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EFG Companies Recognizes Two Agents for Raising the Bar in Dealership Engagement

DALLAS –  EFG Companies, the innovator behind the award-winning Hyundai Assurance program, recently hosted its 9th National Agent Council, honoring Empire Dealer Services with the Annual Top Agent Award and Auto Method with the Rising Star Award.

This marks the third time the Principal Owners and Founders of Empire Dealer Services, John Kane and Edward Adamson, have won the Top Agent Award. EFG Companies’ Annual Top Agent Award is determined by overall product production performance, effective training, and comprehensive achievements throughout the year.

“Empire Dealer Services maintains a strong, collaborative partnership with both EFG and the agency’s dealership partners,” said Adam Ouart, Vice President, EFG Companies. “Through their dealer partnership model, Empire Dealer Services has delivered effective programs and training, resulting in significant year-over-year gains in average dealership PRU and product penetration for the past three years.”

This is the first year for EFG to honor an agent with the Rising Star Award, which was created to recognize the achievements of those agents who make the largest strides when it comes to improving their value proposition with their dealer clients. EFG chose Auto Method because of their commitment to improving dealership operations. With EFG’s active engagement, Auto Method has achieved a 38 percent average for VSC penetration, and increased appearance protection penetration by 21 percent, generating an average of $277 dealership PRU.

Hosted in the spring and fall of each year, EFG’s National Agent Council is designed to provide a collaborative environment in which agents can formalize their strategies to better serve their dealer clients, improve F&I performance, and increase dealer profit.

This year, EFG’s premier agents from across the United States attended a four-day roundtable at the historic Hotel del Coronado in San Diego, CA, review current industry trends and challenges, share best practices and discuss new product innovation.

“The purpose behind our agent council is to ensure EFG’s ongoing support for our agents’ long-term business goals, said Eric Fifield, Executive Vice President, EFG Companies. “Twice a year, we meet as a group with our top agents to dissect market trends, map agent progress, and evaluate how EFG can continue to accelerate their success.”

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Leveraging Prepaid Maintenance

2016 marks the end of an uptick cycle with vehicle sales. Starting this year, industry experts expect vehicle sales to slow down and possibly plateau with little to no growth in overall unit sales. For dealers, this means customer retention and brand enhancement will become more critical to gain market share. Agents, in turn, can expect dealers to rely more heavily on them to help drive more service customers and expand in a stagnant market.

Meanwhile, the Consumer Financial Protection Bureau (CFPB)’s influence will continue to grow among lenders. As more lenders implement flat-fee models or caps on dealer markup, agents will feel pressure to help dealers reduce their reliance on finance reserves. However, adding products to the already crowded F&I menu can be tricky. Balancing CSI, the speed of the finance process, and providing products that make sense for the customer, as well as the dealership, is a difficult task.

One way to address current dealer needs is through a cutting-edge, customer-centric maintenance program designed to increase F&I profitability and service drive retention. Yes, I said maintenance programs. We have all heard statistics around prepaid maintenance driving higher customer retention rates — and it remains true. According to J.D. Power, maintenance packages help drive higher repurchase rates among owners, with 72% of those who have a complimentary or prepaid maintenance package repurchasing the same vehicle make on their next purchase.

A Powerful Tool

Even with statistics to back it up, this category of F&I products is one of the most overlooked and underutilized profit drivers for dealerships. But with the right foundation, it could be one of the greatest customer-retention tools at a dealer’s disposal. So rather than discuss the benefits of prepaid maintenance, let’s discuss how to effectively utilize it, starting with evaluating your dealership partners’ current prepaid maintenance programs.

The next time you visit your dealership partners, assess how successful each dealer is in offering prepaid maintenance on the sales floor, in the F&I office and in the service drive. Ask them the following questions:

  • What is their profit per retail unit (PRU) on maintenance contracts? How many are sold compared to the number of cars sold in a given week or month?
  • Does the dealership give away any maintenance contracts as a brand-enhancing value proposition? If so, how many?
  • Do they offer different levels of maintenance coverage? Of the contracts sold, how many are upsells?
  • Where on the F&I menu is the program positioned and how it is it sold?
  • What benchmarks does the dealership use to hold its team members accountable for selling maintenance contracts?

The answers to these questions will give you a clearer picture of whether a dealer is utilizing prepaid maintenance to meet their profit goals. Use the answers as a baseline to determine where you can plug in to help your clients achieve greater results.

