07/29/10 by Becky | Articles | Comments Off
Trying to sell everything will just confuse your customers
|
By Rebecca Chernek
Ward’s Dealer Business, Aug 1, 2009 12:00 PM |
Since I began my career in the automotive finance office in 1987, I have witnessed several national recessions. The markets crashed. Banks closed. People lost their jobs and their savings or both.
Always, the car industry was deeply affected. Always, recovery produced more prosperity than ever before. Now, the entire world is in a recession and deeper than most of us have ever experienced.
Our government has taken over a chunk of the car industry and hundreds of dealerships have been closed by edict. We wonder how we can pull ourselves out of the doldrums produced by our worry and concern. Times have changed.
U.K. Prime Minister Harold, no stranger to recessions, said, “The only human institution that rejects progress is the cemetery.”
Those who were involved in our industry during the 1960s know that it was Pat Ryan, described by some as the father of finance and insurance as a designated dealership entity, who brought us out of the Dark Ages.
At only the age of 26, he introduced the idea that dealers should not only offer consumers financing arrangements at the time of sale, but other benefits as well, benefits such as credit, life and disability insurance and service contracts.
Within four years, his idea had grown into a $15 million business. By the end of the 1980s, Ryan had acquired or merged with other companies and, together, his newly formed Aon Corp. had 28,000 employees and was worth a few billion of dollars. By 2004, Aon employed 53,000 people, with 600 offices in more than 120 countries.
“There is only one way to do business — the right way, Ryan once said, referring to high levels of integrity and morality.
When Ryan introduced his revolutionary idea to those in our industry, it was not without detractors. In time, his proposal was accepted enthusiastically, because it offered dealers the opportunity to generate additional back-end profit through the sale of F&I products.
It also allowed them to take advantage of reinsurance profits. Most dealers benefited handsomely from this system and can do so again. But increasing profits through the sale of products must be tempered with building customer trust and loyalty through “…the highest levels of integrity in a highly principled, highly moral and highly ethical manner.”
Today, dealers have a long list of products to offer consumers: service contract, maintenance, tire and wheel, etch, key replacement, paint and fabric protection, GPS, Lo-Jack, dent-ding, diamond fusion, lease wear and tear, gap, unemployment insurance, credit life/disability, tires for life, engines for life. The list goes on.
Obviously, products are the driver to a profitable finance department. But, in today’s business climate, exactly which products bring the most value to the consumer, while creating wealth for the dealer?
What is the most effective and efficient way to present them? Why shouldn’t every value-added product available to the consumer be offered? Which products for specific dealers make the most sense?
Which products should be offered every time and with every customer, because they deliver the greatest impact to the dealer’s bottom line? The answers to these questions influence the end result. So is understanding that offering an endless litany of products in the finance department does not always lead to profits.
Now let’s talk about you and your dealership. Before you make any decisions regarding which of the wide variety of products to offer your customers, you need to put your primary goal on paper.
This gets you to think about it. And seeing it in black and white ensures you recognize the reality of your current situation. Is your goal simply to offer whichever products will bring in the most back-end profits?
Or is it to increase back-end profits while building a successful reinsurance portfolio? Or something else? Unless you commit to putting your primary goal in writing, you will not know what needs to be changed and why.
Once you know your goal, ask yourself another series of questions.
Begin with an assessment of all the products available to you. Is this the best product of its kind and at the right price?
Do I have complete trust in the product company? What are my product partner’s expectations and can I meet them? Can they meet mine? Can I fully support the product and its value for my customers? What are the negatives, if any? Will my F&I manager agree with my assessment and be enthusiastic about offering the product to my customers?
Ironically, few dealers ask their F&I managers if they believe the offered products on their menu have intrinsic value over other similar products.
Why is this necessary? Unless they can wholeheartedly support the product, they will be unsuccessful in not only presenting the product but in overcoming customer objections.
The only way to know for sure if a product should be on your menu is to make product comparisons and conduct thorough research. Especially in today’s market climate, every dime a consumer spends must have proven value.
Presenting your menu with a long list of products will seldom increase products sold. It will, however, confuse the customer and diminish their interest in buying any!
Today’s more savvy and cautious vehicle buyers are looking for the best quality, the lowest price, and the best terms on everything. Dealers must be prepared to answer their every question candidly, convincingly, and conscientiously.
