The Bundled Products Value Proposition
The Bundled Products Value Proposition

When it comes to F&I products, the buzzword of the day is “bundling.” Spurred in part by the advent of the electronic menu, providers have been experimenting with different combinations of ancillary products as well as vehicle service contracts and GAP coverage.

To learn more, P&A spoke with six experts: Bob Corbin of IAS, Allstate Dealer Services’ Doug Frey, RoadVantage’s Garret Lacour, John Luckett of Resource Agent Group (div. The Warranty Group), Kelly Price of National Automotive Experts (NAE)/NWAN and National Auto Care’s Tony Wanderon.

With their help, we will take a closer look at the reasons why providers are so passionate about this approach, how they feel it affects the F&I manager’s presentation, the administration of the products and what the future might hold for this sales model.

A Closer Look: The Components

When talking about bundles, the most important piece of the conversation is what goes into them. In general, providers are finding that the best approach is to have a standard package, but then give dealers and consumers the flexibility to customize them to increase the potential value. Experimentation is an ongoing process, but the typical bundle will offer some combination of tire-and-wheel, dent-and-ding, windshield repair, key replacement and roadside assistance.

At IAS, President and CEO Bob Corbin says the Austin, Texas-based company offers ready-made bundles with the standard range of products such as tire-and-wheel road hazard, dent-and-ding, windshield repair protection and key protection, but notes that there is wiggle room. Consumers and dealers can mix and match various interior and exterior protection products to create a bundle that works for them. “The combinations are limitless,” he says.

Garret Lacour is the founder and CEO of RoadVantage, which is also based in Austin. His company offers a “Preferred” family of customizable bundles that include sets of products designed specifically for lease or retail, including tire-and-wheel, cosmetic wheel, dent-and-ding, windshield repair and replacement, key replacement and roadside service, as well as interior and exterior repair. By going with a tiered approach, Lacour says, they increase the odds that one of the already-created bundles will work well in most situations. Like Corbin, Lacour notes that the actual products included can vary based on state and local regulations.

Meanwhile, Strongsville, Ohio-based NAE/NWAN takes a slightly different approach to bundling. According to company president Kelly Price, as long as the bundled products are compliant with the relevant laws, they will tailor the package to meet whatever needs the dealer might have. “We really customize,” she says, citing examples where a dealer might want to combine products that aren’t typically thought of as a set, such as dent-and-ding and key replacement. Another option that has proven popular is a bundle of multiple appearance protection products.

National Auto Care’s Tony Wanderon says the menu presentation is a key reference point. As president and CEO of the Ponte Vedra Beach, Fla.-based company, he has focused on bundling products that are strong when they stand alone but can offer more efficient and compelling menu presentations as a group. NAC combines tire-and-wheel with a “curb cosmetic” product, paintless dent repair, windshield repair, key replacement and roadside assistance in their “Complete Protection” offering.

To that end, our experts agreed that, while bundling is a great way to add value and make the menu presentation shorter, it’s not a great idea to get bundle-happy. Service contracts, in particular, are better left as standalone products, or bundled with just a prepaid maintenance plan, as opposed to making them part of a larger bundle.

Doug Frey, president and COO of Northbrook, Ill.-based Allstate Dealer Services, put it best when he noted that, when done correctly, bundling can increase the perceived value of most ancillary products, but service contracts don’t need that boost — consumers already view this product as valuable. Instead, he notes, a better option is to use modern menu technologies to present a service contract paired with a strong ancillary product bundle.

“This gives the F&I manager the ability to still sell a service contract even if the customer does not desire the additional ancillary coverages,” Frey says. His company offers “Allstate Complete Protection,” which includes roadside assistance, key replacement, tire-and-wheel, paintless dent repair, windshield repair and interior repair.

And it’s not just the inherent value that makes bundling service contracts with other products problematic. It can be done, but as John Luckett, who serves as senior vice president of sales and marketing for Resource Agent Group in Chicago — whose company typically bundles tire-and-wheel, windshield repair and paintless dent repair — notes, this is where those state and local regulations often come into play. Even in states where it’s not illegal, bundling these types of products can actually make it more confusing to consumers, not less. He also cited GAP protection as another product that can be difficult to combine with other products.

Service contracts and GAP aside, Corbin says that trying to combine interior and exterior products into a single bundle can be a tough sell as well. Consumers see them as separate and may have a hard time making sense of bundles that include both types.

Frey pointed out that trying to combine products with overlapping coverages is another red flag for consumers, and can work against F&I managers. One example he gave was roadside assistance: If the service contract includes that benefit, trying to include a roadside product in another bundle would only cause confusion.

That said, he adds, Allstate has yet to launch an unsuccessful product combination. “The launch of our bundled products a few years ago has provided very favorable growth and customer acceptance.”

A Closer Look: The Sale

Once a dealer has found a product bundle that meets state regulations and promises broad appeal to their market, it’s time to make the sale. There are a number of articles dedicated to the best way to present F&I products; for our purposes, we’ll only be looking at the ease of selling a bundle versus selling a standalone product.

