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Compliance at Ground Level

Compliance at Ground Level

As I have stated in virtually every article I have written, your ability to close new business — and keep the business you currently have — is directly proportional to the strength of your (or your agency’s) value proposition to your dealers. In this article, I would like to focus on one area that has garnered a lot of attention over the last few years: regulatory compliance. So, as an agent, how can you help your dealer clients?

1) Become a resource, not an expert.

Take the time to get certified by the Association of Finance & Insurance Professionals (AFIP), and if it’s been a while since your original certification, get re-certified. The base of knowledge this program provides enables you to spot potential compliance issues within a store and have intelligent conversations with the owners about them. In fact, one of my favorite questions to ask a dealer is, “What’s more important, what you make or what you keep?” In the area of compliance, bad internal processes (whether on the sales side or the F&I side) may provide short-term gains, but if they result in any type of legal or regulatory action, it’s going to get costly. Focus on becoming a resource, not an expert. It is not your place to give legal advice; rather, you should focus on being a resource to guide your customers in the right direction.

2) Develop a list of best practices and encourage the dealer to adopt them.

When making recommendations to your customers, keep the following three elements in mind: They must be legal, they must be moral and they must be ethical. It may seem obvious, but sometimes common sense doesn’t always rule the day. The daily grind to “make the numbers” sometimes clouds the judgment of otherwise good people. Your role is to question what you see, and remember: If a policy, practice or procedure doesn’t seem right to you, it probably isn’t.

My suggestion for the No. 1 best practice for any dealership is to handle complaints promptly.

All too often, customer complaints or requests to cancel purchases are ignored, dismissed or slow-walked. No matter what the source of the complaint, passing time and a lack of response make for a volatile situation. When a customer has a concern and they take the time to call, email or stop by the dealership, it’s safe to assume they’re not happy. If they’re simply dissatisfied or unhappy, it’s relatively easy to address and solve the issue.

When you ignore a person who is predisposed to being unhappy, you make them angry. Once a person gets to this stage, it is no longer about satisfying them. You have to try to guess what they think they can get above and beyond their initial concern. It’s still not too late to satisfy this consumer, but it will likely to cost you something extra.

When you fail to address the angry customer, they escalate to the final stage: emotional investment. When you find yourself dealing with an emotionally invested customer, it’s no longer about satisfaction, it’s about getting even. These types of customers lead the charge for bad publicity, legal action and even class-action lawsuits. When things get to this level, the cost of refunding the original product or service is a small fraction of the potential cost to the dealership.

My next best practice would be to make AFIP certification an employment requirement for F&I managers.

Why? There are a few reasons. First, it ensures the F&I managers know what’s right and, more importantly, what’s wrong. Secondly, it affords the dealer a measure of insulation against the bad acts of a rogue employee. Should some legal action occur due to the actions of these individuals, they may be separated from the dealership and forced to defend themselves against the charges.

Along these same lines, my next best practice would be to have a written and signed F&I Code of Ethics document in the personnel file of each employee working in the store and keep them on file for at least five years after the individual leaves the store. This Code of Ethics clearly defines what is acceptable and, more importantly, what is not acceptable within the dealership. It should clearly state that any representative of the organization agrees to operate in a manner consistent with the applicable rules, laws and regulations governing the F&I transaction.

Understanding the power of the pay plan is the next best practice. What is a pay plan? Simply put, it’s a job description, and if that job description encourages bad behavior in the dealership, it leaves the dealer exposed. There are a number of quality pay plans out there, but the better ones are easy to understand, encourage product sales while minimizing the focus on F&I reserve and have an element of customer satisfaction included.

Avoid potentially predatory or discriminatory sales practices. In today’s environment, it’s all about customer value. Here are some recommendations to help ensure your practices are sound:

  • Double-check for duplicate or unnecessary coverages.
  • Use fixed product mark ups, make sure they are reasonable and document any variances.
  • Provide proper disclosure of product terms, conditions and exclusions.
  • Match product terms and features to customer needs.

3) Finally, encourage the people in the dealership to use common sense and good judgment. You don’t have to be a legal scholar to recognize unfair or deceptive trade practices in a car store. If you see something in one of your accounts and you’re not sure if it’s a good (read: compliant) practice, it probably isn’t.

