Many owners and general managers are forced to wear many hats during the course of each day. The list of responsibilities can often be overwhelming. Here are a few items to consider when examining how your dealership currently operates.

The national average for service contract penetrations is approximately 32 percent. Where is your store currently? What can you do to increase it? Clearly, of all the products offered by your store, the vehicle service contract offers the highest value for all parties. When educated properly, the consumer sees the exposure for cost of repairs as potentially significant.

When was the last time you audited the evidence manuals for each of your producers? Are the articles and repair orders contained current (meaning within the last year) or are they old and therefore irrelevant? One article that should be in every F&I manager's office, “Why Dinosaurs Will Keep Ruling the Auto Industry,” came from the most unlikely of publications, the June 2010 issue of Harvard Business Review. Not exactly the first place you might look for tools to explain to someone how the technology of today’s automobiles are so advanced that turning down a service contract can be a very expensive alternative if some of the very technical parts of a car need work.

One of the co-authors, John MacDuffie, is co-director of MIT’s International Motor Vehicle Program and an associate professor at Wharton School. He, along with co-author Takahiro Fujimoto (a professor at the University of Tokyo and the executive director of its Manufacturing Management Research Center), helps provide context for how technology has advanced to the point where many of today’s vehicles are more advanced and complex than an airplane.

Contracts-in-transit (CIT) are a critical source of cash flow for any dealership. What is the current number of days for CITs at your location? How could technology decrease funding time?

Manufacturers and finance companies offer the option to submit applications electronically. Some even have created programs to execute paperless transactions. The technology may not currently be in widespread use, but it looks promising. While the elimination of hard copy transactions is uncertain, one strategy to increase efficiency in funding may lie with your service contract provider.

Electronic menu systems offer many advantages including the flexibility to adjust product mix, print your customer’s name, and provide unit description for accuracy and credibility. However, it often can also provide the option of speeding up dealership reimbursements for service contract revenue from your provider. Many vendors allow for immediate processing and electronic transfer of funds when using an electronic menu. If you presently are receiving physical checks from your provider, ask them about electronic payment options. If they do not offer that option, perhaps you need to look elsewhere for an upgrade to another provider.

When customers feel uncomfortable, F&I product acceptance is low. What should you do to make your customer feel comfortable before entering the F&I office?

The first strategy to implement is to involve your F&I staff early in the process. The idea of waiting in an office until the deal comes to them is no longer practical. When you consider the fact that the salesperson has more than an hour to bond with the customer, how can your F&I manager connect with the guest quickly? Time is compressed and strategic positioning is the first step towards success in the customer feeling comfortable with the process.

The customer is clearly more comfortable in the open area of the showroom. This is where the first contact must occur. The F&I manager’s introduction should be focused on explaining who they are, what their job entails, and how long the process will take. It should sound a little like this:

Hello, and congratulations on the purchase of your new vehicle. My name is Kirk Manzo. I am the business manager here at Friendly Motors. My job is to handle all of the legal paperwork like titling and registration, as well as review some mandatory disclosures related to your purchase. The process normally takes about 20 to 25 minutes. There are a few questions I have before preparing all of your paperwork. May I sit and review those with you now? Thank you.

Then they should begin the interview process. In the interest of space and time, the details of how to conduct a proper interview can be left for a later discussion.

Clearly the exemption of auto dealerships from the most recent federal financial reform packages should send a clear message to stay within the lines. While implementation of new standards like Red Flags is not scheduled until later this year, where does your dealership stand on the basics?

Are your F&I offices locked when not occupied? Yes, even for visits to the restroom. Are all sales documents including worksheets and guest surveys being locked in drawers, or are they simply being left on salespeople’s desks? Do yourself a favor—arrive early in the morning and walk the showroom and offices. Pull some drawers of desks on the showroom. You will likely be shocked to see the amount of personal customer information you will find lying around that is supposed to be safeguarded under the Gramm-Leach-Bliley Act. This is so easily correctable yet overlooked daily at nearly every store.

As the owner or GM, you have many hats you must wear, but in the end, as Peter Drucker said, “You cannot manage what you do not measure.” The burden of checking to make sure your team has the right tools and strategies – and is applying them consistently – falls to you.

Heavy is the head that wears the crown!

Vol. 7, Issue 9