Car dealerships are complex businesses relying on two key profit areas: variable and fixed ops. Variable operations usually refer to car sales, which typically have a lot of volatile variables.
On the other hand, fixed operations, an industry term for the parts and service departments, are much more steady. For auto dealerships, fixed operations are a significant area for growth and the key to customer retention.
In the past, auto dealers have primarily viewed variable operations, or vehicle sales, as the primary profit area, but that is changing. According to the National Automobile Dealers Association (NADA), although fixed ops only account for an annual average of about 12% of a dealership’s revenue, they also comprise nearly half of the gross profits.
That means fixed ops could be a hidden powerhouse in your automotive dealership. Safeguard’s automotive marketing experts are here to help with this through innovative marketing strategies specifically for your parts and service departments.
What are aspects of automotive business profitability?
Profitability is at the core of any business, and the main factor for profitability is generally revenue from the sales of products or services. For an auto dealership, this is typically split between car sales, referred to as variable operations, and income from the parts and service department, referred to as fixed operations.
Aging Cars Represent a Fixed Ops Opportunity for Automotive Dealerships
Consumers are keeping their cars longer than before, with reports showing that the average vehicle is over 12 years old. At a time when many dealerships are still struggling with inventory shortages, the increasing number of aging cars on the road is a growing opportunity for auto dealerships to utilize their service departments.
In fact, even as dealers saw a slight dip in customer volume, overall repair order revenue has continued to increase. When utilized effectively, the service department can also be a critical asset for retention and repeat sales.
As fixed operations become a more prominent profit center, auto dealerships can make sure they see the most significant benefit from their service department by ensuring that it runs efficiently and delivers a customer-centered experience wherever possible.
How Increasing EV Sales Represent a Shift in Fixed Ops
The electric vehicle market has generally been niche, representing only a tiny share of the population, but demand for EVs is increasing. More than 750,000 new all-electric cars were registered in the U.S. in 2022, 57% more than in 2021.
Encompassing hybrids, plug-in hybrids, and pure battery-electric vehicles, electrified vehicles are expected to continue to gain more market share from conventional internal-combustion engine vehicles.
As the typical electric vehicle (EV) only has 20 moving parts in its powertrain, compared to most combustion vehicles on the road with over 2,000 parts, EVs usually need less frequent repairs and maintenance.
As EV sales increase, there is the potential for fewer dealership visits by EV customers, which impacts not only car sales but also the parts and services department.
As EV adoption is still growing, less than 1% of the 250 million vehicles on the road in the U.S. are electric; auto dealers can implement changes in their parts department to make the most of future trends. This may include a shift to focus on services such as tires, brakes, suspensions, alignments, and electrical systems.
Additionally, dealers may consider staying stocked with EV parts and batteries. As batteries are the most critical high-priced EV component, dealers might also invest in equipment that would allow them to refurbish and resell EV and hybrid batteries.
4 Fixed Ops Marketing Strategies
Marketing strategies can differ between fixed and variable ops because they focus on selling two different things. To create success for their parts and service departments, dealers must implement marketing strategies specific to their fixed ops offerings.
Focusing on auto marketing strategies such as building a service-centered webpage, curating specific email lists for fixed ops, and utilizing social media can help ensure auto dealers are well-positioned to reach customers looking for needed services and repairs.
Make sure your website includes pages that provide information about the parts and services your dealership offers. Consider including ways for customers to schedule their service online.
Email marketing is ideal for marketing that inspires readers to act, making it a great place to include discounts or coupons for various services. You can also create personalized emails to remind customers to schedule routine services. These incentives encourage customers to return to your dealership for all their parts and service needs.
3. Social Media
Auto dealers can use social media to raise awareness of limited-time offers, advertise service specials, and allow potential customers to ask questions via direct messages. Consider creating social media posts with employees posing with happy customers to strengthen customer relationships and help your staff feel recognized.
4. Customized Corporate Apparel
A big part of marketing efforts is the in-person experience for your customers. Ensure that your employees deliver a great first impression with customized corporate apparel from Safeguard that reinforces your brand and builds team unity in the shop.
- Auto dealership profitability is split between car sales, referred to as variable operations, and revenue from the parts and service department, referred to as fixed operations.
- When utilized effectively, the service department can also be a critical asset for retention and repeat sales.
- To create success for their parts and service departments, dealers must implement marketing strategies specific to their fixed ops offerings.
- Auto dealerships can ensure they see the most significant benefit from their service department by ensuring that it runs efficiently and delivers a customer-centered experience.
- The automotive marketing specialists at Safeguard can help with strategies for auto dealers that bring customers to your shop.