Today’s Internet shopper was at the center of two panel sessions staged at Industry Summit 2014 this past September. The first session, “Building the Fully Online Sales Process,” had directors from three dealerships and technology executives discussing how they’re connecting online prospects to their in-store sales processes. The second, “How to Protect F&I Profits in an Online Transaction,” had F&I trainers calling on F&I pros to carve out their place in the digital age.
Serving as a backdrop for both discussions were studies like one issued by AutoTrader last May. It showed that 79% of all car buyers used the Internet to shop for cars in 2014, up from 71% in 2011. But it was a tale of two departments: The first session revealed how stats like that have forced dealerships to alter their sales and marketing strategies; the second painted a picture of an industry resistant to change.
“It wasn’t that long ago that everybody in this room was being told that online car sales were going to replace brick-and-mortar dealerships. Do you remember that? It didn’t happen, did it?” said Peter Chafetz, national sales training manager for Allstate Dealers Services, during the F&I trainer session. “While this is a change, if you want to look at it as a threat, you’re putting yourself in the wrong mindset.
“The biggest threat dealers face today is fear — fear of change, fear of adapting to what the new reality is,” Chafetz added. “Quite frankly, you can shout at the rain, but you’re not going to stop it. So embrace it.”
Pressure to Perform
Provider Exchange Network (PEN)’s Ron Greer kicked off the F&I trainer session by asking, “How is the online shopping experience impacting F&I selling in the dealership today?” First to respond was The Warranty Group’s David Worrall, who served on the panel alongside Chafetz, Protective Asset Protection’s Rich Moore, Safe-Guard Products International’s Luis Garcia and Chrysler Capital Consulting’s John Lovin.
“It’s putting more pressure on F&I to increase dollar per car,” Worrall said, noting that the average profit margin on a new vehicle has tumbled in the last decade. “The problem for the dealer is that the price they usually receive from TrueCar or other online services is a lot closer to the minimum acceptable deal than it is to the price we would have maybe negotiated with that customer walking through the front door.”
Based on data from the National Automobile Dealers Association (NADA), F&I offices are helping to close the profit gap. In 2013, for instance, the association reported that F&I profits rose for the fourth year in a row, accounting for 38.8% of front-end gross profits. But there are concerns this trend won’t last as consumers continue to push for an ecommerce-type situation.
“That online buyer, you may not be able to offer them a service contract when they pick up the car,” Chafetz noted.
F&I managers are already seeing more and more consumers entering their offices preapproved for vehicle financing. The problem, Worrall pointed out, is today’s Internet shopper doesn’t have the patience to wait 45 minutes for an F&I manager to prepare paperwork.
“… Sixty-two percent of those folks, while they’re sitting there waiting, are on their smartphone shopping other dealerships. We don’t want to waste their time,” he said. “If a lot of this transaction can be completed online prior their visit to the dealership, the showroom visit is shortened up.”
Bridge the Gap
On stage with executives from Autobytel, Black Book’s Activator Division, Dealertrack and RouteOne, Karen Vance, director of finance operations for Virginia-based Jim Koons Automotive Cos., discussed how her organization is cutting down on transaction times. She said the dealer group was forced to make big changes to the way it accepts online credit applications to prevent customers from falling through the cracks.
“We had them coming from OEMS, coming from our website, coming from third-party lead providers. Each time an application would come in, our BDC would get notified, and they’d need a different password and user ID to go in and find the application,” she said. “Sometimes they didn’t know where to find the applications.
“It was a really bad customer experience when the customer would come in, because sometimes we’d have their applications, sometimes we wouldn’t,” she added.
So the group implemented RouteOne’s FinanceConnect, an online credit app, and made some strategic changes to its websites. Not only did the organization make the credit application button more visible on its store websites, it added the button to each site’s finance page. Now, when a customer submits an online credit application, FinanceConnect drops the information directly into the RouteOne platform and notifies the BDC, as well as three other designated employees.
“Our number of applications increased considerably, and the surprising part was the number of applications for prime consumers increased a lot,” Vance noted.
Representing RouteOne was Todd Mason, the company’s chief product and marketing officer. He said stories like Vance’s are not uncommon, especially as the industry continues to witness a sea change in consumer expectations.
“With FinanceConnect, we’re seeing an 80% completion rate,” he noted. “The completion rate is important, but it’s really about engagement. It’s really about setting that first expectation with the consumer before they come in.”
The high expectations of today’s Internet customer is why Chrysler Capital Consulting’s Lovin believes dealers need to improve the F&I sections of their websites. He listed several examples of how some forward-thinking dealers are doing that, including one dealer who allows Internet shoppers to calculate the impact F&I products have on their monthly payment.
“On the payment calculator page, they can click ‘I want tire and wheel’ or ‘I want dent and ding’ and it adds nine dollars to the monthly payment,” he explained. “The people who go to the Internet and who want information, the dealers that are good at it are the ones who are giving them all the information.”
