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From the Boardroom: Digital F&I and the Millennial Boom

From their thoughts on what is an acceptable per-copy average to how their companies aim to address the online F&I push, four F&I product provider reps weighed in on a host of top-of-mind topics during Industry Summit 2016’s “From the Boardroom” discussion in late August. The main takeaway for general agents is they’ll play a key role in helping to close the digital divide.

The panel featured Tim Blochowiak, vice president of dealer sales for Protective Asset Protection; Greg Oltman, director of business development for Dent Zone; David Pryor, chief marketing officer for Safe-Guard Products International; and Matt Trudeau, director of national sales for Dent Wizard. Their diverse industry experience and roles within their companies offered attendees a unique perspective on the future of the F&I office. The following is an abridged version of that discussion.

Arroyo: We’ve seen public groups like AutoNation and Group 1 posting some impressive per-copy averages. Where do you think the national average sits?

Blochowiak: We’re typically seeing anywhere between $1,200 and $1,400. AutoNation and Group 1 typically are the bell cow and they seem to be leading the pack.

Oltman: I’ve seen it at $1,150, $1,200, but not quite $1,400.

Pryor: I would agree. We do see what AutoNation does. They’re a partner of ours, so we see what they do. They have a very strong process, and that’s what’s driving them to those numbers.

Arroyo: What about penetration rates?

Trudeau: For PDR [paintless dent removal], when people have a good process in place and they’re consistent with their offerings, we see it in the upper 20% range on new and at about 6% to 7% on pre-owned.

Oltman: I think penetrations for all ancillaries are probably 20%, service contracts at about 50%.

Arroyo: David, what about tire-and-wheel protection?

Pryor: Well, again, the mix out there has shifted toward leasing, which puts pressure on the service contract side. So we see tire-and-wheel penetration going up. In a highline store, you could see 30% to 40% penetration.

Arroyo: Without turning this into a commercial, Matt and Greg, can you get us caught up with what your companies have been up to lately? I’ve seen a lot of activity from you guys of late.

Oltman: Well, first of all, it’s our 25-year anniversary and, to Greg’s point, we’ve got a lot of things going on. We were the first PDR service contract and then the first company to have a nationwide technician network. Recently, we purchased a chemical company and a paint-and-fab company. We also just purchased a new odor eliminator that’s going to be added to our suite of products.

We also developed AutoBodyguard, a new division offering a complete line of appearance program and vehicle protection products. It’s where our new bundle is coming from. It has eight products, including PDR, paint-and-fab and an odor eliminator.

Trudeau: At Dent Wizard, one of our newest additions this year is Ding Shield One. It encompasses PDR with hail damage repair and unlimited cosmetic wheel coverage. It also comes with an option for bumper repair and interior protection. One of the things we take pride in is we service what we sell. We have over 2,400 employees now throughout the United States and Canada, which helps us be good stewards of our program in that we can manage our claims. But it’s adding those different things, especially with the amount of leasing we’re seeing right now.

Arroyo: Let’s move to the service drive, because it remains an untapped source of additional F&I product sales. Matt, Dent Wizard is doing something different in that area, correct?

Trudeau: We do a few different things. There’s the side of our company where we go out and consult with service departments on doing walkarounds and how to receive a customer. We come in and do some training clinics. And we have a program where you can sell dent-and-ding coverage, but it comes with preexisting damage so that advisors can sell it.

But it is like pushing a freight train uphill getting these advisors to sell product, especially if you approach it from that side. What we do is work with them on selling our service, where guys come out and repair a car. And they’re able to mark that up, so they’re interested in doing that. So we work with them on selling our service, not our service contract, and there’s definitely a revenue pickup there.

Arroyo: What about service contracts?

Blochowiak: Well, it’s definitely a challenge. A lot of that has to with the alignment of things. The service writer sells service, and they’re really trying to help the consumer. And when you get into service contracts on used cars, you’re talking several thousands of dollars, where the Dent Zone, Dent Wizard-type products are a lot more palatable for the consumer and a lot less expensive.

The problem with selling service contracts on cars that are already broke is it doesn’t do a whole lot from an underwriting perspective, because rates become so high that you have to price for that. So it’s been a real challenge selling service contracts in the service drive, but there are some dealers who have the right compensation plan in place for their service writers and have experienced success. But it’s minimal, to say the least.

Pryor: There just aren’t enough dealers who are really focused on it. We all see the opportunity, but it’s a process change, a pay plan change. And you have to have the right commitment at all levels of the dealership to make that work.

Oltman: You also need to consider whether there’s enough meat on the bone. I mean, after you pay a service writer and then you pay F&I, you can’t overprice that service contract to that customer if F&I is involved in the service drive. Next thing you know, there’s what? A $50 profit?