Not Just Any Program Will Do

Next, evaluate the maintenance program itself. Underutilization could be due to not having the right maintenance program in place, poor handling of claims reserves, negative customer service from the administrator, lack of training within the dealership or ineffective compensation incentives.

Review the dealership’s top-selling inventory, customer demographics and surrounding geography, and ask, “Does the current maintenance program cover the required maintenance for the types of vehicles sold and the conditions in which the vehicles are driven?” If not, customers might not find it valuable, which could be another significant reason for a product’s underutilization.

Beyond looking at the product itself, it’s also important to partner with the right administrator to equip the dealership with tools to sell it.

Is the administrator backed by an A.M. Best rated underwriter/insurer? This signifies the administrator’s ability to pay claims and create products beneficial to both customers and dealerships.

How does the administrator benchmark customer service excellence? The claims process must be incredibly efficient for the service department. Is their current process automated? If not, what is their average speed to answer claims calls and average call handle time? How quickly do they pay claims?

Dealers benefit more from an administrator with strong customer service standards and happy customers in a couple of ways: First, it signifies that the products the dealer sells will be better received and seen as more valuable by customers. Second, those happy customers who bought a maintenance program from your dealer partners will be more likely to return to the selling dealership for their next vehicle because of the positive ownership experience the dealership delivered.

Does the administrator provide ongoing training and engagement to ensure the program’s success? No F&I product is successful without the right support, training and dealership buy-in. Seems obvious, but when we are all honest with ourselves, we know ongoing training is sorely lacking in many dealership environments. And as an agent, there’s only so much training you can provide without the in-depth knowledge of an administrator. With that in mind, selecting the right maintenance product for your dealership partners also comes down to the engagement model of the product administrator. Ask whether they do any or all of the following:

  • Conduct formal product installation and market launches
  • Implement quarterly account planning and performance tracking
  • Work with dealerships to develop incentivizing pay plans
  • Provide ongoing F&I development and one-on-one training

Successful prepaid maintenance programs are backed by dealerships equipped with ongoing training and development. Solid programs are priced for both effective claims management and dealership profit, and they are deemed valuable by customers.

Creating a Supportive Culture

To further ensure successful dealership utilization, work with your product administrator to focus training on the differences of selling prepaid maintenance compared to other F&I products.

While it is common practice for dealerships to maximize profit on an F&I product like a vehicle service contract, this approach is not effective when selling prepaid maintenance. When developing F&I pay plans, and in training, it’s important dealerships don’t apply the same markup rules they do for other products. In fact, it’s better to almost give the product away for little margin. This will help F&I managers demonstrate the value to the customer and how the dealership is working to save them money, making it very easy for managers to sell.

Prepaid maintenance programs are designed to be sold for a small margin upfront, for the purpose of gaining customer loyalty and attaining a larger, long-term margin on repeat business in both sales and the service drive.

Now, at this point, most dealer principals and general managers might think, “That’s well and good for my dealership, but my guys won’t sell it if they can’t make something on it too.”

This is a very valid point. In fact, the No. 1 reason most prepaid maintenance programs are underutilized is because dealership employees aren’t motivated to sell it. You can overcome this obstacle by creating a supportive culture around the program.

Cultivating this culture starts at the top. General managers, sales managers, F&I directors and service managers must buy into the idea of making prepaid maintenance central to their operations. Sales and service-drive teams must be trained on when and how to tee up the conversation about prepaid maintenance during the sales process. F&I managers need in-depth product knowledge training. Everyone needs training on asking questions to help position the program as relevant and valuable to customers. Lastly, tie the program to the dealership’s values. If they tout being family-oriented, then train team members to position the program as another way the dealership takes care of its customers like family.

Beyond training, one motivating factor in any dealership is pay plan development. Review the pay plans for your dealer partners and walk them through a retooling process for F&I, sales and the service drive, all geared specifically toward prepaid maintenance programs. Have them consider paying F&I managers on the number of programs sold versus the margin increase.

Another alternative is pay the same flat dollar amount derived directly from the markup. This ensures consistency and prevents managers from trying to mark the product up to maximize a percentage of the gross profit payout, resulting in a lack of value for the customer. Use this same approach with pay plans for sales, paying them for every handoff to F&I where they proactively informed the customer about the program during the sales cycle and when the customer bought the program prior to leaving.

