The Great Recession was a painful period for the industry, but it was also a period of reflection for auto retailers, manufacturers and dealer consultants. Legacy processes came under the microscope, and “automation” became a popular catchphrase as dealers turned to technology to help them navigate the downturn. Most dealers who fought the change were lost to history. Sayville Ford, the largest independent Ford dealership in the state of New York, wasn’t one of them.
Melanie Spare-Oswalt, a third-generation dealer, took over the store in 2008. Located in a small hamlet bordering the Great South Bay of Long Island, N.Y., the dealership was founded in 1957 by her grandfather, Neil Spare Sr. Originally located on Main Street, the store moved to its current location on Sunrise Highway in 1976. Last year, approximately 1,600 new vehicles and just south of 500 used vehicles rolled out of the 19,000-square-foot facility — a great year, considering the state Sayville Ford was in four years earlier.
It was Spare-Oswalt’s father, also named Neil, who handed her the reins. For years, his store was one of the Top 100 dealerships in the nation and Top 10 in the region. But like any good leader, he knew when it was time to pass the torch. The Internet age was taking hold, and changing consumer behaviors were challenging everything he knew.
“He was a progressive dealer, but with the advent of technology and things like that, and the workforce being closer to my age, well …” Spare-Oswalt says. “Bottom line, it was time to automate. It was a struggle to implement the changes we made, but we came through it.”
Frank DiSanti, Spare-Oswalt’s trusted general sales manager, shepherded the dealership’s sales and F&I departments through that period. He had been with the store since 2003 and knew change was needed. But he also knew the store’s biggest hurdle would be its greatest asset: its longtime employees, some of which have been with the store for almost 30 years.
“I knew we were losing money, but we just didn’t have the tools or the help to do what I knew needed to be done,” he says.
It was Ford Motor Co. and its Ford ESP division that would usher in a technological renaissance inside Sayville Ford’s F&I department, which is manned by two longtime employees, Tom Lumley and Joe Corcione. They fought the change initially, even butting heads with the woman who would lead the charge. Today, with their average profit per vehicle retailed up 25 percent and acceptance rates of the store’s Ford Extended Service Plan now north of 50 percent, Lumley and Corcione have seen the light.
Spare-Oswalt had moved west to get her master’s degree before doing a short stint with Chrysler in its Southwest zone office. She then moved to the insurance business in 1991, and remained there for 17 years. Then her father called to offer her a chance to return to the place she worked at after school and all summer as a teenager.
“I jumped at the chance to come back, which wasn’t a very good year,” she says. “And when I came onboard, he literally said, ‘Here, do what you have to do.’ I think it was kind of a blessing in disguise because I didn’t know how things were always done, so I was very open-minded.”
She maintained that mindset when she enrolled in the National Automobile Dealers Association (NADA)’s Dealer Academy, and when she met with her dealership’s department heads, feverishly writing notes into her notepad as she shadowed them. Most of all, she listened and watched. But she figured out pretty quickly why the dealership was struggling.
The downturn was certainly taking its toll, but the dealership’s longstanding reputation kept vehicles moving off the lot. But the deals it was delivering weren’t profitable enough to offset the decrease in sales, forcing the store to cut expenses and its employee count.
The biggest issue, DiSanti recalls, was that customers were being placed in the F&I office once sales took deposit on a vehicle, which meant deliveries were scheduled as the vehicle was being sold. That meant F&I managers weren’t given the opportunity to sell protection products until it was too late to make an effective pitch. The process also left the dealership vulnerable to customers experiencing buyer’s remorse or customers shopping for a better deal online.
The transition to the finance office presented another problem. Some salespeople were good at it, others weren’t. In the F&I office, “hard-adds” like remote-start systems and pinstriping were the hot sellers, not the more profitable F&I products that tie customers to the service department.
But Sayville wasn’t the only store with issues. The area, which has towns so tightly bunched together that community borders are blurred, lost about six Ford stores, as well as a number of other dealerships operating under different marques, including some owned by major dealer groups.
“Recovering from a very tough period, we looked at everything,” Spare-Oswalt says. “I think that helped when Ford came along with this program.”
A New Way
This September will mark the third year since Ford ESP hired MarketSource, an Alpharetta, Ga.-based F&I consulting firm, to roll out a technology-driven income development program to about 800 Ford locations. Also hired was Ristken Software Services, whose web-based, real-time reporting platform was selected to drive the program. For Ford dealers, it is known as Ford ESP ProfitLink Reporting.
“Ford was interested in a menu-selling system, and, more importantly, a reporting platform that allowed Ford ESP and MarketSource personnel to better understand the productivity of their dealerships,” says Ristken President Patrick DeMarco, who has forged similar pacts with other OEMs, F&I product providers and about 200 general agents. “Our system allows them to institute change mid-month, rather than going in and doing an autopsy report 15 to 30 days after the month is over.”
The plan was to drop MarketSource reps into each store, have them learn their processes and institute change. Before that happened, each rep went through intense, online training on the Ristken system. They were also flown out to Ristken’s Dallas headquarters for two-and-a-half days of ProfitLink Academy training. One of the MarketSource reps who completed the program was Nicole Avellina, who started her automotive career in 1998 as a service cashier at one of Sayville’s competitors. So she was more than familiar with how dealerships operated in the area.
“When 2008 rolled around and the economy started to change, a lot of dealerships there hadn’t changed with the times. Some were still doing things they did 30 to 40 years ago,” says Avellina, who served as an F&I manager before joining MarketSource in 2008. “So, we saw a huge amount of dealerships close down. The ones that didn’t either had the right processes in place or were willing to make changes.”