A good agent looks out for the F&I department in the stores they work with. A great agent looks out for the entire dealership, including sales, service and compliance.

Just a final thought, if you think the focus on compliance is going to pass, keep this in mind: About 15 years ago, several dealership personnel were convicted of felonies for things they did to customers in a car store. Since that time, there have been numerous high-profile cases, large fines and terrible exposure for auto dealers. With the advent of the CFPB, the focus has only become sharper. As an individual, you have two choices: You can shout at the rain or you can grab an umbrella. I advise you to grab your umbrella.

Disclaimer: This article is not designed to provide legal advice; in fact, it is a look at the current automotive retail marketplace from a layperson’s perspective.

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Climbing the Relationship Ladder

Climbing the Relationship Ladder

If you’ve read any of my previous articles, you know I’m a firm believer in the need to have a strong value proposition. In fact, when a dealer decides to do business with you, it usually means your value proposition was stronger than the incumbent or your competitor. An often overlooked element of a successful agent’s value proposition is the ability to accurately assess where his or her relationship is with the dealer at any given time, and knowing how to climb the relationship ladder.

The first rung of the relationship ladder is the vendor relationship. As a vendor, you are transactional, not relationship based. You are, in most cases, the low cost provider and your business is safe until someone else comes in with a lower price (and they always do). As a vendor, you do not have access to the leadership team and are not invited to attend any meetings that may take place. As a result, you have no understanding of their corporate strategy and, more importantly, no influence in any decisions that are made. In short, you are in a precarious situation.

The next rung up the relationship ladder is the consultant relationship. As a consultant, you have moved beyond simply providing a product or service to being a member of the team. Your work ethic and industry expertise has earned you the right to talk to the owner when necessary, and you do participate in dealership meetings. This access to the decision makers gives you the advantage of knowing what is going on in the dealership today and, more importantly, what the strategic direction for the future might look like. Your input may be sought on specific topics related to the role you are playing in the dealership – for example: performance development, pay plan structure, job descriptions, etc. This level of access may give you a heads up to future opportunities within the store, but you may still have to compete for them. At the consultant level you have a seat at the table; it’s just that the seat might not be permanent. The consultant level is obviously preferable to that of the vendor, but there is more work to do.

The third rung of the relationship ladder is the advisor relationship. As an advisor, you are now a trusted member of the leadership team. You regularly meet with the owners and participate in most operational meetings. You are viewed as the “go to” person for all things F&I. With this unfettered access, you know exactly where the organization is and where it wants to go. As new opportunities arise, your dealer partner looks for ways to send business your way. At the advisor level, you have earned your seat at the table. You are a part of the team, but you still haven’t reached the top rung of the relationship ladder.

The top rung of the relationship ladder is the personal relationship. At the top rung, not only do you enjoy all the benefits of the advisor relationship, but now your personal life and your business life with this dealer become intertwined. The conversations you engage in are not solely related to business issues. Your council may be sought on a variety of topics and you spend quality time outside the dealership with your dealer partner. Dinners, family vacations, boating, hunting, fishing – you name it. At the personal level you get to spend all this time with the dealer, but you don’t feel compelled to, nor are you asked to foot the bill. For obvious reasons, this level of relationship affords you the best protection from losing the business, and is the level you should strive for in all your accounts.

How strong can the personal relationship be? Several years ago, while working for another organization, I was involved in a deal trying to unseat an independent agent incumbent. We did the dog and pony show – we had a better price; we had a better product; we had more resources. In fact, we had a much stronger value proposition. What we didn’t have was the personal relationship. We found that with the incumbent agent having attained this highest level of relationship, having the best price, product and resources is not always enough to win the business. The dealership was unwilling to switch providers without ensuring that his “guy” was taken care of and included as part of the deal. While this might not be typical, it does illustrate the power and value of reaching this level.

So now what? First, I would suggest you perform an honest inventory of all of your accounts and identify where you are on the relationship ladder. Next, for the rest of the year, try to move up one rung.

In those stores where you are a vendor, go above and beyond what has been expected and earn the right to have access to the decision makers. Prove to them that you have their best interests in mind and bring them value.