On the service side, it’s important to remember that the dealership isn’t looking to make a huge profit on the individual sale of each program. This gives dealerships the opportunity to empower service managers to sell the program to their customers outside of a vehicle purchase. This further cements in the dealership’s customers’ minds the value they can receive from the dealership, as well as the dealership culture of putting customers’ needs first. To motivate service managers to sell the programs, it’s important to pay them on the number of programs sold. However, it’s even more important to make it easy for them to get paid.

If dealership team members have to verify the number of programs sold in three different ways — and work with accounting to get paid — the service drive simply won’t do it. While sales and F&I might have more time in the day to complete extra paperwork, the service drive doesn’t. The average service drive manager handles five times more transactions than anyone else in the dealership, and is working at a much faster pace. They don’t have time to jump through hoops to get paid and won’t do something that makes their job more difficult. So more important than determining what a service manager will be paid, focus on making the process to be paid easy for successful deployment in the service drive.

As dealers place higher demands on their agent partners, we will see agents become more efficient with their clients. If you’re looking for a deep and long-term relationship, consider providing a solution that keeps dealers thinking about how to increase market share and profitability, like successful implementation of prepaid maintenance.

The topic of prepaid maintenance repeatedly comes up because it has a lot of potential. While industry insiders can probably list the benefits of prepaid maintenance off the top of their heads, very few know how to actually implement it effectively. Those agents who use it to differentiate their service offering will better position themselves in a crowded market.

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Don’t Let the Good Times Roll Over You

It would be safe to say that everyone in the retail automotive space lost some weight following 2008, figuratively speaking. It would be surprising to find a dealer who didn’t tighten-up his or her business operations during the Great Recession, both in terms of people and in demanding greater ROI in money spent.

Dealers began to take a more laser-focused approach to personnel, keeping only those who were necessary, and who could perform to hit certain standards. Dealers began to leverage more as a less expensive means to drive traffic and branding, and a more sophisticated means of measuring and tracking business operations.  In essence, dealers came out of the Great Recession as lean and analytical business athletes with the ability to run a marathon.

Fast forward to today. Life is good coming off two years of record sales numbers, with 15.6 million new units sold in 2013 and 16.5 sold in 2014. And, the industry expects this year’s sales numbers to be on par or better than 2014. Unemployment and consumer confidence continues to improve, and fuel prices reached record lows in the first quarter of this year. In general, the economy is looking up. So, let’s live a little! But remember, the key is to live a little – don’t hit the all you can eat buffet.

While the Great Recession was incredibly painful for all aspects of the industry, it did help correct significant operational issues that long needed to be addressed in the retail automotive space. And, it did so in a condensed period of time.

The new operating model requires a different level of analytics; diligence in compliance; proactive management and efforts to capture online car shoppers. In addition, individualized training programs for personnel with key staff retention strategies are needed. In short, this means much closer and empirical daily management. Let’s call it daily cardio for the business.

Now that things are rolling, dealers are tempted to skip their proverbial workout. You may not be hearing as much about how every deal counts. You may see less emphasis on training in exchange for more people on the floor. There may be less career path planning and higher turnover, as well as less urgency around online customer reviews. And the pounds start showing up around the waist and on the hips of the business. Sound familiar?

Your role as an agent is to be your dealer’s personal trainer to ensure they stay fit and healthy as a business. You also have to resist the urge to splurge, and your counsel to your clients has to go beyond F&I revenue, PRU and penetration rates.

Consider a comprehensive performance evaluation that an objective party would use to gauge your contribution to your client’s overall business health. How do you think you would rate if we were in a down economy?

  • Are you as engaged with your dealer clients as you were in 2009?
  • Are you as concerned with providing your clients support above and beyond what they could get elsewhere?

The fact that we’re in an up economy should mean that we also ramp up engagement. It’s the perfect time to identify areas where dealers can improve operations to fortify them for the next time the economy shifts. There are immediate things you can do to improve their health for the long-haul.

1. Compliance

With the CFPB looking for ways to extend their influence into the F&I space, more lenders considering flat fee models, and the growing importance of compliance in the dealer space, now is the perfect time to help your dealer clients insulate their business. Help them evaluate where they stand with their compliance processes, methodologies and certifications, and, determine a go-forward plan to tighten compliance procedures.

