the word out to your community about your dealership’s service offerings.
Print Marketing
Print marketing platforms, such as local newspapers and magazine ads, are still utilized by dealerships, despite many of these publications transitioning to online distribution. Direct mail has also been a long-standing option for dealers. With direct mail, a dealer can target a specific audience at a particular time.
Phone Marketing
Telemarketing is a traditional method that isn’t as popular as it once was due to more restrictions and the National Do Not Call Registry. Caller ID and mobile devices allow people to avoid these calls, making this form of marketing less effective. Many people feel calling potential customers is an intimidating task. But when used appropriately, it is a powerful tool for dealerships to attract new business and retain the customers they already have. Calls to current customers can be in the form of follow-up service or friendly reminders.
Radio & Television Ads
These two traditional marketing platforms are still very much alive, even if the audience isn’t as focused anymore. However, radio and television advertising are geared toward sales rather than service.
These platforms cover vast areas, including customers who wouldn’t make the drive across town to have their car serviced. It isn’t practical to utilize these methods to market for the service department.
Digital Marketing Tools that Drive Service Business
Digital marketing has taken the lead in how the automotive industry reaches customers. It allows the service department to get a specific audience with a customized message.
Email Marketing
Dealers can make an impact with email marketing. Email marketing is a direct tool, but it has to be well-executed for it to be effective. Everything, from the right subject line to an easy-to-understand email body and an enticing call to action, must be in place to prevent your email from being sent to the trash or spam folders.
Social Media
Engaging your audience with social media is an effective way to build trust with your community, but you can also place ads that reach a target audience. Facebook ads allow you to set a specific budget for a certain period. These ads reach the audience you select by age, gender, and location.
Your Website
Dealer websites are powerful tools. They do much of the work for the dealer, but potential customers must be able to find them easily. The dealership website designs must be visually appealing yet still provide answers to common user questions. The website should have good search engine optimization (SEO) to be found when browsing.
4 Strategic Opportunities in The Service Drive
1. Service Loyalty: Strengthen Long-Term Relationships
The most fundamental and often most overlooked opportunity in the service drive is reinforcing loyalty. Customers who have already purchased from the dealership and return for regular maintenance are primed for retention. By offering consistent, personalized service experiences from timely appointment reminders to tailored service offers, dealers can stay top-of-mind throughout the ownership cycle.
These touchpoints not only reinforce brand trust but also open the door for future sales, accessories, or protection plans. Over time, these loyal customers often evolve into brand advocates who drive referrals and repeat business.
2. Service Unsold: Engage Customers Who Service but Haven’t Purchased
Some of the highest-potential prospects in a dealership’s ecosystem are already in the service bay; they just haven’t bought a car from you yet. These “service unsold” customers represent a natural sales opportunity.
They already trust your dealership with their vehicle, and with the correct data and communication, they can be nurtured into becoming sales customers. Sales and service teams can collaborate to understand these individuals’ vehicle ownership stages, provide valuations, or identify upgrade opportunities, especially when inventory is limited and used cars are in high demand.
3. Conquest: Win Over Customers from Competing Dealerships
With shoppers increasingly exploring different brands and service options, the service drive presents a golden opportunity to convert customers from competitors. These are customers who may have purchased elsewhere but are now using your service centre, perhaps due to location, promotions, or reputation. To convert them, dealerships must act proactively.
Use customer data and digital tools to identify conquest customers, understand their ownership journey, and deliver targeted, value-driven messaging that highlights your dealership’s advantages. From competitive trade-in offers to loyalty incentives, positioning your dealership as the better choice can flip a one-time service visit into a long-term customer relationship.
4. Recall Opportunities: Build Trust Through Problem-Solving
Every recall visit is more than just a repair; it’s a chance to build trust in moments that matter most. These customers may not be happy to come in, but how a dealership handles the experience can make or break the relationship.
Dealers who approach recalls with:
- Empathy
- Speed
- Transparency
Turn a potential negative into a positive brand interaction. By resolving issues efficiently and offering added value, such as complimentary inspections or trade appraisals, you open the door to future engagement and possibly even sales conversations. A recall handled well often leads to renewed loyalty and referrals.
FAQs on Dealership Service Department Best Practices
Dealership service departments, commonly referred to as “fixed ops,” are the most profitable departments within a dealership. New and used vehicle sales generate higher revenues, but they come with thinner margins.
In contrast, service, parts, and repairs provide steady, high-margin income. Service and parts make up nearly 50% of a dealership’s total gross profit, according to NADA. Just as critically, service retention drives future sales: customers who return for service are 74% more likely to buy their next vehicle from that same dealership, compared to only 35% for those who don’t.
Best Practices for Service Departments
Just as every vehicle requires routine maintenance to perform at its best, service departments must follow best practices to operate efficiently and boost profitability. Top-performing service departments consistently follow these practices:
Prioritize Customer Communication
Customers want to stay informed about their vehicles. Dealerships can enhance service retention and boost customer satisfaction scores by keeping customers informed.
Communication begins with appointment reminders, which can be sent via:
- Text
- Automated phone calls
Provide real-time status updates during service. Finally, follow up with customers after the service to thank them for their business and address any lingering concerns.
Streamline Scheduling and Check-In
Busy service departments can overwhelm customers. Reduce the stress on your customers by making service appointments and check-ins as easy as possible. Offer online booking, mobile-friendly service portals, and express check-in to streamline the process.
Focus on Technician Efficiency
Technician productivity drives service department profitability. Use workflow tools to help organize repairs and track progress. Invest in training to upskill your team and improve their performance. Ensure that technicians are matched with the correct repair orders to minimize wasted time and improve repair turnaround.
Adopt Proactive Retention Tactics
Service retention doesn’t have to be a mystery. You can actively improve your service retention rates through various tactics.
- Implement loyalty programs to reward repeat customers.
- Offer multi-channel follow-ups to stay connected with customers after the service.
- Schedule the next appointments before customers leave to encourage return visits.
Embrace Transparency
Today’s consumers demand transparency. Build trust with your customers and reduce declined services by clearly communicating repair needs and costs. Utilize video walkarounds and digital repair estimates to enhance the transparency of your service department.
What is a Dealer Management System?
A Dealer Management System (DMS) is a centralized software platform that integrates and manages the various departments of an auto dealership. It helps streamline operations, track customer interactions, manage service appointments, and ensure regulatory compliance.
Leading DMS providers, such as:
- Reynolds and Reynolds
- CDK Global
- Tekion
Offer cloud-based systems that enable real-time data sharing between departments, thereby improving decision-making and customer satisfaction. An effective DMS is the digital backbone of any modern dealership.
Book a Demo to Boost your Revenue by 20% (Trusted by Hundreds of Dealerships Across the Nation)
Pam, short for “Personal Automotive Messenger,” is like having a 24/7 AI receptionist at your dealership. She’s always ready and waiting to take calls when your team can’t. Pam never misses a call, scheduling service, or nurturing leads, even when your team is off the clock.
This artificial intelligence technology outperforms human agents and competing AI solutions, delivering a 20% revenue increase and a 10x return on investment (ROI) for over 100 dealerships nationwide. Pam integrates seamlessly with your existing systems, such as Tekion and XTime. Experience the technology that can boost your dealership's revenue by 20%.
Schedule your personalized demo today. Implementation takes just one day.