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September 9, 2020

Why 5 Years of Free Service Will Pay Off for Mazda

Why not throw additional discounts like other car manufacturers? If Mazda says buyers can save between P 90,000 to P 150,000 for five years of free service, why not just give it to buyers as a cash discount? That’s one of the more common questioned asked when Mazda Philippines made the move to offer owners a free 5-year service plan. The answer, it seems, is down to providing something that’s more beneficial to owners.

According to Mazda Philippines president Steven Tan, the decision to move to a 5-year free service plan from the current 3-year plan is a response to prevailing market conditions.

When Bermaz Auto Philippines (then known as Berjaya Auto Philippines) took over the exclusive distributorship of the brand in 2013, they introduced the free 3-year service plan as part of their Yojin-3 program. The decision was spurred in large part to Mazda wanting to reduce the owner’s so-called friction cost (total direct and indirect costs associated with the execution of a financial transaction). At the time, banks and financial institutions offered car financing up to a 36-month term which made three years of free service a welcome financial reprieve for those meeting their monthly amortization payment.

Today, car loans have been stretched, on an average, by an additional 24 months to a 60-month or 5-year term. With that in mind, it made perfect sense for Mazda Philippines to reevaluate and adjust its free service plan as a response to current Philippine market conditions. Once again, it’s all about removing the friction cost to owners. Moreover, because the free service is part of the vehicle’s purchase price (this is not a limited time offer as with other brands), owners are protected from any potential price increase or inflation of parts and labor. These factors also influenced as to why the carmaker opted to retroactively apply the extended free service to customers who purchased vehicles during the pandemic (April 2020 onwards). “They need it more than anyone else,” says Mr. Tan.

The decision to extend the free service plan is also paying dividends to Mazda dealers as well. Not only are dealers paid back 100 percent for owners who avail of the free periodic maintenance service, but they also see higher customer retention rates as well.

“Normally, customer retentions drop dramatically after just a year,” says Tan. “But we’re happy to say that with Mazda, our customer retention is between 90 to 95 percent. A big part of this is because of our free periodic maintenance service program.” Tan reiterates that a longer a customer stays with a dealership, the better the chances of forming a relationship. “It’s part of Mazda’s push to become a more premium brand,” he says. Together with their just implemented dealer online service appointment system, he notes that Metro Manila-based dealerships are now exceeding their Units Received (UR) for service even compared to pre-pandemic levels. Service, it seems, has paid off very well for Mazda.

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