With product sales increasing in importance in a potentially expanding flat-fee lending environment, consistent pricing is key during this time of heavy scrutiny. Take a look at how much your dealer clients typically make on each product and help them create a reasonable, predictable and consistent range in which their F&I managers can the markup the product.

Along with pricing, it’s equally important for dealers to have a formal process to address complaints. As we’ve seen in previous years, institutions like the CFPB and FTC direct their focus based on consumer complaints. So, it’s important that they are effectively managed before calling the attention of the government. Beyond that, studies continuously show that customers are more likely to remain loyal to a brand that successfully remediates complaints. And, we all know it’s a lot easier and less expensive to keep a customer than it is to get a new one. So, help your dealer clients put in place a formal complaint process that will enable them to act quickly, demonstrate that the customer’s voice is heard, empowers employees to make quick decisions, and provides documentable data for the dealer to review.

2. Product Mix and Performance

Take a deeper look at your dealer client’s PRU and penetration numbers to help determine what’s working and what’s not. This could signal the need for additional training, or a product mix revamp. Conduct a market analysis, reviewing consumer income levels, unemployment, housing stats, etc. to ensure that the F&I products the dealer is selling match the needs of their target consumer group.

Review your dealer clients pay plans and incentives, and compare them to their turnover numbers. Remind them that a main reason why good sales managers and F&I producers are recruited out of a dealership is because their pay plan was changed, resulting in less take-home pay. Help your dealer clients refine their job descriptions and determine a pay plan for each position based on the percentages they are willing to pay. Then remind them to stick to those plans when their people succeed. If an F&I producer is taking home a fat check, that means the dealership is making that much more.

3. eLead Engagement and Competitive Edge

Mystery shop their store and their competitors. Review their website. Submit an online inquiry and evaluate their follow-up practices. Look at their online reviews. Determine the strength of their online presence in comparison to the competition. When you call, use your research and ideas to have something interesting to say. The dealership personnel will be more intrigued to see what you have to offer and how you can make them more successful.

One area where many dealerships are struggling is how to successfully service customers online, especially on platforms beyond their control on social media and review sites. More and more consumers today actively research both car reviews and dealership reviews, and they trust these more than any advertising tactic.

Help your dealership clients leverage this trend. Remind them that consumers often choose who they want to work with before they even enter the store by looking at reviews. In fact, according to Equifax, consumers are now visiting 1.2 showrooms before buying. Therefore, more reviews correlates with increased opportunity for sales for the team members and the dealership. Have your dealership clients coach their team to ask for reviews. Or, even have your clients run an incentive-based contest among the sales and service teams to drive reviews. Sales professionals are trained to ask for the sale. It’s time to motivate them to ask for the review.

Help your dealership clients stay focused and healthy by setting them up for future success. Develop mechanisms to elevate your relationship with your dealer clients by evaluating their operations and creating solutions for potential problems they didn’t know they had. Remember, the healthier dealers are, the healthier the agent – and, the less likely the dealer will be to look for other resources.

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The Sub-Prime Cinderella Story: Who Has The Glass Slipper?

After five years of consistent increases, used car prices are expected to collapse in 2014. According to NADA, the average price of a used car rose by 18 percent from 2007 to 2013, and is now roughly 10 percent higher than the average price of the past two decades. That bubble is expected to pop as NADA predicts 42 million units to hit showroom floors nationwide. Of that 42 million, 16 million units will be a result of lease-end models being returned to franchise dealers.

For an independent dealer selling used cars, this poses a significant obstacle. Beyond the drop in price per retail unit sold, other kinds of dealers will lay claim to 38 percent of the available used car inventory. However, there is an upside. According to a 2014 Equifax study, there is pent up demand for more than 26 million vehicles. With the labor force participation rate declining and moderate wage and employment growth, it’s a good assumption that consumers will continue the trend of preferring to buy used over new.

These recession-wary consumers are more willing to shop for the best price and financing available. This partly explains why used vehicles accounted for 62 percent of all vehicles financed for the fourth quarter of 2013, according to Experian.

While we ended the year with an almost even split between independent and franchise dealer market share in used car financing, independent dealers are well positioned to tap further into the current consumer market. For example, picture what you think a typical independent dealer customer looks like:

  • What’s their credit score?
  • Do they rent or own their home?
  • Are they employed?
  • If they have gainful employment, in what industry segment are they employed?

