Dealers are increasing F&I revenue and penetration with post-sale service contracts by using intelligent, data-driven marketing. Even if your customer didn’t purchase a service contract at point-of-sale, you can still capture that business and extend your profits.
It is important to market the customer at the right time, with the right message.
There’s a myriad of companies solely dedicated to capturing your customers post-sale, which proves it isn’t too late to sell a vehicle service contract after they leave the dealership. Many dealers simply miss out on these sales opportunities and associated revenue streams.
These companies, who are selling service contracts directly to consumers, are doing so nationwide through commercials, social media, direct mail, email, websites, and even illegal outbound telemarketing. Many of these companies are unsophisticated, certainly not worried about the service they are providing people, and are making money because the dealer is not filling that void. Their businesses are capitalizing from this void and, often due to poor management, are going out of business leaving a bad experience for customers with these types of products. Some oversell poor coverage, making the customer believe it’s more than it is.
Some companies go so far as to pose as local dealerships. If a customer asks if they are their dealer, these companies typically say, yes, they are in all the dealerships in the U.S. — a claim that is simply veiled and false. They have no association with you, the dealer.
But these companies continue to sell because there is a healthy appetite for these products. Consumers are spending hard earned money and want to buy a reputable product, not a sham. These companies have no physical service location, poor customer service, make it very hard for customers to cancel when dissatisfied, and are not sending out refunds when requested. There are lots of issues and problems, yet consumers continue to buy from unrecognized brands. Consumers, even more specifically, your customers, deserve better.
Fill the Void
Largely, dealers are not filling that void and offering their customers vehicle service contract options after point-of-sale. Dealerships sell at the point of sale, and many customers just are not interested at that time. Moreover, some consumers buy a vehicle through a private party as a second owner and would be willing to buy a vehicle service contract, but are not being marketed by you, their local dealership. So, these third-rate companies are going after them. Dealers should reflect upon the fact that customers are buying from these other companies and they service the vehicle with them, and/or they bought the vehicle from a dealer, but they are buying these inferior products from other companies.
Obviously, it is to a dealer’s benefit to retain their customers by offering them a program whereby they can buy through and be serviced by the dealer. This is the most effective way to combat this marketplace replacing those inferior products with better products. Why wouldn’t you provide your customers with the ability to buy from you and have those breakdowns repaired by you? Dealers are far better equipped to be the seller of these products to their customers. Protect your customers with proven products and not the unrecognized brands being peddled to them. A dealer can also easily embrace a conquest marketing strategy that provides these products from you to consumers who live in your area who are already buying them from others.
Consumers understand that dealers are the best resource for providing the right products because they are the manufacturers’ direct partners. Third parties do not have those capabilities. So, let’s think it through. Would you, the dealer, rather a customer be aligned with a third-party plan from a telemarketer, where you have no control over the administration or product, or would you prefer your customers or even consumers in your geography walking in with your product that you sold them? Your own program allows you to nurture the relationship with your customers’ sales and service, along with those consumers that live in your backyard who are not currently customers of your dealership. By providing exceptional customer service, you can retain them as a loyal customer for life. It goes beyond combatting the third-party companies. In truth, the benefit you get is to retain customers and add new ones, all while increasing future loyalty to you.
If the third-party telemarketer sells to your customer, that same customer can take their vehicle to any mechanic. They can go anywhere, the closest guy down the street or a competitive service location. These direct-to-consumer third-party companies have the ability to market your customers away from you and drive loyalty to someone else.
Solutions for Dealers
There are solid solutions available for the dealer to combat these third-party companies. It’s not an easy endeavor to pursue within the dealership alone because of the marketing expertise, compliance, data modeling, and required program consistency that is involved. It is important to market the customer at the right time, with the right message.
If more dealers sold vehicle service contracts to their own customers and direct-to-consumers in their backyard, it would be extremely effective in re-directing this marketplace back to dealerships, which is where these products historically were sold. The clear advantage would be going from unrecognized brands to recognized brands that can actually provide consumers with great customer service and critical vehicle repairs.
What many dealers don’t realize is they have an entire database of customers who did not purchase a vehicle service contract at the point-of-sale. Dealers also have customers who maybe never even purchased a vehicle from them and are service customers that can be marketed as well. These programs can create sales over the phone, just like the third-party marketers, and increase in-store walk-in traffic generating revenue for you, the dealer.
Effectively Combat Third-Party Marketers
Dealers can leverage data and take advantage of marketing its customers’ vehicle service contracts without having to add additional dollars to their marketing budget. Programs are available enabling dealerships to enter this market for no additional costs to the dealership. The program pays for itself and can add thousands of dollars in incremental revenue from contract sales and future repairs. It is estimated that 85% of repairs made under a service contract are performed by the dealership that sold the service contract.
Kyle McEvoy is president of APC Integrated Services Group.