Lacour pointed out that selling a bundle offers several key benefits at first glance: The value proposition is far more easily defined for the consumer, it is much easier for F&I managers to demonstrate when they are showing how a set of products can offer complete protection, and because bundles are often condensed to a single form, it makes them far easier to administer.

Selling a bundle, Wanderon notes, really does benefit everyone in the product’s chain, which is, he believes, one of the reasons for their growing popularity. A few of the additional benefits he pointed out include reduced paperwork for the F&I manager, consumer and administrator; increased profits when combining high and low-use products together; a single admin fee for agents; a more complete product portfolio; and streamlined product presentations that get the consumer in and out faster.

And these benefits aren’t just true for finance deals, either. As Luckett notes, lease customers are usually more resistant to service contracts, but offering a bundled set of products designed to ensure there are no surprises at the end of the lease is a great way to increase penetration in a segment where VSC sales can be a more difficult sell.

The presentation, in particular, is one benefit that F&I managers, providers and consumers can all agree is better when it gets to the point and makes a case for the value quickly. Corbin points out that studies have proven that the less time a consumer spends in the F&I office, the more products they are likely to purchase. It might seem counterintuitive, but consumers will listen when an F&I manager makes a great case for the value of the product. But if they feel they are being pressured into a sale, they are more likely to shut down and may even back out of purchasing products they do see value in.

One way that works is that bundles allow the F&I manager to present a much wider range of benefits in a much shorter period of time — and it allows them to focus on the discount the consumer will receive for purchasing the bundle over those same products as standalone items, which just increases the value proposition further, says Frey. When F&I managers are freed from having to go over the benefits and value of each individual product in the menu, they can save a considerable amount of time.

“Bundling simplifies, streamlines and strengthens the presentation by taking it from a piecemeal presentation of several individual products, prices and contracts to a single presentation for a single price,” Lacour says. “As a result, bundling also improves penetrations over standalone products.”

But popularity doesn’t keep the dealership afloat, and at the end of the day, profit is what both dealers and providers need to be concerned with. Presented correctly, Lacour adds, bundles can help boost the dealership’s bottom line. He notes that consumers today are already familiar with the concept of bundling. They see it in their everyday lives in everything from the fast-food value menu to packages offered by their phone, cable and Internet providers. They already perceive greater value in bundles, making the job of the F&I manager that much easier.

But Frey cautions that is not always a good thing. He notes that the perception will be that the price of the bundle will be significantly less than the cost of the individual products would be. So while the dealership will see greater penetration, and will see some increase in profits from sales and reduced administration costs, it might not be as much of a boost as the dealer might be hoping for.

Overall, Price notes, the profit gains outweigh the potential pitfalls.

“If it’s all on one contract, that can save the dealer a little money, and the agent has the ability to make a little more commission than if they were trying to get the F&I manager to sell it separately,” she says. “And you’re only paying for one administration fee to process one piece of paper.”

A Closer Look: The Future

Are F&I product bundles here to stay? Kelly believes they are, and when considering the future of bundling, it’s important to recognize the fact that it’s not a completely new concept. She notes that her company has been packaging products this way for more than 10 years, although it wasn’t necessarily a popular option a decade ago.

So what changed? Kelly notes that they tried to bundle things too tightly in the past, making it a lost sale if a consumer only wanted some of the package, but not all of it. And when you add in the sheer volume of F&I products today versus 10 years ago, it’s much easier to make the case for bundles now and in the foreseeable future.

Wanderon agrees, noting that F&I menus are, by their very nature, a form of bundling, and that sales method isn’t going away anytime soon. He believes the concept of selling bundles will only gain in popularity as they continue to make it easier for F&I managers to demonstrate value and streamline the entire selling process. He notes that, bundling, like any F&I product or process, really comes down to profit: If the consumers give their approval by spending their dollars, the dealers will continue to use and expand upon the concept.

However, several of our experts note that it’s not an unlimited opportunity either. Corbin, in particular, says that he believes there is a tipping point where it will simply be trying to cram too many coverages onto a single form. At that point, bundling could become more of a problem than a solution.

Luckett notes that interest from federal regulators in the sale and pricing of F&I products could change the way bundles are created and presented. However, he adds, “As the industry, regulators and lenders grow and mature with this product, we may see some advancements that allow combinations of products we have not seen to date.”

Bundles will continue to grow and evolve as the products — and the F&I industry as a whole — continue to change. Regulations, pricing and the perceived value of bundled products are all factors that can have a lasting impact. But there is no denying the value bundling brings to the F&I office, or the selling power it can put in the hands of F&I managers.

“We do believe that product bundling will continue to gain favor as administrators strive to find ways to increase value and make F&I products easier to sell at the local level,” Wanderon notes. “Bundles initially saw slow adoption as dealers were concerned that the sale of one product instead of five would yield a lower F&I gross. However, the consumer popularity of the bundled products helped increase F&I penetration, so profits remained steady.”

By all accounts, as long as they continue to promote a strong bottom line and remain attractive to dealers, providers and administrators, F&I product bundles are here to stay.

About the author
Tariq Kamal

Tariq Kamal

Associate Publisher

Tariq Kamal is the associate publisher of Bobit Business Media's Dealer Group.

View Bio
0 Comments