In the stores where you think you are at the consultant level, look for ways to improve their business. Remember, their business is more than just the F&I operations. Look to add value in the fixed operations area, become a legal compliance guru and keep your partners up to speed on the activities of the CFPB. Remember if you want more, you have to do more.

In the stores where you think you have attained advisor status, test the waters to see if the possibility of moving to the personal relationship level exists. I mention this because it very likely you will not be able to get to a personal relationship with all of your accounts, and that is all right.

If you’ve been fortunate to reach the personal relationship level, do not take it for granted. Continue to give more than you receive and your business will be much stronger.

Remember, this job is a journey, not a destination.

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Making the Time to Improve

Making the Time to Improve

Why do F&I Managers often avoid attending training classes? While they will tell you that they “don’t have the time,” or that they are “shorthanded in the store,” the real reason is training takes people out of their comfort zone. Humans are creatures of habit and once a habit is ingrained, any attempt to change the habit is met with considerable resistance. Change is generally viewed as a bad thing – something to be avoided at all costs. This resistance to change becomes problematic when the performance in the store is not at an acceptable level. This situation deprives you and your dealers of additional revenue opportunities – just do the math. How many stores are you responsible for? How much money is being left on the table each month? This situation reminds me of a quote from former Major League Baseball catcher, Yogi Berra: “If you keep doing what you’re doing, you’ll keep getting what you’ve got.”

To illustrate this point I’d like you to think about the stores you manage. In those stores, do you see a wild fluctuation in the per vehicle unit (PVR)/per retail unit (PRU) from month to month? For example, in the first month the PVR/PRU is $750, then the next is $900, and that’s followed by $665, or do they remain relatively constant? My experience has shown that the month-to-month PVR/PRU figure stays pretty constant, varying by $20 to $50. But if you think about it, how is that possible? Every month a new group of customers come through the F&I office, each unique as far as income and credit, yet the PVR/PRU number is relatively static. Why? Because that PVR/PRU number is comfortable for the F&I manager. It’s comfortable from a commission standpoint and it’s comfortable from a process standpoint. If the F&I Manager has their F&I sales process grooved, and they are satisfied with their monthly paycheck, why would they want to change anything? They won’t. They have convinced themselves, their bosses and even perhaps you that the number is the right number and life goes on.

A savvy agent knows how to combat this resistance to change, and also knows how to leverage pay plans and incentives to improve in-store performance. Good agents recognize the value that a quality training program brings to the individuals in attendance, and also know that what’s good for the F&I manager is usually good for the agent as well. So, do you consider yourself a good agent? Do you consider yourself a savvy agent? If so, I’d like to ask you a question …

When was the last time YOU made time for your own professional development? When was the last time you attended an agent-focused training event?

Sadly, for many of you it’s been way too long. Just like the F&I managers you try to convince to go to F&I school, you’re just as resistant to change as they are. And, just like the F&I managers, you may have grown satisfied with your monthly commissions and are content to keep doing what you’re doing and getting what you’re getting. Unfortunately, this mindset hurts your dealers; your F&I managers; your boss (or bosses) if applicable; and most importantly, it hurts you and your family.

Finding the time for professional development, while important, isn’t the goal, MAKING the time for professional development is the goal. This can be accomplished in a number of ways. For example, why not take advantage of your windshield time by listening to an audiobook? They’re inexpensive and may just provide you with that little edge that will help you win more new business or help you hold onto your current business. We are constantly adding new sales concepts to our agent training based on the new sales oriented offerings. The beauty of taking advantage of this type of self-development is it’s just you. You can process what you hear and then decide if and how you can apply it to your daily battles.

Your product providers may also offer professional development. Some of the topics Allstate Dealer Services covers with the independent agents representing our products in the field include; time and territory management; new account acquisition skills; account development and management: how to leverage pay plans and incentives; and understanding deal structure and reinsurance options, just to name a few.

Listening to audiobooks and searching out training and development opportunities are just a couple of ways to make yourself better, but the first step is being honest with yourself. Are you as good as you can be at your job? Do you know what your strengths are? Do you know how to leverage them? Are you honest with yourself about your weaknesses? Do you know how keep them from getting in the way of your success?

