Traditional F&I products or "legacy" products like service contracts, GAP and credit insurance form the backbone of a dealership's F&I offerings, but are arguably the most difficult conquest products for an independent agent. How does an agent distinguish himself from his competitors when everyone essentially sells a slightly different version of the same thing?
Enter the ancillary products that complement the dealer's legacy products on a menu. There are so many different types of ancillaries: chemical/appearance, theft, tire & wheel, pre-paid maintenance, key replacement, paintless dent repair, lease wear and tear, identity theft protection and more. These low-cost, often non-cancellable products offer huge benefits to the dealer and the consumer while offering the agent a useful door-breaker to gain a foothold in conquest accounts.
If we look at a dealer's menu as a piece of commercial real estate, the total size of the property is limited. We must maximize the income producing potential of each section of the property. Service contracts and GAP are our anchor properties, with the outparcels consisting or our ancillary offerings.
What number of ancillary products is too few or too many on a menu? Is there an optimum number? A good rule of thumb would be each ancillary product should achieve at least 20 percent penetration per retail or you have too many. An indication of too few ancillary products would be a menu for a cash deal that did not have enough products to make a four-column menu with a decreasing number of products in each column.
Has anyone else noticed that there has not been a really "new" or exciting F&I product in quite some time? LoJack's RF (radio frequency) theft recovery product was interesting when it originally came out but was generally sold directly to dealerships, thus bypassing most general agents. LoJack was extremely successful, so much so that the company went public. Today, however, technology has left them in the dust. Could there be a way to capture some of that marketing magic and provide opportunity for the general agent?
GPS-based telematics solutions just might be the next great F&I product offering and assume the position on the menu as the "best of the rest." The ubiquity of smart phones and the build out of the digital cellular network has made this technology possible at a price point too low to ignore any longer. With OEM's like GM and now Chrysler offering telematics solutions as standard equipment on 2011 models, there is a big gaping hole to fill offering a telematics solution to the dealers of other makes.
A quick telematics primer for those unfamiliar with this technology:
- A "device" the size of a small cellular phone is "stealthily" installed in the vehicle. A technician with a modest skill level can install the device in just a few minutes in any vehicle.
- There are no antennas or anything identifying that the vehicle is equipped with the device, unlike OnStar which is easily defeatable by simply breaking off the external antenna.
- The device contains a GPS chip and a digital cellular telephone with internal antennas.
- The GPS chip uses the same satellites as a navigation system to determine its location, speed and direction. The vehicle can then be located on a map.
- By simply querying the vehicle through the digital cell phone, effectively asking the device "Where are you?" it is possible to provide a host of LBS (location-based services) accessible on the web by the consumer or a call center operator.
- A partial list of LBS features include on-demand live vehicle tracking, historical location, ignition on/off, speed monitoring, geo fencing (notification is provided if the vehicle enters or leaves a user defined radius) and early theft detection.
As sexy, high-tech, practical and inexpensive as today's telematics services are, no provider has achieved even a modest success when compared to what LoJack has accomplished over the last 10 years. Perhaps this is a function of the product's simplicity? LoJack only purports to do one thing and they do it well, at least in the very limited area they provide coverage: recover a stolen vehicle.
Full-blown telematics solutions available today have not had a significant impact in the market, in spite of the fact that they offer a plethora of valuable LBS to the consumer accessible via the web plus an RF-killing stolen vehicle recovery solution that offers nationwide coverage with none of RF's limitations.
The reason for the lack of success in finance of a full-blown telematics solution is that it is simply beyond the ability of a finance manager, constrained as they are to secure financing and sell service contracts, GAP and other ancillaries within a short time period, to have an additional 15 minutes to sell all of the features and benefits of a full featured telematics product. Perhaps a different approach could bring this exciting technology within reach of the average consumer?
The main focus of a development agent is assisting his dealer clients in increasing finance gross. A noble cause, surely, but every agent out there is trying to do the same thing. Suppose your agency could present a scenario to a dealer in which he not only increased finance gross but sales gross and fixed operations gross as well. Let's call it a "holistic" approach to income development in which the entire dealership is affected positively all at the same time. Could you get a dealer's attention with such a scenario if it worked? Would it distinguish your agency in the marketplace?
These opportunities exist today for the savvy agent who is clever enough to recognize the implications, limitations and potential of melding a tangible product (the device) with an intangible product (non-recovered stolen vehicle guarantee, much like the cash benefit of an etch product)and combining everything into a solution where everybody wins: the agent, the dealership and the consumer.