F&I trainer Rebecca Chernek is CEO of Chernek Consulting Inc. She can be reached at 404-276-4026 and chernekconsulting@earthlink.net.
07/29/10 by Becky | Articles | Comments Off
It pays to recognize customers’ individual circumstances
|
By Rebecca Chernek
Ward’s Dealer Business, Sep 1, 2009 12:00 PM |
Products equal profits! But you won’t know how much and from which finance and insurance products until you work it out on paper. This is no time for guessing.
This is not the time for strong-arm tactics or pushing products on those who have no need for them. The F&I presentation process requires product knowledge, proper training, regular practice in how effectively to sell off the menu, and sensitivity to customers’ individual circumstances.
Which products are best for customers making a lease, cash or finance transaction? What is your dealership’s percentage of each of these transaction types?
Why is it important to know your percentage of cash sales comparing them to outside finance sources? Perhaps because if your customers obtain outside financing, your F&I manager should be offering a gap policy on a cash menu, especially if you aren’t in a waiver state. If you didn’t know this, now is the time to dig deeper for your preparations.
What products on a cash transaction yield a better result? It depends. Dealers located in Detroit know that, because the area’s weather and climate change is significant, product choices should include paint and fabric protection.
Dealers in Memphis, where the theft rate is growing substantially, usually offer a VIN security product.
Ironically, credit life/disability was the product of choice 20 years ago, less so today. But dealers should evaluate whether such products bring in the same value as before. A credit life or disability product that will significantly increase a customer’s payment may generate a 50% commission.
Dealers in New York, however, will only realize a minimal commission for the same product sale, as opposed to the 100% earned by offering three other valued products while keeping the customer’s payment within reason. Know your numbers. They influence your profit line.
Do many of your customers lease vehicles? If so, does it make sense to offer a service contract as a first priority? In these cases, perhaps you should offer more relevant products that bring profit to your bottom line, without significantly increasing your customer’s payments.
How about a tire/wheel maintenance, paint/fabric protection, dent/ding repair coverage or key replacement?
Dealers from every state and region experience different results. The size of the market, the brands being offered, inventory, the general state of the local economy affect the number of vehicles and products sold.
Dealers, therefore, have wide-ranging expectations. But, the underlying result is the same. What percentage of sale should you expect and at what profit? How should you price each product and what is your return on investment?
Your customers can only afford so much. Knowing which products will benefit them the most and how these ultimately affect your backend profit and support your reinsurance program are the keys to your success.
Products that carry a high claim-cost factor may not be worth consideration for some dealers or to those who have a reinsurance program. Some dealers sell high-mileage vehicles, while others don’t, because of their location and the customers demand for more utilitarian vehicles.
Customers who live in Eastern cities have less use for a big car, because they have public transport or drive shorter distances. Larger, more rugged vehicles are needed by those who live in rural areas or in Western states where there are greater driving distances.
Carefully evaluate your market and your customers’ needs. If your dealership sells more high-mileage cars, know what kind of service contract programs to offer.
Know your products and ones that are more suitable than others. Offering a service contract that costs about the same as the car may not be wise choice.
As you add products, ask yourself if one could hinder or help the sale of another.
F&I trainer Rebecca Chernek is CEO of Chernek Consulting Inc. She can be reached at 404-276-4026 and chernekconsulting@earthlink.net.
07/29/10 by Becky | Articles | Comments Off
Here are ways to keep the F&I department humming
|
By Rebecca Chernek
Ward’s Dealer Business, Oct 1, 2009 12:00 PM |
It is possible to enjoy healthy finance and insurance profits even when the market is off kilter. Let’s look at ways to do that.
First, create a consistent pricing philosophy after deciding which F&I products to sell.
Each product should have a specific mark-up, and each should be presented to every customer with that mark-up in mind. Have in writing your return on investment on each product sold and at what percentage.
The mark-up is not achieved through a willy-nilly process; the banks you do business with have advance policies that affect such a decision. Consistency with product offering and pricing increases sales and profitability.
If you allow finance officers to pick and choose what products suit them or which ones to offer to the customer and at what price, it can sabotage results.
Pay Plans that Produce Results
Now is the time to review your pay plans.
Pay attention to the products on your menu and to your total department payout. Use the figures you’ve worked out for each product, including your expected units sold and at what price.
