*This article previously appeared in the Reynolds and Reynolds FUEL monthly newsletter*

By Tim Yalich

Do you find yourself questioning whether online retailing is really worth the hassle? Be honest, do you secretly hope it’s a trend that passes after the pandemic ends?

If you answered yes to those questions, you might be disappointed to learn that digital retailing probably isn’t going away anytime soon. In fact, about 20% of consumers would like to complete their next vehicle purchase entirely online. 1

You might have some apprehension about taking your processes online – especially in your F&I department. The good news is, you don’t have to sacrifice F&I profitability or compliance to bring your customers a digital experience. But, it’s not enough to simply offer online options for customers, you have to be able to actively sell in order to see success. Three simple tips can help ensure your F&I processes are up to par for a digital retailing environment.

1. Keep customers engaged.

Many customers are focused on the purchase of the car itself and do not have vehicle protection products top of mind. How do you get customers to look at products and maintain your backend profit if they’re not with you in person? You might be tempted to send them a link to a site where they can browse F&I products on their own. While it can be great for customers to educate themselves, it usually takes talking to an F&I manager to actually close the sale.

Even if you are engaging with customers, it can be tough to interest them in vehicle protection products when you’re only able to have discussions over the phone or worse – email. While you’re trying to present important information, your customer could be at home multi-tasking, distracted, or even willfully ignoring your calls and messages. Use of video conferencing can help capture a customer’s attention with face-to-face interaction and allows you to use visuals when explaining product options. This can improve your customer’s understanding and your ability to sell to them.

2. Pay extra attention to compliance.

Extra vigilance is required when completing transactions remotely because additional rules come in to play on top of the already extensive regulations required for in-person F&I. For your transactions to be compliant, your customers must use proper technology that allows them to fully participate in the process and receive proper disclosures. Use technology that documents your customers are in fact receiving required information and electronically completing paperwork.

In addition, as with traditional F&I, regulations are constantly changing, and it’s easy to miss signatures or other important information when reviewing documents. Technology that alerts you to missing information can help ensure paperwork isn’t rejected for compliance reasons. The last thing you want is to reach out to a customer to re-sign a document when they thought they had set themselves up for efficiency by completing everything remotely.

3. Complete as much of the process online as possible.

Customers choose to buy online for many reasons, but convenience is usually a big incentive. Try to make the process as simple and easy as possible for them. The more of the transaction you can execute electronically, the better. Due to some state regulations, it’s not always possible to sign the deal completely electronically, but signing some paperwork digitally is better than none at all. Make sure you also have a way to provide electronic documents to customers once the deal is complete so you can be as transparent as possible and customers don’t end up with stacks of paperwork delivered to them.

The F&I process can be complicated in-person and may seem even trickier to take online, but the potential backend profitability and increase in CSI, if you’re doing it successfully, is worth the effort. Following the above tips can help you get off on the right foot with your digital retailing efforts, so you don’t have to figure out best practices through trial and error. Your employees and your customers will thank you for it.

1 The Changing Automotive Landscape From In-Store to Online

About the Author

Tim Yalich is the senior manager of product planning at Reynolds and Reynolds for F&I solutions including eForms, Menus, eContracting, and the docuPAD® system. Tim started working for a large automotive retail group in 1992 supporting F&I and administrative systems. In 2000, he joined Reynolds as an F&I product manager. He is responsible for building F&I solutions for dealerships, establishing business relationships with market vendors and financial institutions, and spearheading the business development of advanced technology solutions such as the docuPAD system.

*This article previously appeared in the Reynolds and Reynolds FUEL monthly newsletter*

By Raymond Desadier

As scholars ponder the future of the automotive industry, those within its ranks are concerned with the impact it will have on all facets of the business. One profit center the COVID-19 pandemic may not have an adverse effect on is accessory sales.

The market for accessory sales has actually improved when you consider the following variables:

0% financing – Several OEMs are offering zero percent financing for anywhere between 60 to 84 months. Why take on the cost of accessories elsewhere when you can add it to your monthly car installment and pay it out over several years for no additional cost?