Another good question to ask yourself is – where did you learn how to do the job you do every day? A lot of you worked for a large direct company in the past, learned what you needed to learn, became disenchanted with the politics or whatever and decided to try the agent route. While you were employed, you were provided training, and required to follow your particular organization’s processes. This was probably where you learned how to do the job, but how long ago was that? If it was more than five or ten years ago, then what have you done to update your repertoire? Wouldn’t you agree that the car business today is a lot different than it was in 2004?

A fair number of you reading this article may have found your way to the agent side directly from an F&I office. You got to know an agent, figured the hours had to be less, and knew you had more talent than the guy calling on your store. So you gave it a shot. You knew what to do when a customer came into your office, but who taught you how to be an agent? Who taught them? Have you picked up any bad habits along the way? Would you recognize them if you had?

I realize this article is filled with a lot of inward-looking questions, but who is in a better position to know you, than you? No matter how you found your way to this side of the business, you have probably already learned the hard way that there are no guarantees. But I can make one guarantee, if you stop growing personally and professionally, you will eventually rot and die on the vine.

Recognize that there is no good time for training. You can come up with TEN great reasons why you shouldn’t attend a training session, but I’d like to offer ONE reason you should. You owe it to yourself. If for no other reason, do it for yourself. Who knows, you might just pick up one new idea, or piece of knowledge that will enable you to win that deal you’ve been chasing for years.

When you have an opportunity to attend a training session and you begin to think that you might try to make it, remember Yoda’s immortal words, “Try not. Do … or do not. There is no try.”

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Taking on the Big Boys – Differentiation Part 2

Taking on the Big Boys – Differentiation Part 2

In my last article I discussed the importance of knowing who you are and what your sweet spot is. In this article I would like to explore the concept of differentiation and the role it plays in winning business. To illustrate this point, I’d like to ask you a question, the same question we ask at the start of all our agent sales programs.

Why would a dealer be willing to hand over a multi-million dollar piece of their business to you?

Take a moment…what did you come up with?

More than likely, you came up with something like, “we provide excellent training designed to improve F&I performance”, or “we’re a well established local company with a long track record of success”, or “we’re experts in the area of wealth building for our dealer clients”. While these answers may well be true, they’re probably not going to get through to your prospect. Why? Because it’s the same thing they’ve heard before.

Look at it this way, if you were the dealer and someone pitched you something that was essentially the same as what you currently have, what would be your motivation to change? Change is hard, and in order for your prospect to be willing to take on that change, they must believe that you or your solution is a sufficiently better option to what they currently have. If not, they’re likely to stay with the status quo.

So, how do you differentiate yourself from your competition? It begins with changing the way you think. The power of the mind is an amazing thing, and if you change the way you think, you’ll change the way you act. Yes, you have to know your stuff. Yes, you need to have a compelling value proposition. Yes, you need to be able to provide high quality products and services to your customers (all of which I will address in subsequent articles). But more importantly, you have to stop thinking that your prospect is doing you the favor by buying from you.

Let me repeat that. You must change the belief that the prospect is doing you a favor when they decide to partner with you or purchase from you.

Once you know your stuff, and you have the ability to convey your strong value proposition to the prospect, you change your belief to — I’m doing the prospect the favor by offering my products and services to him / her. There are a ton of options out there, but only one of me. When you change the way you think, you change the way you act.

A word of caution, before you go running off to your next appointment and tell the dealer that he / she should feel honored by the fact that you’re even talking to them, please keep in mind that this approach is based on a significant amount of research. More specifically, it’s based on neuroscience or the study of the brain. In short, the modern brain has three levels with each level separated by a gate. The first gate will open only if you’re compelling, different or interesting. If you’re not, if you’re just like the last guy, you have little or no chance of success. But once you understand the power of being different, doors will open. Change the way you think, and you’ll change the way you act.

