The dealer landscape looks very different today than it did 10 years ago. Rapid advancements in technology, the demand for a short lead-time from buying decisions to delivery, and changes to legislation and regulation leave dealerships scrambling to stay ahead of the curve.
Given the F&I department plays a significant role in the customer journey, the pressure is on for dealership management teams to understand what buyers are looking for and translate these findings into best practice. Ian Tinker, commercial director at DealTrak, looks at the ways in which dealers should measure their success in 2019 – in order to keep up with customer demand.
Focus on your customers – not the numbers
Traditional ‘hard’ measures of success such as out-and-out sales, finance and product penetration, or income per retail unit, will always remain in place, but for a dealership to flourish within a shifting landscape they need to actively embrace customer-focused KPIs.
By understanding your own operational efficiencies and reflecting on how fairly you treat your customers, and whether you strive to get the best outcomes for the customer with your lender or broker partners.
A move towards a service-led business attitude will see traditional metrics begin to look after themselves.
Customers can become frustrated with the length of time which lapses between making the decision purchase and driving away.
Often, the number of legal processes and paperwork which needs to be read, digested and signed can leave the buyer reviewing multiple documents on their way to finalising a finance agreement.
Digitisation has significantly reduced the level of tolerance for reams of paperwork. So, conducting an internal audit to understand how many documents make up your own customer journey, can often be an enlightening process.
Consider how many you would sign and how long you would wait once you had decided to go ahead with an F&I agreement. Aim towards hitting that same target within your dealership.
Streamline your systems
Continuing with the theme of digitisation, explore the number of different sales, finance and insurance interfaces being used throughout the customer journey.
Are you having to input basic information – such as name, address, date of birth – multiple times, much to the annoyance of the buyer?
It’s a given that dealerships will work with several lenders, but an efficient firm shouldn’t need to log onto each point of sale system separately in order to give the customer an impartial and compliant financial evaluation.
Additionally, using separate compliance tools and other systems for insurance makes the combined process inefficient.
By choosing an F&I platform which integrates each element means the customer spends less time waiting and the sales team can focus on selling more cars.
A well-streamlined F&I process can therefore enable dealers to process more finance applications each day.
Quality over quantity
Each time a dealership sends a customer finance application to a lender and it is declined, the decision will have a negative impact on the credit rating of the buyer.
If a buyer leaves your showroom with no car and a damaged credit score, they will be unlikely to return.
By the same token, it also costs lenders both time and money to evaluate each finance application – whether successful or not.
Additionally, when pricing retailer packages, lenders assess the quality of business proposed as well as the volume.
Managing efficiencies in conjunction with your lender partners could allow you to agree more appropriate rates and terms.
The F&I product ratio
Dealers should place just as much emphasis on what isn't bought as what is.
By considering the number of vehicle sales where no F&I products were purchased, dealerships can identify where there may be an area of unbalanced performance.
Historically, respectable performance might have been achieved by making a significant profit from a small number of customers – and hardly any from most.
However, even the most competent dealerships might find the ratio surprisingly high. By focusing on what is not purchased, dealerships can highlight important shortcomings in the sales process.
Linked to this, dealerships should monitor lost sales just as much as successful ones. Consider the amount of untapped profit when customers have left the showroom after being declined credit.
A greater understanding of this area can highlight the need for a good broker or non-prime lender on your finance panel, thus increasing customer satisfaction and profitability in 2019.
Lender panels which work for a dealership in London meanwhile, may not work for one in Manchester – as the demographics of buyers may be fundamentally different.
Curate your lender panel to match the needs of customers looking to transact with your business and you’ll naturally see a rise in F&I sales.