BMW of Sarasota Incorporates Third-Party Service Loaner Program

As the operations manager of BMW of Sarasota, Malcolm Cheek has a vested interest in keeping customer satisfaction and retention high. As a manufacturer, BMW’s customer retention rate is 53 percent, according to the J.D. Power and Associates 2010 Customer Retention Study.

BMW of Sarasota’s customers are just as loyal, with two-thirds of sales customers converting to long-term service customers. That’s an impressive percentage, considering many Florida residents aren’t year-round residents. He added, “We’re actually very fortunate on that respect. We’ve got a good service organization taking care of the customer. And of course BMW having the 4-year, 50,000-mile warranty and the maintenance included also helps you retain the customers.”

The dealership does have a bit of an advantage because there isn’t another BMW dealership for about 70 miles. “Our market is a little bit interesting because you have to literally go a full hour’s drive – 70 miles south or 70 miles north – to get to another [BMW] dealer.”

Even though there are no other BMW service departments nearby, the dealership still makes sure to regularly market the service department. Cheek said the dealership does various monthly campaigns advertising seasonal specials, as well as targeted marketing to customers whose 4-year, 50,000-mile warranty has recently run out. Those customers are offered no-cost inspections to let them know what services their BMWs need right away and what they will need six months down the road. As for how the dealership sends those messages, Cheek said, “We’ll do everything from direct mail to e-mail campaigns, depending on how the customers really want to be contacted.”

To keep service customers satisfied and returning, the dealership offers a host of perks to its customers, including two waiting rooms, Wi-Fi, a children’s play area, and various munchies like homemade cookies, soda and chips. “We get a lot of people that like to hang out in the dealership, and of course we have a Lamborghini dealership that we own next door. People like to go look at those cars as well,” said Cheek.

The dealership also offers BMW service loaners as a complimentary perk for most services. Cheek sees it as just part of the cost of doing business to keep his customers happy. He said most BMW drivers want to drive another BMW when their cars are in for service, even if it is just for one day, which is no surprise considering BMW customers are some of the most loyal.

The dealership was managing its own BMW rental fleet until mid-2010, when Cheek partnered with Enterprise Rent-a-Car to handle the dealership’s service loaners. Enterprise set up and staffs a desk in the dealership, so now service advisors turn customers who get a loaner over to the Enterprise desk. As a part of the partnership, the dealership had to allot space on the lot for Enterprise’s BMW rental fleet, which is much bigger than the one the dealership maintained, and an area for its employees to wash and detail returned vehicles.

Other than that, it’s a hands-off partnership for the dealership. Cheek said, “[Enterprise] generally has two people on-site all the time, and then the manager … in charge of our location … is here throughout the day. They are a self-contained unit and do a great job as far as managing the whole business.”

Considering the advantages Cheek said are a result of outsourcing the service loaners, the concessions seem minor. One of the main benefits to outsourcing the rental department is the amount of capital freed up. He said, “From a capital standpoint, you’re talking in excess of a $1 million worth of inventory in cars even with a small fleet, so from a dealership perspective, you can keep that capital working somewhere else or invest it into something else.”

As of early 2011, the Enterprise fleet contained about 50 BMWs (and was still growing). All the vehicles in the Enterprise BMW fleet are purchased from BMW of Sarasota. Once vehicles cycle through their rental periods, the dealership has the option to buy the cars back to resell as pre-owned. An added benefit is the dealership knows the whole history of those vehicles.

Another advantage Cheek mentioned was the extra time service advisors now have. When the dealership managed the rental operation in-house, the advisors handled the loaner process for customers. He said it’s one advantage dealers overlook at first, “but if your service advisors can have an extra 10 minutes for every customer,” it’s making them “more productive.” He added, “They’re not processing paperwork, making sure there’s [a] driver’s license and insurance, getting loaner agreements … Hopefully [it] keeps our service department running a little more smoothly and keeps the wait time for the customers down as well.”

One other benefit to having a third party handle the rental operation is the dealership assumes less risk. Cheek said, “From a liability standpoint, you do end up lowering the liability risk to the dealership.” Additionally, the insurance required for a rental car operation is quite expensive.

The dealership is keeping the in-dealership Enterprise location quite busy. He said, “We tried not to over-promise in the beginning, so I think we’re keeping them busier than we originally told them.” The service department averages about 275 repair orders a week among six advisors, 18 technicians and 20 bays, and about half of the department’s customers are provided with loaners. So, Enterprise is averaging over 130 rentals a week for the dealership.

With a 50-car fleet, they occasionally run out of BMWs for customers, which is why they’re still building up the rental fleet. When the event arises, an Enterprise location about a mile away from the dealership handles overflow. Obviously, the goal is to get everyone in a BMW loaner, which is easier to accomplish nowadays compared to when the dealership managed the operation because of Enterprise’s much larger fleet. However, it’s nice to have an option for overflow nearby.

While the dealership doesn’t typically include a message about the rental cars in its service marketing, Cheek said salespeople use it on a daily basis as a marketing tool to differentiate the dealership from other BMW stores, letting potential sales customers know that this is a complimentary service they might not necessarily receive at other BMW stores.

The dealership did have to sign a contract with Enterprise. “They had to make a commitment as far as investing in people and infrastructure. They had to bring in computers, do some wiring, do some setup, so obviously you’ve got to give them a commitment too.” However, there are no flat fees the dealership must pay to have the Enterprise operation in-house. It simply covers the cost of the rentals.

Obviously, when handing over part of the sales or service process to a third-party, there are hesitations. Cheek said, “If [customers] have a bad experience with a third party, obviously that’s going to [have a negative effect].” While the third-party rental venture was new at BMW of Sarasota, Cheek previously managed a BMW store in Tampa, Fla., that had implemented an Enterprise rental fleet in the dealership, so he knew what to expect at the Sarasota store. As with any partnership, it comes down to cohesion. “It really does all come down to the people involved and everybody working together, and it’s worked out well for both parties.”