As a new decade begins, we are experiencing unprecedented challenges in the economic environment. These include constraints in the capital markets, consumer hesitancy in the buying cycle and manufacturer challenges.
Despite this dim landscape, opportunities do exist to enhance our collective businesses and even to grow and improve our net profitability. The key, in my opinion, lies in the concept of interdependency.
We are all, by now, familiar with a renewed attention to expense, inventory and working capital controls, without which we would not survive. But if you dig deeper, you will discover a plethora of opportunities to supplant revenues and enhance efficiencies.
While technology continues to drive time and process management improvements, it is our adherence to core fundamentals that ultimately determine their effectiveness.
Once we understand the opportunities, the concept of interdependence truly comes into play in the area of accountability. For example, how well do your people know the products they market? How well do they know the touch points that contribute to revenue and customer retention? How do you hold them accountable?
Even with The Warranty Group’s 46-year track record of success in F&I, variable and fixed-process management, we are constantly discovering new venues of interdependency.
The F&I manager, whose department now contributes 52 percent of dealership profitability, needs to be more educated than ever before. For example, training should enable F&I managers to answer the following questions:
- How does a certified warranty work?
- What are the coverage levels?
- What are the exclusions?
In addition, product providers should monitor how dealerships perform in the following areas:
- Is the F&I manager spending a measurable amount of time with the fixed operations people to understand the drivers that yield lasting customer satisfaction?
- Does the F&I manager present the features and benefits in a manner that results in customer dissatisfaction down the road from unmet expectations?
- Does the dealer or general manager regularly sit in on F&I deliveries to ensure proper solicitations and product knowledge presentations?
- Are the salespeople well-versed in the features and benefits? Is it reinforced every time a deal is desked?
- How does the dealership compare to the competition?
- How often do F&I managers, sales managers and salespeople attend meetings with fixed personnel?
This all relates to interdependency. Regular meetings with variable and fixed teams ensure a consistent message and value proposition.
I frequently remind my own team that we aim to deliver “unmatched client value.” Regardless of whether we’re talking about a large company, an independent agent or a manufacturer’s representative, there is no room for error.
Gone are the days when a service contract representative visits a dealership, stocks brochures and gives out sports tickets as an incentive to sell a particular product. Too much is at stake to not hold your partners accountable for performance.
As constraints in lending and the capital markets continue to present challenges, it is more critical than ever to have well-trained professionals marketing your products and services.
For those dealers who have yet to recognize that there is as much as $500 in participation profit for every service contract they sell (outside of their dealership financial statement), they are missing what may be the difference between nominal profitability and tremendous wealth.
Whether in the form of reinsurance, self-insurance, retrospectives or direct programs that drive working capital, it has never been more critical for dealers to avail themselves of all of the knowledge of the features and benefits of all of these potential programs. To have that dialogue with someone who understands it all intimately and has no bias is true interdependency.
Product providers must be subject experts not only in the area of F&I, but also about the drivers that contribute to profitability and efficiency, such as fixed, inventory/capital management, pre-owned, sales and new and used-vehicle merchandising.
Providers must have the ability to create programs and products that drive immediate revenue and provide long-term sustenance customer retention.
If we, as an industry, can continue to enhance the concept of interdependency, we can collectively position ourselves for explosive growth when this economic environment does improve.