Inventory Issues – As inventory shrinks due to production slowdowns, accessories are a way for customers to make sure they get all the features they want in their new vehicle.  Upgraded wheels, chrome inserts, infotainment systems, and hitches are common trim upgrades that can now be accessory opportunities for you.

Trucks Are Still Big – Pickup sales have held strong amongst the pandemic, dropping only 18.7% compared to SUVs falling 36.6%. Trucks are by far the biggest accessory opportunity with so many modifications and add-ons available. Make sure you have a full catalog of accessories to offer your truck customers.

Increased Accessory Budget – Many consumers in the market for a car are likely to be in a stronger financial position now than pre-pandemic. Between stimulus checks, lower expenses, and no opportunities to spend money on entertainment, many have disposable income that wasn’t there previously. In fact, we are at the highest personal savings rates since the 1980s. Now is the time to present accessory options to every customer.

Increased Value of “One-Stop Shopping” – Convenience has become more important than ever as consumers have become accustomed to home deliveries or easy street-side pick-up. The demand for safety and convenience carries over to other purchases as well. Your customers will stick with you if they can get all their vehicle needs from one visit.

Increased Value of Accessories – Some accessories are now even more valuable. Keeping your vehicle clean is top of mind for consumers; all-weather mats are easily hosed down and seat covers can be washed regularly. Storage compartments are perfect for containing extra masks or sanitation supplies. But also, accessories that inspire fun – like spoilers, suspension, and roof racks, have also increased in value. Now that people have to make their own fun, they may turn to their personal vehicle.

There is no better time to rethink your accessory strategy and adapt to the current environment. Make sure you’re ready to take advantage of this lucrative market with a vetted digital solution.

About the Author

Raymond began his career in the automotive industry in 2001. He joined the Reynolds Consulting Services team 15 years later as an accessories business consultant. He has established accessory departments in many dealerships and has helped them thrive with training and recommendations.

*This article previously appeared in the Reynolds and Reynolds FUEL monthly newsletter*

By Mike Pishner

There are many reasons why a dealership invests in a digital solution for their F&I department – to cut down on paper, increase efficiency, maintain compliance, or speed up CIT time. Regardless of the main reason, I want to talk about a benefit many dealerships often forget – leveraging customer experience to increase revenue per customer.

Imagine the impact an engaging, digital F&I solution has from your customer’s perspective. A transparent and interactive experience enables them to feel in control, knowledgeable, and at ease. Sounds amazing right? Here’s the catch: a digital solution is only the foundation. Your F&I managers need to know how to leverage it effectively and purposefully to capture more sales per customer. Here are three common ways customer experience is missed, despite having a digital solution.

1. Buying vs Selling

Your F&I managers have a lot of responsibilities on their plate, including selling enough products to make the sale profitable. However, customers don’t want to be sold products – they want the freedom to buy a product. Having your F&I managers effectively utilize sales tools is crucial in educating the customer on what each product offers and how it will uniquely benefit them. It requires an F&I manager to be confident in the technology to create a confident consumer.

2. Lack of Transparency

Satisfaction drops significantly when customers feel information is being kept from them. When a customer doesn’t want a certain product, the F&I manager must go back to the PC to make the change. The act is innocent enough, but the customer doesn’t know what the F&I manager is doing. If there are multiple changes throughout the process, the F&I manager is continuously going back and forth from PC to customer. Every time this happens, the customer trusts the F&I manager less and becomes less likely to buy. When the F&I manager has the ability to make changes in front of the customer, it puts them at ease.

3. Engagement Throughout

A lot can be done to affect a customer’s perception of time. Constant engagement throughout the whole buying process can make time seem to go by faster. There is often a bottleneck at F&I, especially on busy days, meaning your customer will have to wait. Use that waiting time as an opportunity to keep customers in the buying process by giving an accessory presentation. This helps with their overall experience at your dealership, and reinforces ownership of their car before going in to F&I.

