Balloon Engineering: I Wish They Had Taught This at Purdue

Sixth in a 10-Part Series on the Ten Critical Components for Success in Special Finance

Every day in nine out of 10 dealerships in the country, potential buyers (SF customers) are blown out of showrooms.  Unsuspecting sales people or desk managers allows customers to select a vehicle, which in turn they present, sell and eventually close subject to terms that can never get approved in finance. I have witnessed this happen in some of the most successful and profitable dealerships in the country. There are many reasons why it occurs, and many people understand that it is occurring, yet it is often allowed to continue.

The blame or criticism is, unfairly, turned to the finance manager or Special Finance manager (a.k.a. the Miracle Worker) who is perceived to be ineffective if they can’t get the deal done. Often, interviewing these individuals reveals they aren’t the source of the problem. Generally, they are frustrated at the sales desk for showing vehicles and structuring deals that have little chance of approval. If they are successful in creating a miracle, they are “rewarded” with a deal that seldom has room for any back-end products, so their F&I numbers also take a beating. Hopefully this doesn’t sound familiar to your store.

Whether a separate department within a dealership or working as a blended floor, perhaps the most important step in the Special Finance sales process is to be able to identify the SF customer at the onset of the sale—before the customer is shown, and sold, a vehicle.

The identification process is simple for those customers the SF Manager, or department, has attracted as leads, contacted and set appointments to visit the dealership. The credit status of the customer should already be established, and once the customer arrives at the dealership the sales process is already set. The sales team immediately moves into the finance loop, where the customer completes a credit statement, a credit bureau is pulled and the combination is evaluated to see which finance companies’ programs are the best fit. Once that is determined, the desk can then suggest the most appropriate vehicles for the sales person to show. These are the ones that will allow for the most likely approvals, as well as larger gross profits.

Most sales teams are taught a process involving the road to the sale. Depending on the source, it may involve seven or more steps. In most situations, they all work the same – starting with the meet-and-meet, investigating needs and wants and so on. When working with prime credit customers, this is a tried and true, and a very sound, way of executing the sales process.

The problem occurs when the customer has sub-prime credit. In most stores, in today’s market, that is over 50 percent of the time. That means, more often than not, the customers are being worked improperly.

My two degrees from Purdue did not include an engineering degree. I didn’t earn my B.S. in Balloon Engineering until I paid a lot of tuition for my continuing education in the car business. I simply didn’t understand when I bought my first store, how critical it was to be able to properly use balloons. You give them to children, see them on antennae and in the showroom, and occasionally, with helium, they offer some impromptu levity.

I have frequently written in the past that it would be ideal if dealers could place a balloon kiosk in the customer parking area, and customers would be required to select one of two colored balloons to walk around the dealership with.  A green balloon would indicate those with good credit while a red balloon would indicate those with sub-prime credit.

That would make the sales process so easy. It would help keep a sales person from directing customers to, and working deals on, vehicles that the customer could never qualify for or afford. Red Balloon (RB) customers would be identified immediately, and after the meet and greet, they would immediately be directed into the finance loop. With Green Balloon (GB) customers, nothing in the process would change from the tried and true.

I have never seen a balloon kiosk offered at the NADA convention by any vendors. More so, at least in some of my old stores, customers would drive past the customer parking area and park in the middle of the lot anyway, meaning they might miss the kiosk and fail to participate in the self-grading of their credit. In order to maximize our opportunities, as well as make the customer experience as good as possible, we must put in place a technique that allows us to identify the customer at the earliest possible time.

The key, regardless of the department structure, is to insert a simple, non-offending qualifying question or two into your meet-and-greet process. It can be as simple as asking, “Are you here for the big sale today?”

“Yes.”

“Great! Are you interested in our special [insert the appropriate number] 0.0 percent APR interest rate program for preferred credit customers?”

If the answer is yes, then the customer is a GB, proceed with your traditional road to the sale. If the answer is no, then ask, “Would you like to take advantage of our special financing programs to help you establish or re-establish credit?”

“Yes.”

“Great, please follow me inside and we can get you quickly pre-approved” (RB—proceed with the traditional SF sales process).

You can certainly ask different questions. “Is the car that you are currently driving financed?”

“Yes.”

“Who with, if you don’t mind me asking?”

“Wells Fargo” (Mixed signal…could be a prime or could be a Special Finance deal).