Garcia also lauded the benefits of being more transparent in the F&I office. “The Internet customer wants to catch us at our own game,” he explained. “They want us to wait until the very last minute to pull out the menu so they can go, ‘Aha! I knew you were going to do that.’”
The trust gap between car shoppers and dealers was highlighted in results of a poll TrueCar issued last June. Respondents guessed that dealers make about a 20% profit on the sale of a $30,000 vehicle. But according to the NADA, profits on new-car sales have fallen from 5.5% in 2003 to 3.8% in 2013. Such findings are what have Garcia suggesting an unusual tactic: emailing Internet customers a menu before they come in to take delivery of their vehicle. [PAGEBREAK]
“I have a lot of F&I managers who resist that change at first, because they say, ‘I’m not going to email my menu, are you crazy?’” he said. “I say, ‘Tell me what your [profit per vehicle retailed], product index and penetrations are on these customers. They’re low, right? So you’ve got nothing to lose.’”
But Garcia conceded that putting F&I products online is unlikely to ever generate the same profit as a seasoned F&I professional. “We have F&I managers [who] I think are very talented, that run 65% to 70% vehicle service contract penetration month in and month out. Will we ever see that by selling to the customer directly? I don’t think so.”
But there is one thing linking dealership efforts to capture digital leads to the F&I process: the credit application. Results of a 2013 survey issued by AutoUSA Internet Sales Solutions showed that 52% of dealership respondents ranked online credit apps as the No. 1 lead conversion tool. Trade-in calculators came in second at 37%.
“The number of basic leads that get submitted has been pretty flat for six years now,” said Pete Batten, senior director of product management for Dealertrack’s Digital Retailing Solutions. “But the number of people who are submitting finance applications keeps going up. The number of people doing a full trade appraisal … keeps going up. I think you see consumers having more and more of an interest in doing that process online.”
Combining the company’s online finance applications with a payment calculator improves completion rates even more, Batten added, noting that the excitement of knowing their payment makes customers more likely to complete the application. “When we tie it to the payment calculator, we actually see a 300% increase in the volume of the credit applications that get submitted,” he said.
Panelist Lou Bregou, director of operations for Drivers Village in Cicero, N.Y., said he has seen a big increase in online credit applications since he began using Dealertrack’s tools. The dealer group has been using both FinanceDriver and TradeDriver to create an ecommerce-like process, one that delivered 38 additional online vehicle sales in August — the majority of which were used units.
“We’re going from talking about building leads to ecommerce,” Bregou said. “For the consumer, that’s a big switch.”
Bregou was quick to admit, however, that his dealer group has not had much luck selling F&I products to online customers. “I feel like I’m the Ghost of Christmas Future at an F&I conference,” he joked. “We’re not great at F&I … F&I can get really hurt here.”
Another dealer panelist having success with an online solution was Steven Stasi, Fox Lake (Ill.) Toyota’s BDC director. Stasi implemented Autobytel’s SaleMove, a solution that allows dealer personnel to interact with website visitors via video, voice or chat.
“You can actually take customers virtually to where they would fill out the online secure credit application and walk them through step-by-step so you know that it’s completely filled out when it’s transacted,” Stasi said. “We started using the SaleMove product in May, and within two hours of installation, we had our first appointment. Four hours after that, we sold our first car.”
Rich Shugg, director of sales for strategic accounts for Autobytel, said the motivation behind the tool was to get away from traditional lead generation and move toward customer engagement.
“It’s less about getting a person to fill out their name, address and email, and waiting for an email response or phone call,” he explained. “It’s more about communicating with the consumer as much as you can while they’re on your website.”
At the “How to Protect F&I Profits in an Online Transaction” session, Safe-Guard’s Garcia also discussed customer engagement. While many dealers are working to reduce lead-response times, he said they’re still coming up short in terms of response quality.
“You’d be surprised what an Internet manager will send to a customer from his smartphone, and the way it comes across to the customer — without a signature, without a dealership logo, without spellcheck,” he said. He went on to suggest that dealers create dummy email addresses and send communications to their stores to test how online inquiries are being handled.
Steve Knight, director of online auto retail concepts for Black Book’s Activator Division, had his own take on how to capture Internet shoppers. He said the experience dealers deliver online needs to imitate the in-dealership experience, which means allowing consumers to view inventory, appraise their trade and start the financing process.
“You offer them all of those things in your store, and they have a specific user experience when they come to your store,” he said. “That same user experience has to happen across your Web-based platform and your Web-based initiatives, including mobile.
“All those things have to be exactly in sync because people often ask me, ‘What’s the difference between the Internet customer and the customer who walks in the door?’ The answer is there is not a difference.”
Those sentiments were echoed by the moderator of the F&I trainer panel. “There’s this thing called an Internet shopper. Guess what? We’re all Internet shoppers,” PEN’s Greer told attendees.
Chrysler Capital Consulting’s Lovin also weighed in: “I don’t know where the industry is going to go, but if we cater to that Internet customer, they still need a qualified F&I person to take them over the finish line.”