Conclusion

Remember, a customer’s experience is driven by the person they are interacting with.  Your F&I managers need to have great tools and be trained to use them effectively.  As you dig in to understand and implement lasting improvements, I recommend seeking the assistance of an experienced consultant. Not only is your dealership unique, but so are your challenges. If you have trouble identifying a solution, or even struggle with where to start, a consultant with background in the industry and perspectives from multiple dealerships can take the necessary time to help you.

About the Author

Mike Pishner is accomplished in eBusiness management and strategy, CRM processes, BDC implementation and improvement, and Desk management. He has over 10 years of automotive experience in sales and sales management roles prior to joining Reynolds Consulting Services in 2018.

*This article previously appeared in the Reynolds and Reynolds FUEL monthly newsletter*

By Brooks Fiesinger

If you pick up a report listing the most successful dealerships nationwide, nearly each one would identify success based on revenue. When I sit down with a general manager and ask how they’re doing, the first thing they say to me is almost always, “we sold X dollars of cars this month!” I look at the whiteboard and see a revenue target, a count of how many cars were sold and maybe – just maybe – a gross profit figure mentioned somewhere.

Revenue as a whole is overrated. At first glance this comment is going to be met with eye rolling and a sigh because, “everyone knows it”. However, it is a core issue that must be addressed. A dealer will only improve what they measure.

Revenues are up at dealerships across the board, but the cause for concern is in diminished vehicle margins. When profitability is purely coming from increased volume it is more important than ever to measure margins.

Without revenue, it is impossible to have profit. But, revenue itself doesn’t pay employees, owners, or provide for expansion. In fact, even gross profit isn’t the ideal target of an automotive dealership. Gross profit is only taking into account the cost of goods sold. Rather, net profit is what matters; taking all the revenue and subtracting all expenses.

Each dealership should ask themselves this: would I rather have $60 million dollars in revenue and be published as a top dealer in the nation, with $120,000 in net profit? Or, would I rather see $30 million dollars in revenue, still be recognized as a dealer leader, and walk home with $260,000 in net profit?

Many of the top volume dealers in the nation see tremendous revenues in extremely low margin products and operations, but neglect high margin profit segments, such as F&I offices and fixed operations. Dealerships consumed with revenues treat them all the same, focusing on quantity over quality.

Aftermarket accessories are something that frequently gets overlooked in a dealership. Few dealerships recognize the potential for dealership-wide profit accessories can offer. Take a spoiler for example. Traditionally, a $750 spoiler may net only $120. On the other hand, a $550 F&I product offers $149 in gross to the F&I office. This makes the spoiler seem like a second-tier sell. However, at the enterprise level, a $750 spoiler may only net $120 in the F&I office, but the $630 cost isn’t going to an outside company; it’s going to the service department. After $220 installation and paint (at a profit of $170 to the service department), the $410 service department cost goes to parts. Parts has a $196.80 cost on the product, netting $213.20.

From a comprehensive level, which is more appealing: (A) an F&I product which offers $149 to the dealership or (B) a spoiler which offers $503.20 to the dealership?

In a study of aftermarket accessories, the comprehensive profit margin averaged 57% and could be as high as 88.2%. Compare this to F&I products such as extended service contracts which average only 45%.

From this viewpoint, it’s evident dealerships make the most of what’s important when looking at how much of the revenues flow into net profit. When focusing on profit as opposed to revenue, dealerships can preserve much more of what counts at the end of the day: what goes into their pockets.

Want to learn more about creating a new profit center in your dealership with accessories? Download our latest accessories trend report.

About the Author

Brooks Fiesinger is the Senior Product Planning Manager for Reynolds and Reynolds, leading analytics and intelligence products. Brooks has years of expertise in the automotive industry, both in academic research and practice. He is passionate about educating others and helping them succeed.

