While the shift to online car sales has been underway for some time now, many agents and dealers have been understandably hesitant to bring more of the F&I process and product presentation experience online, out of fear of lost profit. But now, consumers and dealers alike have turned to digital retailing in spades as we have all had to adapt to being virtual during these challenging times. In fact, according to the 2020 Cox Automotive COVID-19 Consumer Impact Study, 50% of all dealers plan to shift more activities online in the near future.
The industry is going virtual, and we all need to grow, adapt, and deliver to meet consumer needs.
Cheryl Miller, vice president of operations for Dealertrack F&I Solutions, and Phillip Battista, chief executive officer of Darwin Automotive, recently sat down with AE to discuss the evolution of menu selling, the need to bridge the traditional F&I sales model with digital retailing, and best practices for agents as they adapt to this new normal.
Q: How has menu selling, and when it occurs in the deal making process, evolved over the past 10 years?
Miller: Over the past few years in particular, new technology has been coming to the market that has radically changed the F&I process for the better. Dealers today have the capability to drive one paperless F&I workflow and deliver aftermarket presentation on any device. While menu selling has traditionally been pushed to the end of the process, emerging technology and system integrations are enabling dealers to introduce and educate consumers about aftermarket products significantly earlier in the deal-making process both online and in-store.
Battista: Ten years ago, electronic menus were created. At that time, however, the industry looked to menu selling for compliance and protection from lawsuits rather than selling product more effectively. Over time, menu selling became a key part of the F&I process. Everyone is doing it now, and it has grown from a compliance tool to a core tool to help drive revenue.
As far as the current digital age and looking to the future are concerned, electronic menu selling is an important part of the process to better engage with consumers the way they want to be engaged. The next phase, which is already in motion today, is a mobilization to smartphones, tablets, and online for the customer. The process has grown from a piece of paper, to electronic, to mobile, and to online on the dealer’s website, where the consumer is aware of options prior to walking in the door or purchasing online.
Q: Why is moving menu selling, earlier in the deal-making process, so critical to F&I profitability?
Miller: Moving menu selling earlier in the deal-making process is a game changer, as it gives dealers the opportunity to increase transparency and become a more consultative figure to consumers. While F&I aftermarket products can be an important source of profitability for dealers, pushing it to the end of the car-buying journey, after consumers already think the final price has been locked in, is no longer a viable option. Today’s car buyers expect transparency throughout the entire process and want to be able to learn about the available products on their own time. In fact, according to the 2018 Cox Automotive Future of Digital Retail Study, 71% of consumers prefer to get information about the deal – including aftermarket add-ons – online and outside of the dealership. Agents can be catalysts for helping dealers adjust to this new reality by working with them to maximize each step of the menu-selling process.
Battista: The concept of consumers doing research online isn’t new. And in today’s market where we are required to be virtual, many more consumers have turned online for all kinds of purchases and related research. What has evolved even further is how dealers interact with consumers online. The fact is, if they start to educate customers about F&I protection products as part of the process earlier in the sales cycle, the take rate is dramatically higher, and the number of products purchased increases significantly.
Today, success in F&I depends mainly on three things: transparency, education, and personalization.
As Cheryl also points out, dealers must be transparent and provide education. Then, what makes the real call-to-action is to have the presentation personalized specifically to the individual customer; to their vehicle, driving habits, etc. For most dealerships, the F&I process now starts with the consumer completing a simple ownership survey. This information is then merged with DMS information, including purchase history when applicable, and external data to identify the F&I products most likely to resonate with each customer. All products are presented to ensure compliance, but the presentation order changes based on the individual customer’s needs.
Why is F&I so important? The proof is in the data – NADA market data to be exact. It shows a 39.6% increase of overall gross profit for the past two years for both the new and used vehicle department coming from protection products. Dealerships simply cannot afford to lose out on these sales. Consumers these days have become used to a simple click-to-buy process. If F&I is not part of the dealer’s digital retail process, then long-term prospects and profitability are at risk.
The challenge, and where the menu process comes in, is when the consumer goes from the salesperson with whom they have built a relationship with into the F&I office. Here, they are confronted with a stranger. There is a real barrier to entry, as the customer does not know who the F&I manager is. And, in most cases, the F&I manager knows nothing about the customer in front of them. A menu helps bring down the barrier, and the customer can feel more engaged with the process.
Q: How can agents and dealers bridge the traditional F&I sales model with digital retailing to better meet the needs of today’s consumers?
Battista: Simple – put F&I into the digital retailing application. The same way as offline – include transparency, education and provide personalization. In digital retailing, offering too many choices will confuse the consumer. Ultimately, dealers want to control profitability and differentiation. Online, they may offer a service contract personalized to the consumer with a $100 deductible. If the customer comes into the store, the dealer can offer them that $100, plus a $50 or $0 deductible, which may work better for them.
Keep it simple on the web, with one option personalized for each customer, but protect the dealership’s ability to build gross profit with other options that can be talked through at the dealership.
Miller: Now more than ever, it’s important for dealers to make the move to digital retailing. Agents will play a vital role in helping dealers navigate the learning curve to optimize each step of the digital retailing process. In order to sell more cars at greater profits, the consumer must be able to interact with menu choices to see the complete all-in price inclusive of trade-in, monthly payments and any aftermarket products under consideration.
Q: How does the unifying of technology providers help agents and dealers better personalize the F&I selling process and enable a more seamless workflow?
Battista: From an agent perspective, you will miss out on sales if you are not including F&I in digital retailing. Customers are doing more and more of the transaction online. If dealers do not offer F&I up front as part of this process, they just become a place for the delivery and lose the protection product sales.
Miller: The way we see it, the more that technology solutions and providers can come together to bring greater flexibility to dealers’ workflows, the better. With greater integration, agents can work with dealers to find the solutions that map best to their processes. When aftermarket menu selling can connect to the rest of the F&I process, it gives dealers more data to work from to personalize the experience, understand which aftermarket products the customer wants, and how those choices will influence the terms of the deal.
Q: What are some best practices agents can leverage as they adapt to this shifting F&I sales model?
Battista: Just be open to new concepts. Don’t be afraid as the F&I sales model continues to transform over the next few months. It will move more-and-more online, and agents and dealers need to be flexible to that dynamic and change with it.
Miller: The industry is going virtual, and we all need to grow, adapt, and deliver to meet consumer needs. Agents are already some of the strongest subject matter experts for the F&I process and menu selling. Add subject matter expertise on top of digital retailing with menu products to help dealers and partners make a profitable shift.