LEVERAGING THE POWER OF BIG DATA TO CUSTOMIZE DEALS AND DRIVE F&I REVENUE
There’s still a general consensus across automotive retailing that many dealers don’t fully understand the benefits F&I can bring, nor the fact that Big Data enables us to target business office products and services to dealership customers like never before. So what’s the problem? More importantly, how can stores overcome these obstacles and realize the potential Big Data offers from an F&I perspective?
Cathie Clark, Director, Remarketing Performance Management at IA-SAL, says that one issue is getting dealers to really wrap their heads around the whole concept. “We don’t see a lot of dealers taking the opportunity to implement really custom and niche marketing strategies,” she says. Clark notes that modern DMS systems have a tremendous ability for segmenting data, allowing dealers to pull reports and generate target marketing lists and yet currently, there are few taking advantage of it.
She says the reason many aren’t is because they feel it is too complicated and don’t really understand it. “The key problem,” says Clark, “is there is no one person in charge of utilizing the data and I think this kind of correlates to a bigger problem.”
She refers to the fact that dealerships often don’t allocate enough human resources to their digital business and in order to change that, it requires having staff that are more focused and who understand that the customer on their list is equally as important as a customer who is physically in the dealership.
Using the data
Mark O’Brien, Senior Director of Dealer Solutions at Dealertrack Technologies in Canada, says the company has long been an advocate for harnessing data analytics to improve efficiency, boost performance and ultimately increase sales for dealers. O’Brien says that Big Data itself could well be transformational on several fronts when it comes to auto retailing in Canada.
Mark O’Brien
“Cars have already been transformed into personalized data hubs,” he says and notes that some trends such as the “pay as you drive” programs being rolled out by insurance companies, which allow consumers to have custom-tailored rates based on their own motoring habits add considerable value. “If I’m able to receive a statement from my insurance company that shows the speed my daughter was driving during a particular month, I’d pay for that added value,” he says.
O’Brien says that today, dealers have generally surrounded themselves with enough data to effectively match consumer financing and needs to vehicle purchases but with Big Data set to “become a Mega Trend, this is likely to undergo significant changes in the next few years.”
As a result, O’Brien says dealers who are able to interpret Big Data and translate analytics into effective decision making tools, are the ones that will likely be most successful.
But what about other challenges, such as effectively assessing needs based on a customer’s credit requirements and tailoring products and services that benefit both the customer and the dealer, especially in view of the pressure to generate solid repeatable business through F&I?
Mark O’Brien says a big part concerns focusing on the “right” asset protection programs in order to enhance customer loyalty. It’s also important to really be mindful of financing trends in the marketplace, whether they relate to new or used vehicles.
“At Dealertrack, our data indicates a steady increase in the average used vehicle sale price in Canada, which is up 13 per cent since 2011.” O’Brien says trends also point to a continued uptick in used vehicle financing. And with more of that financing coming from trade-ins, dealers will require not only effective appraisal tools but also a successful repeat process in place to boost conversion rates.
Emphasize the customer, not the deal
But what about the F&I process itself? Even with access to customer information like never before and more stores relying on F&I as a major revenue source, why is it that some dealers still struggle to really maximize the potential of their business office?
Cathie Clark says one issue is that traditionally, F&I menu selling has placed more emphasis on the deal itself rather than the customer, which can be difficult to change because the products the customer sees as adding value might not necessarily appear the most profitable, at least in the short term. “As dealer customers, you and I could be doing a four-year lease,” she says “but for very different reasons. So products and protection that might appeal to you based on your particular deal structure would be very different than what would appeal to me.”
As a result, Clark says that by learning which data fields to look at when creating sets, even subsets of customers, dealers really need to take the type of customer, not the deal into consideration if they are to drive loyalty and succeed in the long term. It’s a view that Mario Champagne, CEO of Groupe PPP also shares.
“Each customer and each deal situation is unique,” he says. “Identifying the suite of F&I products on the menu and showing the customer what they provide based on the customer’s needs, financial situation and risk tolerance, results in a level of choice and requirement that is both satisfactory for the customer and also a good source of profit for the dealer.”
Mark O’Brien says it is very likely we’ll see a day when the business office will move closer to the sales desk and consumers will self-select using tablet based F&I menus. “This is something that’s already started,” he says.
Another aspect that can really help dealers take their F&I operations to the next level is to ensure there’s support for the business office across the entire dealership, from the dealer principal and general manager, to the business manager and sales staff. “Everybody needs to be committed to the role of the business office,” says O’Brien. “Much like any functional area in any business, it needs its own strategy and focus with clearly defined key performance indicators (KPIs).” Investing in the right training and technology are also essential considerations. “This endeavour is exactly that — an investment,” says O’Brien. “It increases margins and increases loyalty so why not take it very seriously?”
The impact of longer financing terms
Mario Champagne says that credit protection is a very important consideration over the longer term, since with the cost of repairing vehicles increasing and the growth in negative equity, consumers need financial protection more than ever, especially if their vehicle gets written off as a result of a crash and they need to shop for an affordable replacement. |
Extended term financing continues to be a hot topic for the industry. At the operational level, the fact remains that customers are keeping cars longer and are visiting the dealership less often. Consequently, there’s a need to mitigate the impact on margins via effective F&I strategies. Cathie Clark says there are actually advantages to longer buying cycles, namely that customers will need greater protection should the vehicle go wrong or should something happen that impacts the customer’s purchasing ability in the future. “There’s more opportunity to sell extended warranties and credit protection because it just makes sense for the customer,” she says. Clark also notes that longer financing contracts and a payment driven culture mean that such packages also have less of an impact on the overall vehicle payment when financing is extended over a longer period.
