Accountability was a recurring theme from many speakers and panelists at the recent Agent Conference in Las Vegas. We've all heard and spoken the "inspect what you expect" mantra; there are countless other sayings and anecdotes essentially saying the same thing: if it's worth doing, it's worth measuring.
From a historical perspective, the automotive retail industry seriously lags other industries in its ability to measure important metrics and report or display the data in meaningful ways. The legacy DMS systems, which are nothing more than glorified accounting programs, were never designed to actually help manage a dealership for profitability, process, and retention. If DMS systems are just big calculators and data repositories, how does the serious dealer development agent capture some of the data analysis that is enjoyed by other more technologically mature industries?
The evolution from the manual F&I log to software programs that poll the DMS system is still taking place. There are numerous software providers that deliver automated F&I logs and even more advanced reporting platforms, some of which are listed in the Featured Companies directory on this website.
It is inconceivable to this author that a dealership would not have some form of web based reporting software to track performance on a daily basis.
The old adage, "You can't get to where you're going, if you don't know where you're at," poor grammar notwithstanding, holds true in spite of the fact that there still exists a large percentage of dealerships today that when asked, "What's your PVR and service contract penetration?" the answer would be, "I don't know."
If F&I performance metrics are only tabulated and analyzed at month-end, it is an autopsy report. It is too late to take remedial action if the finance manager has already missed his marks.
As development agents, in order for us to make each visit "impactful", we must have a plan of action before we enter the dealership. We must have access to the dealership's reporting tool via the web. We don't want to show up at a dealership, take an hour to figure out the areas needing attention, and then get to work. We need to do this from home while we are drinking our morning coffee and planning our day.
Identifying the exact areas needing attention, the personnel needing the attention, and developing a strategy to remedy the problem area(s) are essential for the development agent to be efficient, impactful, and able to deliver measurable results to the dealer.
What should our priorities be as development agents when analyzing a daily F&I report?
Look for systemic metrics first, because if these are broken, it affects everything.
"Captured Finance Penetration" is the most important. If the desk cannot control the deal and give finance a chance to earn a customer's financing, our development efforts must begin here. We all know where the holes are that would cause Captured Finance Penetration to be low, so plug them fast. Our F&I managers can't swing if they don't make it to the plate.
Be cautious when placing the blame for low finance penetration entirely on the desk or the sales force. If the finance managers are spending the entire day in their offices and are not out walking around and getting involved in every deal early, then they have no one to blame but themselves when they miss opportunities.A wise development agent once said to a finance manager, "If you're not spinning a deal, calling in a deal, re-hashing a deal, billing out a deal, or chasing stips, GET THE HELL OUT OF YOUR OFFICE!"
Another systemic metric that was mentioned at the conference is "Products Per Retail:" the total number of finance products sold divided by retail deliveries. A fractional figure of less than one is widely considered poor performance, and a good goal to shoot for is an average of two products per delivery.
Some form of F&I presentation software or a menu is crucial to get this metric to the higher end of the range. Low Products Per Retail could indicate that the manager is not using the menu properly, is giving up too easily, needs more product knowledge, needs work on objection handling, and is not satisfying needs, amongst a myriad of other possible maladies. This topic alone could be the basis for an entire article.
Next in the hierarchical priority list would be our core "wealth creation" products that are often reinsured and are hot button products for the dealer: service contracts and GAP. We all love our ancillary offerings, but if the dealer is not ceding premium into his reinsurance company, it doesn't matter how many ancillary products he's selling, he'll accuse them of cannibalizing his core products.
Look at service contracts sold PER RETAIL to raise the bar on VSC penetrations. Too many dealerships are only selling service contracts on finance deals and are not looking at leases as opportunities to sell a service contract. We need to fix this - it's happening almost everywhere.
Lastly, having at least a 25% VSC penetration on cash deals is a goal worthy of our serious training efforts. VSC penetration on cash deals is a solid indicator of just how good a finance manager really is at selling service contracts and how hard he is trying.
A great way to raise PVR quickly is to identify producers that have low GAP penetrations. GAP is relatively inexpensive and should be an easy sell to the majority of finance customers. Teaching the producers to use graphical representations of the impact of negative equity seems to work best here, as humans are a visual people.
Having near real-time data on penetration statistics will allow your agency to be laser focused on rounding out the F&I profit portfolio. If the dealership is doing a great job on capturing finance, plus selling service contracts and GAP, then PVR is already headed in the right direction. The next opportunity will be in developing a solid mix of ancillary offerings that provide an ownership enhancing experience to the customer while adding incremental PVR to the total profit picture.
Watch penetration stats closely on ancillaries. If there is a dud product, is it the product or the F&I managers? Should a dealer even offer a product that doesn't get over 20% penetration?
These are tough questions. Encourage your dealers to try something new if the right people are in place and they are properly trained and executing, but the results still don't measure up. The menu is a valuable piece of real estate and we should be maximizing every inch of it.
One area that dealers should focus on and software reporting providers could assist is what has historically been called the "Time Sales Analysis", or summary of lender activity.
To make the point, what would the answers be if you asked a finance director, "Through which lender does your dealership make the best overall rate spread? Which lender has the highest VSC penetration? Do you have a ranking of your lenders by number of deals booked, total back-end dollars earned, and VSC penetration as it relates to FICO score?"
If you get a blank stare, then having the ability to access this type of info at a glance will help your dealerships better manage their banking relationships, while making sure they are rewarding the right lenders with their business.
Failure to recognize the relationship between pay plans and performance without a near real-time way of managing the two will only lead to disappointment when a finance manager misses a bonus level by a small margin.
Thankfully, our industry is maturing when it comes to data analysis and reporting, and it is a cornerstone of dealer development to manage expectations and reward exceptional production. These are technologically exciting and economically challenging times we live in. Utilizing accountability tools to set our agencies and our clients up for success could be the difference between the winners and the losers.