“And how has your experience been with them?”

“I hate them, they are always calling me” (RB signal…collections department is calling them, assume SF)..

From here, in some stores the “Red Balloon” will mean turning over the customer to the Special Finance sales team or department. In others, it will mean bringing them inside to begin the finance loop and privately discuss their credit background. Ultimately, with the SF customer, it means that the focus shifts to qualifying for financing rather than looking at a specific vehicle.

By doing so, it will mean that SF customers are much less likely to be shown vehicles they cannot qualify for, meaning the dealership will have a much better opportunity to deliver a vehicle, and the sales process for these customers will provide a much more positive buying experience.

Other qualifying methods could be to ask: “Mr. Jones would you like our assistance to help find you competitive financing or leasing options on this purchase?” “Yes.” “No problem, we’ll be happy to do that. Let me ask you, on a scale of one to five, five being great (not good, but great), how would you rate your credit?” If they reply a five, work them as a GB, and one through four as a RB.

Some people have a hard time with this thought process. They feel that asking any credit qualifying questions will offend GB customers. I will tell you that it was my single biggest leap of faith in the car business—more so than buying my first new car store. I can tell you that after spending six weeks training my team in late 1989; I had more than a little trepidation when I took the first UP to show the team how to do it. Naturally it was a wealthy farmer, and an existing customer, that immediately told me he didn’t need help with financing, and he could buy the store “twice over with cash money.”. Green Balloon! Incidentally, he bought his wife a new Buick.

That occurred in January 1990. That was back when the majority of shoppers had good credit. Today, with more FICO or Beacon scores in your dealership being below a 620 (survey the last 30 days of all your credit bureau scores if you doubt me), if you don’t attempt to qualify the customer’s credit, you are more apt to work a bad credit score than not. I assure you that even the RB customers value their time. The last thing that they want is to be worked on a vehicle that they cannot qualify for, and then be strung along for a week while the finance manager tries to create a miracle. If a deal could have taken place, after that long it won’t, and the customer will not be happy. Remember, new car dealers’ CSI is only measured on those customers that actually purchase a car. Those that go through the wrong process are still not happy, only you won’t be sending them a survey. However, they will tell their friends about their experience.

A GB will not be offended by inoffensive questions. Indeed they will puff out their chests and proudly proclaim, “I am paying cash,” or “My credit is perfect!” With them, you can just stroll right on down the road to the sale.

The challenging part is putting it into play.. I have trained more dealers and their management teams than I can count. They all look at me after I cover this training and say, “Piece of cake!” I always tell them, I wish it were. However, it just doesn’t work that way in real life.

Commissioned sales people are often reluctant to change the way they do business. They are not comfortable, and tend to regress to their old habits after a few failed attempts. Additionally, some compensation plans effectively penalize the sales person, or sales manager, if the deal winds up going to SF.(Not a good thing, but that is another column). The sales person ultimately either works the deal conventionally out of fear, or because they feel they won’t be compensated justly if it goes SF, and as a result they blow up more deals than they sell.

The other derailment is when a sales person accomplishes identifying the RB successfully, but the sales or finance desk doesn’t know how to use the information. They mistakenly think all they have to do is to work payments based on shorter terms and high interest rates, and everything else will fall into place. That doesn’t work. Either the finance office has no room to deduct the acquisition fee, the deal becomes over-advanced, or there is insufficient equity to allow the deal to take place.

Whether it is a Verde, Cardone, Cummings, One Price or your very own system, I have seen this process successfully integrated with all the traditional approaches. Dealers that have solid traditional sales training programs, train them consistently. The only way to overcome the obstacles created by a sales person or sales manager’s indifference is through strong, consistent and repetitive training of all parties. Sales people, sales managers, finance managers and SF managers need to be educated as to what needs to take place, when it should take place and how it will be executed. Follow that up by measuring the results (how many RBs are identified and worked SF before they are shown a vehicle, and how many are delivered), which allows you to manage the progress as well. That is basic systems and processes.

The metaphor of using Green Balloons and Red Balloons (yes, it is a metaphor - a dealer one time thought I was serious about actually handing out balloons) may seem simple and childish to some, but for those that understand how important these qualifying steps are to a Special Finance department, it can turn the sales process into child’s play.

Skip the helium tank, and until next month -
Good Selling!

Vol 4, Issue 6