Q: I am confident that customers who buy on the floor will use our service department but I’m losing customers who buy online. What are tips to get these online customers into my service department? Joel W., Cleveland
A: Bill Playford, vice president and partner, DealerKnows
As I’ve said many times over the years, one of the critical barriers to selling a car over the Internet is that people have a preconceived notion of how they should buy a car.
If we want to move customers into an e-commerce relationship, we need start by creating new and repetitive routines. How? It’s actually quite simple. Instead of focusing all of our e-commerce efforts on selling vehicles, we should look at the continuously overlooked profit center inside of every franchised dealership: The service department.
Providing a customer maintains their vehicle, they will interact with a (preferably your) service department dozens of times between purchasing vehicles. If a dealership is lucky, its service writers will get to see a household’s vehicles every three months or three thousand miles, or eight times a year if Hubby and Wifey Smith are loyal customers. Again, assuming the dealership is super lucky, and those same Smiths alternate twenty-four-month lease cycles, they interact with the sales team once a year. You tell me, who has a better chance of altering the routine, the department that delivers smiling faces eight times a year or the department that delivers smiling faces once a year?
All of the things we’ve been offering to customers on the sales side in the hopes of creating an e-commerce relationship aren’t enough to change a customer’s routine. The shopping carts, click-to-calls, live chats, no matter how fancy these things are, do nothing to alter the customer’s baseline model of how to interact with a car dealership. As soon as these tools drive a transaction, the relationship then reverts back to calling the dealership, or just showing up, to schedule routine maintenance on the vehicle.
If the automotive industry wants to drive change on the retail side of the business, it must focus its efforts where customers interact most. All of the whiz-bang technology that’s meant to create a seamless digital experience should start on the service side. If we can change a customer’s routine way of interacting with a dealership, then we can cultivate a way to change the way they purchase their vehicles in the future. Stop throwing money at a moving target five years from now, and invest that money in a future you can create today.
Q: I need tips in handling subprime customers. What do I need to know to make the deal go through with a minimum of risk and exposure? Daniel E. Springfield, Ill.
A: Rebecca Chernek, Founder, Chernek Consulting
More than 57 percent of the car buying public today has near-average to subprime credit, which means that nonprime and subprime customers represent a substantial bulk of untapped opportunity.
Before you race off in your newfound revelation that embracing subprime financing is the key to achieving killer profit, there are a few things you have to consider first. The fact is, most dealerships simply aren’t equipped with the processes necessary to take advantage of this largely unserved percentage of car buyers. Even fewer know what they need to do to make it fly.
Here are a few things to consider:
— Have the right inventory to service a wide range of customers, budgets and approvals.
— Establish solid bank relationships that will offer reasonable terms
— Ensure your F&I manager knows subprime financing inside and out, including how to work with banks and complete understanding of their guidelines.
— Have a well-defined F&I process in place to safeguard customer information and prevent credit fraud.
— Being able to defend yourself against unfair and deceptive act claims that your dealership might of used manipulate or confuse customers into buying a car or adding additional products. Terms that are not clear and do not follow a clear concise paper trail.
Working with nonprime and subprime leads is never business as usual, and anyone who thinks otherwise is taking on risk. Your sales staff must be trained on how to qualify buyers prior to landing them on a car they may not get approved or budget for. Dragging the customer through the mud taking all day to get a loan approval is not the way to go. Getting the staff on the same page working in unison is essential to working with subprime customers. A subprime customer is a loyal customer.
Q: My sales staff knows how to overcome customers who are defensive but what about my F&I team? What are some tips so they can recognize and negative defensive customers or overcoming their objections? Aaron B. Baltimore, MD.
A: David Lewis, founder, David Lewis & Associates
The goal of the F&I Office is to create revenue and control the remainder of the sales process. If the Customer remains defensive this truly minimize the amount of revenue that can be created and the control generated.
There are three simple ways to lower the customer’s defensive posture when visiting the F&I Department:
1. Stop planting the seed for the service contract. It does not sell the product, all it does is make the customer aware that someone is going to try and sell them another product. It is OK to mention the Service Contract if it helps sell the car, but that is it.
2. Change the title of the F&I Manager to Billing Clerk. You want the Customer to think that this person is more of a clerk then a highly paid manager.
3. Remove everything in the F&I Office that spells SELL! No brochures, auto parts or plaques visible.
Once you have lowered the Customer’s defensive posture, selling and maintaining control becomes easy.
Q: I’m interested in buying a dealership and am starting to look at their books. Are there any internal control processes that can help me be confident in their numbers and books? Warren S. East Hartford, CT.
A: Michael Roppo, director of Fixed Operations Consulting, Training QPS at WithumSmith+Brown PC and Automotive Domain Results
There are many questions you must ask yourself before buying a dealership! Keeping in mind that the selling dealer’s primary motivation is to obtain as much money for the dealership as possible and knowing that the dealership will be presented in a way to make it as appealing as possible to a buyer.
This is why it is of utmost importance to: Get a Due Diligence Performed: If you are planning on purchasing a dealership, it is vitally important to perform due diligence ( Get It Done Professionally)! Make sure you are working with an experienced accountant and legal professional that knows the business! Keep them attached to the hip! This is a must do! They will carefully ask about and scrutinize items such as the following:
· Current and past financials statements and performance records go back at least five years!
• Assess the target’s earnings and cash-flow quality
• Analyze the quality of assets and liabilities being acquired or assumed
• Evaluate the quality of working capital and recent trends
• Identify past and current internal control weaknesses of systems and personnel
• Ask them about providing you with additional insights on the target’s financial projection analyses
• Ask for any Corporate formation and organization documents
• As about any Contracts with employees
• Ask about Share-holders or vendors (Speak To Them)
· Ask about any insurance policies and the history of any past litigation or legal claims against the business
· Ask about the inventory values ledgers and actual stock?
· Ask about any Special Tool Requirements and its inventory value?
Know The Location: As with any business, your location can mean the difference between success and failure. Make sure you ask valuable questions like the following:
· Is the property sufficient for the inventory you will be carrying?
· Do the zoning and land use regulations for your chosen location allow for a dealership?
· Are there property soil issues?
· Will the property pass an EPA inspection?
Consult an Attorney:
The areas listed above are only a small example of a many areas, issues and questions that one must consider when purchasing a car dealership. Before you start, or if questions arise during a transaction and they should, make sure you consult an experienced industry specific Accountant, Business Valuations Expert and Business Attorney. They can limit the many unwanted surprises that can arise in the transaction. If you need more help please feel free to contact me at any time.
