LOS ANGELES – As Hyundai Motor America’s executive vice president-customer satisfaction at the time, Frank Ferrara recalls attending an event and speaking about the need to make customers happy.

Essentially his message was: It’s nice to be nice.

An attendee “who had too much to drink” challenged him. “He told me, ‘Everything you said about customer satisfaction is BS. You’d want me because I make lots of money for my boss.’”

Ferrara’s immediate reaction was his antagonist probably also lost a lot of business by fixating on profits at all costs and consequently driving many other customers to competitors.

But later, Ferrara had an epiphany. “I realized he was right, in a way. Customer satisfaction doesn’t matter until it rings at the cash register. On the manufacturer side, we sometimes didn’t do a good job of connecting the dots.”

He says customer satisfaction should reap revenue for dealerships, but “that’s a question mark for a lot of people.” Not for him, though.

Retired from Hyundai and now a fixed-operations consultant, he speaks at a recent Customer Experience Summit here on “Monetizing Customer Satisfaction in the Service Drive.”    

He connects the dots this way: Customer satisfaction leads to additional service work, customer referrals and repeat business. Cha-ching.

Many dealers are turning to their service departments to compensate for softening vehicle sales of late, he notes. “Let service be the guide to profits.”

But he says dealerships too often measure back-shop performance strictly by gross profit. Instead, they should focus more on traffic. Increasing that “builds business for the entire store,” he says, citing sales of vehicles, parts and service contracts.

“For service, set traffic targets, not gross-profit targets,” he says. “To many service managers, it is all about gross, about hitting those numbers. But that’s detrimental. The objective is wrong. It leads to bad habits. Customers can get hit with high tickets. The focus should be on keeping this customer for three years.”

Most dealership service-department traffic consists of first- and second-year vehicle owners, he says. But as those vehicles get older, owners often take them elsewhere for service, such as independent shops or national car-care chains.

“New-vehicle owners are low value” because repair orders for them skew towards light warranty work, inexpensive oil changes and simple tire rotations, he says.

But 3- to 5-year-old vehicles have more expensive needs, such as new tires, brakes and higher-cost repair and maintenance work.

Those vehicles also are ripe for “equity mining,” in the service lanes. That involves a dealership offering to buy customers’ vehicles, put them in new ones and remarket their swapped vehicles.

Ferrara’s “holistic view of service traffic” is to “feed the shop (with repair and maintenance work), feed the new-car department (with sales emanating from satisfied service customers and equity mining) and feed the used-car department (with replenished inventory from equity mining).”

What drives customers away? Slow service and high prices are the usual culprits, he says. “You know the story.”

What really drives them away? Dealerships do, if they don’t value them enough, he says. “If they valued customers, they’d figure out how to keep them. They’d have a solid process for everything, and there would be no variations.”

Dealers can double service-department traffic by using a good process, running “come-back” marketing campaigns and offering competitive prices, he says, adding the latter is essential today.

“People go online looking at prices. The dealership service prices absolutely must be competitive.”

sfinlay@wardsauto.com