F&I management payment plans vary. Some dealers have veteran finance personnel who are skilled in presenting their products and produce a satisfying net result. Others need more training and encouragement.
For those who sell less product and hold more reserve, consider a pay plan that yields results through products sold that increase overall performance. Some dealers utilize a grid pay plan that supports volume, percentage of products and profit. A good pay plan motivates your F&I manager to perform to your initiatives. It drives products while still focusing on profit.
Benefits of Reinsurance
Reinsurance is another way to maximize your wealth through products sold. Many dealers who have been hit hard by the recession have managed to keep their doors open due, in part, to the reinsurance program they instituted years earlier.
A successful reinsurance program can add much to your bottom line. Some dealers use reinsurance as a part of their business, while others don’t fully understand how to make it profitable. Proper products that are pre-screened, priced adequately, and presented on a consistent basis will produce satisfying results.
While each dealership is unique, the basic principles of product sales and reinsurance can be used by each.
Increased sales and profits depend entirely on how each dealer defines current problems, new goals and solutions. Every dealer can succeed and grow, even in the current recession.
Perhaps you have read “Out of the Crisis” by W. Edwards Deming, the father of Japan’s post-war industrial revival.
In the book, he said, “There is no substitute for knowledge. Experience by itself teaches nothing. The problem is at the top; management is the problem.”
This is why active, hands-on decision-making and management by dealer principals are important.
Take stock of how your dealership is progressing. Get rid of the window-dressing and zero in on the best quality products that will serve your customers. Price them fairly and know your numbers, but retrain your managers and think about how each product and each benefit of your reinsurance program improves your entire business structure.
But remember. While the numbers are critical, pay even closer attention to your managers, the effectiveness of your procedures and your customers’ needs.
As Myron Tribus, a former director of the Center for Advanced Engineering Study at Massachusetts Institute of Technology, said:
“If you try to improve the performance of a system of people, machines, and procedures by setting numerical goals for the improvement of individual parts of the system, the system will defeat your efforts and you will pay a price where you least expect it.”
F&I trainer Rebecca Chernek is CEO of Chernek Consulting Inc. She can be reached at 404-276-4026 and chernekconsulting@earthlink.net.
07/29/10 by Becky | Articles | Comments Off
Here’s how to get sales, finance teams working together
|
By Rebecca Chernek
Ward’s Dealer Business, Nov 1, 2009 12:00 PM |
Remember the old days? Selling a vehicle of just about any brand, color, or size was possible, and with little effort.
It didn’t matter if your dealership had a strong or a weak desk operation, as long as you had a strong closer in the “box.” It didn’t matter if your customers were on the right car with the wrong payment or the wrong car with an okay payment.
The aim of your sales staff was to throw them into the box and have your closer work whatever magic was necessary to seal the deal.
Times have changed. Today, that attitude is obsolete, unprofessional, and a guarantee for failure.
Your sales manager needs updated training to ensure every member of your sales staff is on the same page as those in the finance department, and those in the finance department need updated training in how to sell in modern times.
The new system requires that every staffer properly assess every customer. That includes a well-qualified, above-board interview to ascertain suitable vehicle choice, considering needs and budget restraints.
Profit is still the primary goal. You want your staff to systematically sell cars while earning a profit on both the front- and back end, while also managing a healthy reinsurance portfolio.
Yes, your dealership can still make profit in a down market, but not in the same way.
With credit tight, those working the desk must manage and negotiate every transaction before it ever gets into finance. This means your sales manager should have some finance experience. No longer can he or she quote payments and terms that don’t exist just to bury the deal in finance.
It amazes me how many desk managers lack effective standards and procedures.
Your dealership will improve operations by following these desking guidelines:
Meeting and greeting: Greeting customers in the right way builds rapport. Proficiency comes through training and an in-place curriculum that is managed on a daily basis, without haphazard techniques left to the imagination.
Qualifying customers: Sales personnel must be trained in how to do this in a meaningful interview. What brought the customers to the dealership? Did they see your ad in the paper or online?
Have they purchased previous vehicles from you? Will they be trading a vehicle or making a new purchase? Was their current vehicle financed, with whom and for how long? How will the new vehicle be used?
Are all the decision makers present, or is this is an information day only? Where does the customer live and what do they do for a living? Are they currently employed? Are they on a budget?
The answers provide valuable information and avoid the problems that occur when customers prematurely select vehicles they can’t really afford.
