It’s the end of the month and a quick review of your F&I manager’s performance tells you that, once again, service contract penetration has been minimal. What’s up? Why is he struggling to keep his head above water?

Maybe it’s because he doesn’t know how to follow through on customer objections. Does he know how to sell from a menu? Is your product pricing consistent? Perhaps your service drive program is nonexistent. Is your dealership able to compete with outside sources offering service contracts at better terms?

It’s time for a thorough analysis of your dealership’s profit problems, especially if your service contract penetration is failing to meet your objectives.

An Interview Helps to Anticipate Objections

Is an outright “no” an objection, or is this all too common customer response simply another way of saying, “I need more information”? Successful sales personnel know it is difficult to close the sale without an objection, but too many finance managers fear rejection and go out of their way to avoid an outright refusal. They shun asking customers: “Why?” They dread hearing any customer objections because they have no effective tools for overcoming them.

What kind of tools are we talking about? Information tools. These tools are gathered during the initial customer interview, which begins at the salesperson’s desk. Finance managers must leave the comfort of their office and meet customers at the sales desk to conduct a proper interview process. This is where the qualifying of customers should begin. This is the place to learn about their driving habits and other relevant facts.

How long do they keep their new vehicles? Three years? Five years? Until they no longer run? Have they ever used their car insurance for a major event, such as a total loss? Do they carry any other type of insurance, such as Blue Cross or Prudential? Have they had to use the insurance for anything other than well care services? Are they repeat customers? Have they always driven your dealership’s brand? Are they gainfully employed? How many years have they been with the same employer? Do they own their homes or are they renters?

Dealers and finance managers should discuss the benefits of meeting customers on their terms at the sales desk and then initiate a well-structured process that takes into consideration the competition, including online sellers of similar products. Waiting to qualify customers in the finance office delays the close appreciably.

Increased profits or product sales are ensured with effective preparation and avoidance of shortcuts. A friendly information gathering interview at the sales desk will not prolong the sale; in fact, it will shorten it and lessen the likelihood of a careless mistake. Customers buy from managers they like and trust and this begins outside the finance office.

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Overcome Objections with Effective Word Tracks

Finance managers should study and rehearse their written word tracks every week. Successful word tracks are valuable tools for closing deals that bring profits because they are designed to consistently overcome objections. If customers are adamant about not wanting to take advantage of a service contract, managers should find out why before jumping into a discussion of why they need one. Let customers guide how the products should be sold. They will reveal exactly why they are turning down a service contract:

  • It costs too much.

  • I bought one before, but didn’t use it.

  • I’m buying a quality automobile and don’t expect trouble.

  • I have my own mechanic.

  • I have the manufacturer’s warranty.

  • I’m only keeping the vehicle for three years.

  • I’ll buy it later.

  • I’m buying one from another source (such as Edmunds).

  • You guys just want to make another buck at my expense.

    Successful finance managers increase their service contract sales by having a logical and convincing word track for each potential objection. They isolate the specific objection and close the sale. If their customers see the value in a service contract but don’t think they can afford it, they explain why it is cost effective and makes sense for any vehicle owner on a tight budget.

    Menu Selling Keeps Presentation on Target

    Menu selling is an effective way to present all of your products to customers every time. Despite this proven method, however, too many finance managers still believe in step selling or other outdated tactics when offering products to their customers. Even F&I managers dislike a sales pitch when personally dealing with service company reps outside the auto industry, yet they stubbornly refuse to remove the blinders when pitching products themselves. They fail to understand that the more they pitch, the less they sell.

    Successful product selling begins with the menu presentation, which should be short and to the point while concisely stating all features and benefits of each product. The service contract dialogue, in particular, must not become a lengthy dissertation. Less is better. A service contract brochure should never be brought out during the presentation, unless there are questions regarding coverage. Customers can only absorb so much information at one sitting. They have just spent an hour or two negotiating a car deal and their attention span is waning. If they become confused, they will shut down and refuse any product.

    Again, practice makes perfect. Any manager who thinks his usual methods are just fine is looking at dwindling profits. Less pushiness, fewer aggressive tactics, more knowledge about customer needs, better understanding of customer savvy and increased rehearsal of proper and proven menu presentation techniques will add up to steadily increasing sales and profits.

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    Initiate Consistent Product Pricing to Avoid Discrimination

    It’s worth mentioning that product pricing must remain consistent for all customers. The goal of a service contract sale, in particular, should be to make a reasonable profit of approximately $1,000. Every time the contract is presented, the price stated must be the same, regardless of whether a customer seems agreeable to buying several products.

    On the other hand, if a customer simply will not or cannot settle for this particular profit margin, don’t hesitate to reduce the price or offer longer terms until the customer agrees to the purchase. Any sale is better than no sale, in this circumstance.

    Why is pricing consistency so important? Today’s savvy customers can quickly recognize price discrimination and are quick to call it an unfair and deceptive act. Besides, inconsistent product pricing doesn’t mean dealerships can capitalize on sales and make increased profits.

    Offering every customer a service contract that is marked up at a fair margin simply keeps managers on target and focused. There is no hesitation in their presentation. There are no shifty eyes or other give-away body movements to sound an alarm. No manager will be caught quoting a different figure to a returning customer. For example, if there are two or more finance managers at the dealership and a customer decides not to take advantage of the service contract on the date of delivery, but returns the following day to buy it, the price quoted should be the same. It will be if the dealership has instituted a consistent pricing scheme. This system also works if a customer calls the dealership for a price quote or orders a service contract or other products online through its Internet department.

    Wait, your dealership doesn’t offer products or service contracts online? Why not? Your competitors do!

    Encourage VSC Sales After Initial Purchase

    Call centers are popping up all over the place. They offer your customers the opportunity to purchase a service contract without contacting your dealership. They may have 10 or more sales closers whose only responsibility is to take calls on service contracts. Their phones are ringing off the hook and their customers merely want to buy a service contract. Why aren’t these new-vehicle buyers calling your dealership? Why will your customers use an outside source rather than buying a contract from you when purchasing a vehicle from your lot?

    First, there is often a perception of inconsistent pricing. Second, customer trust is not always established at the dealership. Common reasons for customers to turn to call centers include:

  • Your dealership had no process in place regarding the offering of a service contract after the time of sale.

  • Your customers were turned off by the manager’s sales tactics and suspicious of the offering. They felt they were being “had.”

  • Customers felt pressured and wanted more time to think about it. Then, the finance manger dropped the ball and didn’t follow through the next day or the next week.

    Sound familiar? Very few dealerships have a service program dedicated to contacting customers after the sale or during their ownership. Few let them purchase a service contract other than on the day of vehicle purchase. Instead, their finance managers insist that the manufacturer will offer the customer the opportunity to purchase a service contract down the road. What?! Dealerships that want to increase their service contract penetration must have a service drive program. If they don’t, their customers will either be contacted by another party or they will contact an outside source of their own volition. A service drive program is a huge profit center that shouldn’t be ignored.

    There are many avenues finance managers can take to increase their service contract penetration. Those who want to change the numbers will set aside enough time to explore the various opportunities. Successful service contract penetration requires dealers and their finance managers to get outside the traditional box. Opportunity is everywhere and increased profits are guaranteed.

    Becky Chernek is president and CEO of Chernek Consulting Inc. dba FYIFI Inc. She has been consulting on menu sales and F&I since 1996 and has been in the auto retail industry since 1985. Visit Chernek Consulting at www.chernekconsulting.com or e-mail [email protected].

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