To illustrate this point, I’d like to put you in a familiar scenario. You’ve been trying to set up your initial meeting with a prospect, and after a few weeks you finally get the meeting. You arrive at the dealership a little early, you have your best suit on, you walk into the dealer’s office, smile and extend your hand and say… “Hi John, I’m Peter, thanks for taking the time to meet with me.” While this may sound professional and courteous, it sends the wrong message. It suggests that the prospect’s time is more valuable than yours, that the prospect is doing you the favor by meeting with you. Without even realizing it you’ve begun your acquisition attempt in a hole. Now I’m not saying you won’t be able to climb out of the hole and win the deal, but I am suggesting you’re making it more difficult than it needs to be.

When you believe it’s you that is doing the favor by meeting with the prospect, the scenario plays out differently. You still arrive at the dealership a little early, you still have your best suit on, you walk into the dealers office, smile and extend your hand and say… “Hi John, I’m Peter, I’m glad we could find the time to get together.” By starting off the conversation on a level playing field, the prospect feels, rather than knows, something is different about you, and you’re more likely to get past the first brain barrier. And, when you’re really good at this and understand the entire process, you’ll be able to actually walk into the dealer’s office and say…”Hi John, I’m Peter, I’m glad I could make the time to meet with you.” But remember, until you fully understand the concept of how a buyer’s mind works, don’t start acting like a jack wagon. I just wanted to illustrate the power of differentiation. If you’re interested in more information about this topic, feel free to contact me.

When it comes to competing with the “Big Box” F&I providers, you have to get your prospect’s attention very quickly. Differentiation is one of the keys. Mull this information over. How often do you automatically take a subordinate position relative to the dealer? Give it a try, rather than thank the prospect for his / her valuable time, tell him / her how happy you are that you could get together. And finally, give some thought to how you’ll answer the question “Why should I do business with you?” Know the answer, practice the answer and then deliver it with confidence and conviction.

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Taking on the Big Boys – Differentiation Part 1

Taking on the Big Boys – Differentiation Part 1

How can independent agents compete for and win business from the “Big Box” F&I providers? Before I provide my thoughts on the subject, let me start out with a definition of “Big Box” F&I provider. For the purpose of the articles I am writing, I’m referring to the large, well established, direct employee providers in our industry. They would be the Goliath in the biblical tale of David and Goliath. Actually, the story of David and Goliath provides a good backdrop to the situation a lot of high quality independent agents’ face on a day-to-day basis. Much like David, the odds look horribly stacked against you. The competition is much bigger than you, financially stronger than you, and has been terrorizing the townspeople for years. Yet, in order to survive, you (like David) have to believe in yourself; you have to defy the odds and you have to take the giant down, but how? Over the next few issues, I’d like to share some of the things I’ve learned over the past 28 years in the sole hope that it will help you elevate your game.

In order to win new business, you need to be able to describe your value proposition (more about that in future articles) in a clear, concise, and compelling manner to prospect dealers. Before you can do that however, you need to determine who you’re going to be. Whether you’re a part of a full service agency or on your own, you need to determine your sweet spot. In other words, where you think you’ll have the greatest competitive advantage. An agent’s sweet spot may be as individual as his/her fingerprints, but it’s an essential element for success. When determining your sweet spot, you need to be honest with yourself and realistic with your expectations.

What are you good at? Can you work with underperforming F&I departments, raise the PVR and improve product penetrations? Do you remain current on the legal climate and how Dodd-Frank and the CFPB are likely to impact dealers today? Are you an authority on reinsurance and wealth-building strategies for dealers? Do you have the manpower to service a multi-store dealer group? Do you have the cheapest product on the street? Do you have something unique and different? These are just a few of the questions you need to ask yourself, and remember, when answering, be honest with yourself.

Next, take a look at the providers you represent. Are your offerings better suited for franchise stores or independents? Do you have an advantage with domestics or imports? Is there a particular make that gives you an edge?

How well do you know the competition? Whenever you attempt to unseat an incumbent, you need to know what you’re up against. Why did the dealer choose them in the first place? How long have they been working together? Who has the important relationships? How good are you at introducing doubt in the mind of the decision maker?

These are just a few thought-starters for you. Once you know who you are and what your ideal prospect looks like, then you can move to the next step, which is segmenting your market. Market segmentation involves looking at the opportunities in your marketing area, and then comparing them to the list of attributes that best align with your sweet spot. This step allows you to prioritize your acquisition activities and better leverage your strengths.

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