Blochowiak: And we may see those types of sales not so much in the service drive going forward, but through technology — apps, phone alerts. If consumers have an app on their phone from either the product provider or the dealership, that gives them opportunities to send out alerts to the consumers and, frankly, offers. And I think catching multiple consumers at the right time makes more sense, because you have a broader consumer base to hit in the course of the day as opposed to the one customer on the service drive at that given time.

Arroyo: Let’s shift to this digital F&I talk. At the magazine’s Dealer Summit this past May, we were having an open forum-type discussion when a compliance and F&I trainer said she didn’t believe much about vehicle sales and finance had changed over the course of her 35-year industry career. She felt that people still want to drive the vehicle, smell it, and be sold on the deal. Do you agree?

Pryor: I would disagree. I think the way consumers are buying cars has changed. They’re doing their research online or looking at social media. They’re looking at dealer reviews. I think they still want to touch and smell the car, but their decision is 90% made before they walk in the door. And I think the F&I industry hasn’t necessarily kept up with that. So I think there is a huge opportunity to start educating consumers earlier in the process by getting more information out there about the products, to focus on the social side and what people are saying about these products.

Oltman: One thing I’ll add to David’s comment is that when we get to that stage — and I’m going to go back to pay plans — you have to make sure that finance wants to get involved. You’re changing their world. So I think the pay plan is a big part of this.

Blochowiak: That’s a really good point. I also think we have to encourage dealers to diversify their interaction with the customer, because not everyone wants to buy a car or interact with the dealership folks in the exact same manner.

Arroyo: So what tech tools are you personally excited about?

Oltman: If you haven’t seen MakeMyDeal, you’ve got to go see it. It’s fabulous. Pearl Technologies’ ShowroomXpress is as good, but MakeMyDeal is here to stay.

Blochowiak: I agree with Greg. I had an opportunity to sit through a demonstration of the MakeMyDeal platform, and it’s nice, because, as I said earlier, it’s about interacting with the customer how they want to be interacted with. And that platform really allows the consumer to start and stop anywhere they want. They can go all the way through to F&I, or they can stop along the way and just use it to shop.

Pryor: I would echo those sentiments about the MakeMyDeal model. What’s interesting about it is it doesn’t take the dealer out of the equation, which I think was the problem with some of the other efforts to kind of push F&I online.

Arroyo: So there are no concerns about production declining?

Oltman: You’re selling a car. And anytime you do that, it’s an opportunity. So there should be no fear.

Arroyo: David, your title, chief marketing officer, is a little unique in this industry. Is it a reflection of this need to address this online push?

Pryor: That’s part of it. When we talk about educating consumers, it’s about generating content and it’s about creating ways for dealers and consumers to share their experiences with these products. And we’re just starting to kind of crack the surface on that, but it’s something we’re looking at. How do we enable it on our websites? How do we enable it in social media channels? And how do we enable it on dealer websites? These are all places customers are going before the purchase, and we want to lower as many barriers as we can so they walk into the F&I office and they’re educated, they’re knowledgeable, and so they’ll buy more.

Arroyo: I’ve always wondered why we’re not using some of these great objection-handling lines or techniques as the basis for some of this content. They’re all designed to build value, to make that product mean something to the customer’s situation. So, to the rest of the panel, what discussions are taking place in your offices about this online marketing stuff?

Blochowiak: We’re really making a push to make it more, as you said, objection-overcoming or really just creating a need. Because if you just list information, that’s all it becomes. But if there’s a picture of a car broken down on the side of the road, that becomes real and that helps create the need for the product.

Oltman: The other thing is, and I know David knows this, you have to know what the dealer’s business plan is, how they market online, what they can stomach, and what they can’t. Once you know that, then you become a partner with them and then it’s all about the people in the store. Because, ultimately, they’re the ones who are going to make it happen.

Arroyo: But what about F&I product pricing? Should we go that far?

Blochowiak: I think you can. And what it could ultimately do is create MSRP-type pricing for our products. Or it could create per-month pricing for the products online. So if you’re advertising a certain car for $399 a month for 60 months and here are your disclaimers, well, you could tack on a service contract for $27 a month or something like that. I think that’s understandable to the consumer.

Oltman: But if you’re going to price online, everybody in the dealership needs to know that price. And there has to be a business plan. So, once again, it’s training and education, because there’s a whole lot more involved than just transparency.

Arroyo: Do you think Millennials will be good F&I product buyers?

Oltman: I definitely think so. I was talking about this with one of my teammates. We both have older children, and they’ve been brought up where every time we bought them anything electronic, we always bought a service contract with it. So they don’t know anything different. So I think Millennials are going to be huge buyers of products.

Pryor: I read something recently that said Millennials are the most protected generation that we’ve ever had. I mean, they all wear bike helmets and they all wear helmets skiing — things that you would have gotten you laughed at when I was growing up. So I think Millennials will be as good as or better than today’s buyers of our products.

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