Y’all Come Back Now!

F&I product administrators have a once-in-a-lifetime opportunity to help dealers sell more products and earn the type of customer loyalty that doesn’t expire with the factory warranty.
By: John Pappanastos

Y’all Come Back Now!

There is nothing as welcoming as Sunday dinner with friends and family. The meal is often a rotation of favorite dishes, the conversation replete with friendly banter — and some well-worn digs — and the dessert can never be passed up. As guests make their departure, the host offers a warm embrace and the phrase, “Y’all come back now!” While it may seem trite, the phrase is always sincere. These people truly want to see you again — soon. You are part of their community — their circle — and they are invested in your wellbeing.

The same can be said for the agents and the dealerships that we support. If they are invested in supporting their customers, hopefully they are repeating the phrase “Y’all come back.” But what makes a customer want to come back? Trust me — it’s more than a phrase and a warm embrace. In these days of fickle, demanding consumers, service retention is a hard-won effort. As product administrators, how can we as an industry help consumers move from having to come back, to wanting to come back?

We’re All Getting Older

According to research firm IHS Automotive, the average age of vehicles on the road in the U.S. has climbed to 11.5 years. Consumer ownership trends have permanently shifted in recent years to longer loan terms and longer ownership cycles. The growing millennial customer base is also seeking more value in the make and model of car they purchase. The rising cost of vehicles coupled with a penchant to keep a vehicle well past its loan terms means consumers are driving older vehicles.

Longer vehicle lifespans have an impact on the customer’s history with the vehicle — as well as the purchase process. Many customers do not have a long-term view of their potential history with a vehicle at the time of purchase. Their focus is on purchasing the vehicle now. It is not on owning and maintaining the vehicle for nearly 12 years! That is all the more reason that providers and administrators need to have a 12-year view for each transaction. Having this mindset will dramatically impact how we as an industry support our clients and help them engage with their customers.

Now is the time to consider how our products align with dealer and consumer needs. Whether working with new or used vehicles, it is important to arm dealers and agents with the right products to sustain the vehicle for 12 years. Think about all of the things that will need to be replaced or addressed during that timeframe:

  • Tires (maybe three or four sets)
  • Transmission and powertrain (because the OEM warranty will likely run out just when things are about to break)
  • Body issues (for accidents, hailstorms and other unforeseen events)

Do Customers Want to Come Back?

As I mentioned earlier, there is a big difference between wanting to come back and having to come back. According to Cox Automotive, 70% of vehicle buyers never return to the dealership for maintenance. Clearly, when dealers only rely on customers needing maintenance, they fall well short of getting customers to want to return to the dealership.

So how can product administrators help dealerships make sure customers want to come back? Almost every product sold in F&I is geared toward increasing service drive retention. The language in most vehicle service contracts and maintenance contracts highly recommend customers bring their vehicles back to the selling dealership. But simply having those products on hand is no longer enough to increase service drive retention.

To fully realize the benefits of F&I products in terms of profitability and customer retention, dealers need a culture of F&I. This means that all departments in a dealership need to know what products are sold in F&I and how they benefit each customer. This goes back to us as administrators.

Any administrator who doesn’t recognize that products are only one piece of a very large pie represent the future dinosaurs of the industry. Dealers need partners to help them shift their operations to an F&I mindset. This includes training more than just F&I managers, but rather the whole dealership on product benefits. It includes providing in-depth analytics for dealers to make more informed decisions on product menus and pricing.

According to NADA, regular service customers are 17 times more likely to buy their next vehicle from their servicing dealership. In addition, an increase in customer retention rates of just 5% can improve dealership profits by 35%.

In addition to providing dealers with ongoing training, auditing and counseling on how to best position each F&I product to individual customer needs and wants, product administrators have the unique perspective to help dealers create pay plans that are tailored to meet dealership goals.

For example, with prepaid maintenance, customers have the opportunity to drastically reduce their ongoing maintenance costs — if the product is priced appropriately. Many dealerships find success in selling the product at cost, and using it as a springboard to upsell customers to a comprehensive vehicle service contract, which is priced to increase dealer margin.

This only works with management buy-in and with pay plans specifically outlining how products should be sold. That is where the product administrator is most important. The administrator has significantly more product knowledge and expertise and can more easily help dealers decide which products should lay the foundation for products with high profit margins.

In addition to working through the F&I department, it is possible for our industry to help dealers fortify the service drive itself. More dealerships are recognizing the benefits of selling “credit-card”-sized products through the service drive, such as tire-only products. These products help boost customer satisfaction with their repair work, which in turn helps create customer retention.

By taking a more holistic approach, we have the potential to position F&I products as one of the top solutions for customer retention. Of course, product positioning is only the first step in cultivating long-term dealer-customer relationships.

Aside from the operations of making a sale once a customer is in the store, dealerships are focusing more of their efforts on digitally engaging with customers before they enter the dealership. Dealers are being forced by consumers to not only connect with them online, but also conduct business. While dealers begin the process of adapting operations to take greater advantage of a more digital environment, product administrators have the opportunity to determine how to better facilitate an online finance process. The administrators who most quickly adapt to this new business paradigm will be better positioned in the market for future success.

Build a ‘Y’all Come Back’ Community

We’ve all seen examples of product administrators suffering the brunt of criticism from consumers about claim adjudication of their policies. And we’ve also heard from dealerships who are dinged when the claims process does not go smoothly. Dealerships have charted poor customer service reviews, resulting from a poor claims experience with the product administrator. These negative reviews impact customer retention levels and dealership profitability, which can potentially prompt dealerships to change their F&I product administrator.

What does that mean for us as an industry? It’s past time for all product administrators to review and address their reputation within the market. To be viewed as truly reputable and dependable, we need to place an emphasis on transparency. From Better Business Bureau ratings to open-book policies on claims processing, we need to be up front with our clients on how we manage their business, providing information on:

  • The number of claims processed quarterly and annually
  • The percentage of claims paid
  • How quickly claims are paid
  • The average call time
  • The call abandon rate
  • The average availability of a service provider or claims adjuster

As dealers focus more on increasing their back-end profitability, they will begin to rely more heavily on good partners. This means administrators will need to have additional capabilities to meet dealer demand, including assisting dealers at an even greater level on service drive development, and dealership process improvement.

Building a “Y’all come back” community is not rocket science — nor is it terribly difficult. But it does require a level of intent and mindfulness that must become second nature. Just as you can count on that Sunday dinner and the welcoming embrace of those in your circle who attend, so should dealership clients and customers be able to count on us.

This article was written by:

- has written 1 posts on P&A Magazine.

John Pappanastos joined Enterprise Financial Group (EFG)’s board of directors in February 2006 and was named president and CEO in February 2007. In his 11 years at the helm, Pappanastos has more than tripled the company’s revenues, and diversified the operation with four new market channels: lenders, retail automotive agents, independent call centers and property and casualty insurance agents.

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The views expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views of P&A Magazine or any employee thereof.

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