The Devil Cometh
Avellina arrived at Sayville Ford in the spring of 2010. She was there with several Ford executives to present the Ford ESP ProfitLink program to Spare-Oswalt. The first thing she noticed was how “green” the new dealer was, how she hung on their every word and furiously jotted down notes.
“We sat with Melanie and explained what the program would be, what her commitment would be — not so much financial, but her blood, sweat and tears,” Avellina recalls. “She really had to put on her brass skirt and turn that store around.”
With Spare-Oswalt onboard, Avellina spent two days at the store interviewing salespeople, managers, and F&I producers. She also audited deals and watched as customers went through the store’s sales and F&I process. The goal was to come up with a roadmap for the dealership, which she shared with Spare-Oswalt’s team during a week-long kickoff meeting at the store. But before that could happen, she had to fix one major problem.
“I was trying to extract 90-day numbers from the dealership and realized they didn’t have an accurate reporting system,” she says. “That’s where the Ristken system came in. It’s just so easy to understand, the way they break out product penetrations, new retail versus used versus leasing.”
Ristken’s onboarding process takes about seven days, depending on what type of DMS integration is required. Once it was in place, Avellina went to work.
The F&I managers were quick to point out which salespeople were the strongest at turning customers over, so she focused her efforts on those individuals first. She also used the Ristken Reporting platform to track objectives she established for each salesperson, and offered incentives based on Ford ESP penetration. She didn’t have to change pay plans since salespeople were already paid a percentage of back-end gross, but she did meet with the team to explain why they were compensated and the importance of a proper “TO.”
“The process isn’t just about F&I, it’s about the sales department and the entire customer experience — from the time the customer walks into the showroom to the turnover to F&I,” she says. “It was difficult, but we got everyone onboard.”
Convincing the F&I department change was needed would require a lot more work and more patience. “I think the F&I managers nicknamed me the ‘Devil,’” Avellina laughs. “So, I have a few scars.”
No Pain, No Gain
Spare-Oswalt was committed to the program, but she was also committed to her people. She didn’t want to lose anyone and told Avellina that getting everyone onboard with the new processes was her preference. And the dealer did her part to keep her people motivated, even when they’d come storming into her office to complain about Avellina. DiSanti also fielded those protests, but continued to urge his people to stay the course.
“At first, Nicole was kind of like a policewoman, making sure processes were being done,” DiSanti says. “But Melanie did the same, so it didn’t take too long before they kind of stepped in line with it.”
The first thing Avellina tackled was compliance. It wasn’t that the store, which has an “A+” rating with the Better Business Bureau, was violating state or federal rules; it just didn’t have a process to prove it wasn’t. The changes she made didn’t take long for the F&I managers to digest — up until the point where she brought in Ristken’s F&I menu. “They were step-selling and they didn’t want to let go of that,” Avellina says, adding that it took the F&I managers three months to understand why the menu was so important.
Avellina also changed the F&I managers’ pay plans, which, before she arrived, paid them a flat percentage. “They were paid 20 percent across the board, and it didn’t matter if they sold air,” Avellina says, adding that a CSI component was also added to their pay plans. “We changed that to include product penetrations so they would focus more on selling the products that married the customer back to the service department, kept revenue in the dealership and created customer loyalty.”
That meant the hard-add products the F&I managers were so good at selling were moved to the front end. “Their F&I guys were really good at selling that stuff,” Avellina says. “But what would happen is they would have to call the vendor, make an appointment, and the vendor would have to come in and put it on the vehicle. That’s when they’d schedule the delivery, which meant they were losing gross the longer the deal sat there.”
A New Era
It took the dealership about six months to start rolling with the new processes and the Ristken reporting system, which has since fostered a healthy competition between producers. Avellina still visits the dealership once a week to provide training and support, and review where the dealership is with its monthly and quarterly goals. As for the F&I managers, well, they have since started calling her by her first name.
“Yeah, they don’t call me the Devil anymore,” Avellina says. “I would say that Sayville was the most success I’ve had so far out of the 13 stores I handle. Melanie is a big reason for that. She stuck to her guns, even when the store took a couple of steps backward.
“But it always comes down to the dealer principal, because it has to come from the top.”
Employees at Sayville Ford move with purpose, checking their numbers on the ProfitLink reporting system. It’s something DiSanti always envisioned for the store. “I think we’re all better off for it,” he says. “Melanie was instrumental in getting Nicole, and both of them were the ones who presented the idea and just ran with it.”
As for the F&I department, not only were Ford ESP acceptance rates up last year, they were up for secondary products like maintenance, etch, and tire-and-wheel protection, rising by 63, 86 and 500 percent, respectively.
“There are hundreds of dealerships like Melanie’s that have embraced the ProfitLink Reporting tools and have experienced overall improvements in penetration rates,” says Josh Schave, Ford ESP program manager. “It’s been a team effort, but Ristken’s support services and dedicated training academy have contributed greatly to the overall success of the program.”
As for 2012, Sayville is shooting for a more than half a million-dollar increase in gross. “That’s realistic based upon what we’re building,” Spare-Oswalt says of her forecast.
“I think what we discovered through all of this is we weren’t living up to our potential,” she adds. “This is about the dealership; it’s not about your F&I manager’s pay plan. It’s about the health of the dealership going forward, and that means reaching a broad base of your customers and selling them product that will hopefully keep them in your dealership. That’s what it’s really about.”