Hamlet famously asked, “To be or not to be? That is the question.” Dealerships and F&I agencies face a similar, if less weighty, question: “To private label? Or sell someone else’s brand? That is the question.”

The concept of private labeling is pretty simple. An F&I provider creates and markets products under its own name, or “label.” So the Acme F&I Co. may sell Acme Service Contracts to consumers through dealerships. All of the brand equity – good or bad – belongs to Acme.

Under a private label arrangement, someone other than the provider labels the product and sells it under its own brand. This could be either the F&I agency or the dealership itself (in either case, the “intermediary”; for purposes of this article, we’ll assume the intermediary is a dealership). And so Danny’s Dodge Superstore could sell the Acme Service Contract as “The Danny Protection Program.” The brand equity resides with Danny’s Dodge.

An alternative to creating a private label is to create a captive provider from the ground up. This involves obtaining an underwriter and establishing an infrastructure for administration, claims adjudication, and payment – no small feat. Well-known examples of this include the Larry H. Miller Group’s LandCar Insurance Services and Van Tuyl’s Mechanical Protection Plan. But to pull that off requires a large enough volume to justify the expense. Private-label programs avoid that expense.

Why private-label? First, a little background. The lines are blurring about what constitutes a provider. Is it a company that just offers good products? Perhaps 20 years ago this was the case, but today many providers have become by necessity much more than suppliers of F&I products.

To survive, today’s F&I providers need a well-crafted suite of products, services, technology and training. Dealers demand, in exchange for the privilege of offering a particular provider’s wares, a host of profit, compliance, training and technological accoutrements.

In addition, the dealer’s loyalty to a provider is typically proportional to the level of commitment a provider is willing to invest in his success. The days of dropping off certs at the dealership and hoping the production fairy delivers bags of money are long gone.

Private Label Products

Offering private-label products can be a great way for product providers to offer a wider array of services without the added burdens and costs of development, ongoing administration, state regulatory compliance and underwriting. Expanding the portfolio of products and services a provider offers can lead to greater profits and enhanced customer loyalty while fortifying the provider/dealership relationship.

Safe-Guard Products International LLC is a provider of F&I products in the automotive aftermarket industry. Kitty Haas, senior vice president of marketing, spoke with P&A about the advantages to private labeling.

“By offering a complete portfolio of products, integrated systems, customer service-focused administration and options with underwriting and re-insurance, I believe that Safe-Guard is well positioned to help any partner build its brand through private label programs,” Haas says. “Flexibility and the capacity to deliver quick customization are key elements of any great private label partnership.”

By definition, companies that private label their products operate behind the scenes while the dealership attaches its branding, logo and name. Let’s examine the scalability of adding one private-labeled product to a dealership’s portfolio compared with an organic product offering. If another company will take on the responsibility for development, compliance, full-service administration and underwriting at a price point at or near what it would be for an organically “grown” product, the choice is clear – a private label is the way to go. The time to market will be drastically reduced, the dealership’s investment shifts from development to marketing and profits reach the bottom line in a shorter time frame.

Bob Furman, former president of MS Diversified (now Assurant), offers one good reason for private labeling a service contract program, “When a service contract carries a national brand, the consumer correctly assumes that it may be used almost anywhere. But when a service contract bears the dealership’s own brand, I think the consumer is more likely to return to that dealership for service. And that’s a big plus.”

Innovative Aftermarket Services (IAS), a provider of F&I aftermarket products, currently partners with 35 private label clients including VSC administrators, other ancillary product providers, agents and dealerships to offer private-label products. Bob Corbin, president of IAS, recently discussed with P&A the benefits of private labeling for his clients.

“IAS is perhaps best known for our product innovation and flexibility for bringing products to market and that is what makes partnering with us on a private label so attractive, in addition to cost,” Corbin says. “Since we take on the responsibility of full-service administration and underwriting for our partners, they can launch a product quickly. Over time, private-label partner companies also have the option to take over part of the administration. Some companies only use us for underwriting, claims adjudication and payment.”

For the traditional service contract provider, what type of products are good prospects for private labeling? Corbin says products like tire and wheel, key replacement, paintless dent repair, appearance protection programs, windshield replacement and anti-theft systems are common.

Private-Label Software

Software can also be private labeled. If a provider does not have experience building a menu or an automated F&I reporting system, a private-label partner may be the best option in terms of development costs, time to market and tech support infrastructure already in place.

“In recent years, we’ve moved away from private labeling our software because we’ve designed it to be completely customizable across the board,” Corbin continues. “This allows our agents to market our software at a fraction of the cost of building it on their own or even paying to private label. Plus, this is a way dealerships have access to our award-winning customer service and support teams should issues arise on implementation, training or otherwise.”

Private-Label Compliance and Training

Training programs are also candidates for private labeling. With a little research and effort, it should be easy to identify partners willing to build your brand while providing high-quality certification programs and training for F&I managers and other dealership personnel. In the long run, providing an effective training platform to the dealer that produces results is as valuable to your company as it is to the dealer. Numerous product providers attempt to offer dealerships the “complete package.” Their value propositions are compelling, and their results are often noteworthy. It is possible to compete toe-to-toe with the larger companies by carefully selecting private-label partners, diversifying your portfolio of offerings, and mitigating the risk of losing an account.

Legal compliance training and tools are also available for private labeling. Realistically, it is the only way to deliver the service as a component of an agency's or product provider's value proposition, as few such companies have the in-house legal, production, and software capability to reinvent that wheel.

“Compliance and training are at the core of every private-label program offered by Safe-Guard,” Haas says. “Our legal team ensures that all products are compliant in every state or province, and our regional trainers provide customized training for our customers. It is important to research any potential partner to make sure that training is a top priority and that no corners are cut on compliance and regulatory matters.”

By private labeling an established compliance program, providers can quickly provide a turn-key solution for all of their dealership clients. Such programs can include web-based deployment and verification of dealership employee handbooks and policy documents, legal compliance training that exposes employees to the laws they are required to follow, and even customized online product training. Once such a program is in place, the basic structure can even accommodate training aimed at Sales or F&I techniques, such as overcoming objections and menu selling.

Jim Ganther, an attorney and president of Mosaic Compliance Services, says his company acts as the compliance "back office" for numerous F&I agencies. "We are the go-to guys for agents in the field, allowing them to properly nudge their dealership clients towards more compliant practices. And adding a consistent layer of compliance awareness to those agents enhances both their credibility and their utility in the dealer’s eyes.”

So why private label? To return to the Melancholy Dane,

"We go to gain a little patch of ground,

That hath in it no profit but the name."