*This article previously appeared in the Reynolds and Reynolds FUEL monthly newsletter*

By Joe Witt

SEMA recently published its latest market report with a lot of new findings. The most exciting finding is that the accessory industry garnered an extraordinary $42.92 billion in retail sales. They also added a new section with do-it-yourself estimates on installations and information on where accessories were purchased and received – an important stat to pay attention to when conducting accessory customer discoveries. But one thing that didn’t change in this new report is that accessory buyers are a diverse group.

The accessorizers are broken into two categories: enthusiasts and non-enthusiasts. SEMA compares types of vehicles they drive, population distribution, age, and more. But SEMA’s reports don’t cover how you sell differently to each group.

To better understand the roles both these groups play in the accessory market, let’s take a closer look. The enthusiasts are broken into three groups:

The Builder buys parts because they enjoy working on their vehicle. They’ll probably buy parts from you if they’re at a discount, but they’ll be doing the installs themselves. That is, unless the install is less fun and more tedious. Try selling them hitches, exterior body accessories, and driver assist systems.

The Driver buys parts to maximize the fun of driving. They’re an easy accessory sell – most likely associated with the off-road segment.

The In-Crowd buys parts to make their vehicle stand out. They’re looking for the craziest accent lights and the shiniest spinners.

The enthusiasts can be an easy sell if you know how to identify them and what accessories to sell. Try to keep them engaged and make the learning process easy. Don’t shove another sales pitch in their face. Instead, let them take the reins on a shopping experience and make it simple for them to buy.

Enthusiasts are only 44% of the market. So what about the other 56% of the market that are the non-enthusiasts? They’re also broken up into three groups:

The Handyman buys parts to upgrade when performing repairs or maintenance. They’re looking to extend the life of their vehicles and maximize efficiency of operation. They’ll be looking for the safety and reliability products.

The Commuter buys parts to maximize driver comfort and for mild personalization. They’re looking for functional accessories more than anything else.

The DIFM, or “do-it-for-me”, buyers listen to their mechanic’s recommendations for everything the vehicle needs. This segment is proof that an accessory department needs to involve all departments. Imagine getting this entire customer base just because your mechanic says they should!

The non-enthusiasts are actually going to be fairly easy to sell to as well. They are aware of accessories, want accessories, and go to the shop down the road to purchase accessories. As with selling to enthusiasts, you’ll want to make it simple for them to buy. Allow them to browse your selection, and don’t shy away from selling aftermarket products.

What’s holding you back from selling accessories? According to SEMA’s report, it may be your customer’s wallet. They found the number one reason preventing people from purchasing more accessories is the cost. Think of the cost of paint protection for example. Most people don’t have $800+ sitting in their bank account for free spending. But they do have a few extra dollars a month. If you build the cost of that sunroof into their new-car deal, you’ve made that purchase a lot more realistic.

There are a lot of different types of accessories out there – performance, functional, entertainment, safety, etc. It’s hard to break all these down in a way where you’re not losing the customer to boredom. A catalog is too big (it will take forever to get through that dusty book), and a showroom is too small (all they see are some floormats, step bars, and sample fabrics).

That’s why the best way to introduce accessories to any customer type is through an interactive digital platform that seamlessly animates the accessory onto their vehicle. An engaging platform keeps the customer excited and involved in the process so they’re not just staring at the back of a computer or flipping through pamphlets. By being able to see all the accessory products in one place, you can identify accessory enthusiasts or non-enthusiasts a lot easier based on what they’re interested in purchasing, and tailor your presentation accordingly. That could go a long way in follow-up efforts!

About the Author

Joe Witt is the Vendor Relations Business Manager for AddOnAuto at Reynolds and Reynolds. He started working in dealership sales in 2005. He became an accessory specialist, and then moved into various management roles. Joe started as an implementation consultant with the AddOnAuto team in 2011. He spends much of his time building relationships with suppliers, restylers, and manufacturers to better the processes and products offered to dealerships with AddOnAuto.