The reality of today might surprise you. With the impact of the recession weighing on bank accounts, even prime consumers are now browsing independent dealership lots. Once you lower your eyebrows, try this number on for size: 11.4 percent of buy-here-pay-here customers fell into the prime and super-prime category in the fourth quarter of 2013.

But what’s even more interesting is the subprime category. This category has become the consumer segment that holds significant value to all dealers: franchise, independent and buy-here-pay-here alike. Of all buy-here-pay-here customers, 88 percent fall within the nonprime, subprime and deep subprime categories. 1 These same customers make up 37.3 percent of franchise dealership customers. 1 While franchise dealers are new to woo this category, they are aggressive, and in some cases offering more than what independents have in their quiver.

When it comes to providing value and creating lasting customer relationships, franchise dealerships have service departments and a deep bench of F&I products to protect and repair the customer’s vehicle. Providing benefits such as these, which have significant impact in preserving the customer’s bank account, has been an uphill battle for independent dealers, specifically in the F&I department.

With an inventory ranging from zero to 70,000 miles, franchise dealerships have significant options in providing consumer protection products. Beyond the manufacturer’s warranty, F&I product providers underwrite extensive vehicle service contracts, maintenance plans, appearance protection products and some forms of insurance, like GAP.

The benefit of this deep bench is they have a better opportunity to increase their value proposition with the customer. By providing extensive coverage on various aspects of their vehicles, they can give their customers significant protection for their bank accounts, while increasing dealership profit per retail unit with upgrades or extended coverage.

Independent dealers paint a different picture. Vehicles on an independent dealership lot have been through approximately three ownership cycles and typically range in mileage from between 30,000 and 150,000 miles. With this in mind, their F&I bench is significantly limited in comparison.

The majority of consumer protection products tailored for independent dealers limit coverage to mainly the powertrain of these older-model vehicles. The reasoning behind this is pretty straight-forward. Older model vehicles are expected to break down more and therefore F&I product providers are more hesitant to create extensive protection products for them as they would expect a higher number of claims submitted.

However, in this value versus cost environment, nonprime and subprime consumers have a new level of expectation in the terms of the products available to them from both franchise and independent dealerships. The recession has forced companies across all industries to re-evaluate the customer service experience, as well as their value proposition. There is no difference in the auto industry. Now, it’s not only prime and super-prime customers that demand the highest level of service, but rather all customers expect to have the same level of respect for their business. While some customers may not be able to afford a traditional vehicle service contract, they are still very interested in purchasing mechanical breakdown protection for their vehicle.

For this reason, F&I product providers are re-evaluating the products they develop for independent dealerships. For example, EFG Companies, a consumer protection product provider based in Irving, Texas, developed a vehicle service contract called Best ReGuards that extends past the powertrain specifically for independent dealerships. This product focuses on several extended coverages while maintaining a low cost price-point:

  • Engine
  • Turbocharger/Supercharger
  • Transmission
  • Transfer Case
  • Air Conditioning
  • Electrical
  • Fuel
  • Seals & Gaskets

Another trend in consumer demands goes beyond mechanical breakdown to include benefits around personal safety, such as roadside assistance. Again, the majority of roadside assistance plans available for independent dealers only provide limited services, if any. However, no matter their credit score, people from all walks of life need the ability to take care of themselves and their family in the event that they are stranded due to a breakdown. With that in mind, EFG paired the following roadside assistance benefits with the mechanical benefits of their Best ReGuards VSC for independent dealers:

  • Towing
  • Flat Tire Changes
  • Jump Starts
  • Lockout Service
  • Nationwide Coverage

Beyond the product itself, the company also backed it with the same product administration that franchise dealers receive. This further emphasizes and ensures the level of customer service on which independent dealers can rely, and that positively impacts their relationships with their customers.

You can see how growth in options such as this gives independent dealers a more valuable toolkit to address each customer’s specific need when it comes to protecting their vehicle. They also fortify independent dealership’s customer appreciation model, which increases their customer retention. With revamped F&I products that provide more comprehensive coverage and service, independent dealerships are positioned to:

  • Increase their product portfolio to generate greater profits
  • Cultivate customer relationships by providing new market opportunities
  • Match consumer buying trends to the dynamics of their dealerships

As supply is expected to outpace demand in 2014, independent dealerships need to expand their product portfolio to be more competitive in the market. Considering how few independent dealers have access to provide F&I products, you are going to see more providers recognizing this growing opportunity and focusing product development efforts on this fresh dealer segment.

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