Show me the numbers: In today’s market, playing games with customers is risky business. Here’s a proper upfront desking procedure:
Present a worksheet as though it were a “menu.” Keep pricing consistent. Don’t prejudge customers. Perform that credit check.
Value-price the vehicle with all the numbers, fair market for the trade-in, 20% down and range payments that are figured using an average rate and terms.
When discussing rate, say, “We use an average interest rate until we review your credit score and payback history.”
Say, “Based on the terms we’ve prepared, what works best for you?” Let the customer tell you how to sell to them. Listen to your customer response. Be clear and concise.
Ensure the customer will qualify at the agreed-upon payment for the right vehicle, before sending the sale into finance.
The bottom line: A sales manager without proper desking skills can cause havoc in front-end profit and back-end performance. Success comes when sales and finance work together, using a practicable, consistent desking system.
F&I trainer Rebecca Chernek is CEO of Chernek Consulting Inc. She can be reached at 404-276-4026 and chernekconsulting@earthlink.net.
07/29/10 by Becky | Articles | Comments Off
Virtual dealerships could be new way to sell, finance cars
|
By Rebecca Chernek
Ward’s Dealer Business, Jan 1, 2010 12:00 PM |
Virtual worlds are popping up all over the Internet and it is entirely feasible to sell cars and provide financing options and products to online users.
Already, many of your customers shop the Internet for the best deals before ever stepping foot on a car lot. Many search cyberspace for the best deals on the products usually sold by your finance manager using a menu.
A virtual dealership could provide you with customers who make use of the Internet at night when they have the most time to search for new vehicles.
They like the ease of comparison shopping while in the comfort of their homes. Now is the time for you to take a serious look at how you can change your way of reaching and keeping every customer.
Check out www.secondlife.com, which is one of the fastest growing free networking communities in the world. Already, sites such as this offer in-world 3-D classroom education through systems from some of the largest and most highly rated universities, including Harvard, Princeton and Stanford.
Several corporations also offer in-world hiring and workshops. Several million individuals from a variety of professions worldwide enter into “second life.com” with the clear objective of finding new ways to conduct business.
The online experience can be extremely lucrative for the forward-thinking dealer, not only for selling cars, arranging financing and offering a variety of products, but for other services, such as online scheduling of routine vehicle maintenance check-ups.
With a click of a mouse, you would invite each customer to experience a 3-D showing of all the vehicles on your lot. They would be able to chat directly with your sales associate and, at the same time, negotiate the terms of the sale without even driving to your dealership.
The process takes place through your dealer avatar (model/prototype). Once the vehicle selection has taken place, the customer meets your business manager, another avatar who begins to finalize the sale at the online sales desk. The process is no different from the one used if the customer were at the dealership.
The customer is then presented the buyer’s agreement, to ensure the registration information and pertinent buying numbers are correct. The applicable information is viewed on screen by the customer, and each step of the way a checkpoint is set up for proper disclosures.
Once a customer agrees to the vehicle purchase, the business manager reviews and submits the loan application.
The beauty of doing virtual selling is that everything can be time-stamped for process assurance to guarantee the negotiation is compliant.
So, with safeguards in place, your business manager reviews the credit application in its entirety and communicates with the customer to verify all the information for accuracy. If the process includes Dealer Track or Route One, the transaction is easily punched in and an approval is imminent.
If the virtual process is properly set up, your business manager will have no trouble qualifying customers for product sales, after the completion of menu presentation.
A virtual dealership is not a fantasy. It is a very real probability. If you are hesitant or not quite ready to visualize your shop as a virtual world shopping experience for your customers, then I suggest you make every effort to ensure your business manager is tied directly to your Internet manager and customers are given a direct link into the office.
Your business manager must be involved earlier in the sale, especially with Internet customers. Just because the customer is out of the dealership doesn’t mean finance isn’t involved in the transaction.
Internet sales can and will mean big business to dealers who know how to utilize this vast technology.
I remember when we first initiated menu selling. Non-believers said it wouldn’t work. It’s now an industry standard. Virtual selling is here. Welcome it with open arms.
F&I trainer Rebecca Chernek is CEO of Chernek Consulting Inc. She can be reached at 404-276-4026 and chernekconsulting@earthlink.net.
Copyright 2010, All Rights Reserved. Site maintained by