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Monthly Archives: September 2015

More Leads From Your Website

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Screenshot-2014-03-25-11.08.23-300x195Would you like to be getting more leads from your website?  Well, duh!  Of course you would.

But what are you doing to actually drive leads?

How many places on your site does a visitor get the option of providing their contact information?

The Fundamental Problem

Getting a visitor to fill out a lead form is getting progressively more difficult.  Today, 96%-98% of website visitors leave without filling a form.  Why?

Buying a boat or an RV is a big deal.  It is complicated and costly.   Dealers are, or should be,  experts on the vehicles, the financing, on all of the nuances of the transaction.  Wouldn’t the shopper be better off and better served by using this expertise in making their purchase decision?  What has caused consumers to stop filling out lead forms and become stealth shoppers?

There are three dominant factors driving the majority of buyers to become stealth shoppers who refuse to complete a standard lead form.

1)   Engaging With Dealers Is Seen As Predominantly Negative

Both anecdotal and statistical evidence abounds demonstrating that consumers would prefer never to engage with a dealer. The nagging perception of having to deal with a “slick salesman” is still prevalent among many consumers.

The different attitudes presented by millennial buyers have been repeatedly, even exhaustively documented. This rapidly increasing segment of consumers who now represent over 25% of all new buyers, expect to be treated differently and share a distaste for engaging with dealers.

Millennials would, by a wide margin, prefer to go to the dentist than negotiate with a salesman.

Moreover, millennials have grown up with access to vast amounts of available and anonymous infor­mation. They rarely are required to communicate personally in order to gather the insight they require during the research or purchase phase of a new product. One study shows that millennials would prefer to complete the entire purchase online, forgoing the need to ever visit a dealership.

2)   Pervasive E-Commerce Has Changed Consumer’s Beliefs Around Online Shopping

The post-Amazon emergence of consumer e-commerce has changed the attitudes of young and old alike as to what the online shopping experience should be. The following highlights the consumer’s current expectations:

Convenience – Anytime, anywhere availability

Speed – Complete answers right now

Visibility – The ability to get information on all competitive products

Transparency – Accuracy, honesty and full-disclosure online

Anonymity – Privacy with no disclosure of personal information until the consumer is ready

When these expectations are combined with millennial desires and general prevailing attitudes about engaging with dealers, it is easy to understand why stealth shopping is the new norm. The magnitude of this attitudinal and behavioral shift in such a relatively short period of time presents a great challenge for dealers.

3) Information Is Readily Available Online

Just a few years ago, consumers had little choice but to visit or at least call dealers. Dealers, after all, had not only the inventory, but also all the information.

As the “internet age” emerged, with the promise of new leads, greater speed and availability, and more access to a larger pool of consumers, some of the power began to shift to the consumer. Dealers still maintained a level of domi­nance through their ability to exert control over information; requiring the consumer’s name, phone number and email address in exchange for vehicle details, pricing and availability.

Today, the majority of consumers that walk into the dealership having completed all of their research, price gathering and comparison online, without any opportunity for the dealer to engage or influence. Due to their e-commerce mentality, the consumer has independently drawn their conclusions and estab­lished their boundaries; the dealer just has to “deal with it” when they show up. This often yields unsatisfactory results for both sides, resulting in reduced margins, lower customer satisfaction scores, frustrated sales people and general discontent.

What Can Be Done?

Consumers don’t feel like they need to “buy” information with their name, email address and phone number.  So, they don’t give up these personal details for information they can get for “free”.   They will give it up to gain knowledge that is unique and is not otherwise available.

A Credit Application is NOT a lead form.  It goes way beyond just name, email and phone number and gets the Social Security Number, Date Of Birth, income and much, much more.  Consumers won’t fill out a credit application 99.9% of the time.  They may already know what their credit is – so there is no need – and there is no promise from the dealer associated with filling out the form.  If your primary lead capture form is a Credit Application, you are grossly inhibiting your dealerships ability to capitalize on the website traffic.

Allowing people to get pre-approved with just their name and address is of value.  This relies on the now available soft-pull technology.  There is real value to a customer and to the store to understand how much vehicle they can buy quickly, easily and with minimal personal intrusion.  Step one in increasing web leads is to replace your Credit Application with a soft-pull solution.  Your finance leads will more than double.

Beyond this, make sure that there are multiple obvious places for consumers to enter just their name, email and phone and give them a valid reason for doing it.  Perhaps you can offer a gift card, or a free maintenance feature or a life jacket  or anything else that places value on this information.

Do you have research documents that help a consumer select between multiple products – maybe with tables that they can fill in?  Offer these online for just a name and email address.

Hold some exclusive, invitation only events at your store and start advertising on your site at least three months ahead of time.  Invitations cost a name, phone number and email address.

There must be a small lead form on every vehicle detail page, with a “Get More Information” tag associated.  You will capture some leads this way…and without these forms you won’t.

Conclusion

Stealth shopping is the new norm.  Capturing online leads is becoming progressively more difficult.  It is not impossible however.

Make it easy for the people who will fill out forms to do so.  Provide real value to induce visitors to give up their information.  Replace your Credit Application with a Soft-Pull form.

Make it easy – make it valuable.  Your sales team will thank you!

Financing For Your Customers – Best Practices

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formssale-300x184What do you do for customers who require or simply prefer financing?

The first question to consider is whether you should offer financing options at all, or just send you customers to the local bank or credit union.

There is, in fact, a right and wrong answer to this with absolutely no shades of gray.

You must offer financing.  It doesn’t matter how large or small you are.  It doesn’t matter that you don’t think most of your customers use or need financing.  It doesn’t matter that you don’t know how to do it.

Financing is a service for your buyers and a profit center for your store.  The fact is that over 80% of buyers finance some or as much as possible of their purchase.  If you believe that your customer base is the exception,  you are probably dealing with shoppers who are arranging financing elsewhere – costing you both bottom line profit and customer satisfaction.

The other fact is that over 55% of customers who leave you store to arrange for financing, never come back.  They may well arrange financing, but most of the time, they will take that financing elsewhere.

Now that you are convinced that you need a financing option for visitors to your store, you have only one other question to consider.  How do you mange the finance function?

Here you have three choices, although there may well be a blend of these.

1)   Hire or appoint someone to handle financing on a part-time basis.

From an economic and efficiency point of view, this may seem like an attractive option.  There are a number of issues to be considered with this approach.

  • What happens to shoppers when your part time person is not around?  Do they have to wait?  Are they just out of luck?
  • How many banking/lending relationships can this person establish and manage?  On average, stores with this kind of F&I function have a single relationship, or perhaps two.  This will significantly impact your approval rate  (and not in the direction you want.)  Customer  satisfaction and unit sales will be negatively impacted.
  • Is your designated Finance Manager fully conversant on and up to date with all of the regulatory compliance issues associated with taking credit applications, handling personally identifiable information, identity theft, etc.?  This is a large and complicated body of knowledge and getting it wrong could cost you a significant amount of money or more (see “Do You Look Good In Stripes?”)
  • Is your individual equipped to handle the presentation and sales of backend products such as extended service agreements, GAP, credit life, etc.?  Are they able to help get insurance binders?  These will be highly profitable for your store and, presented properly, add significantly to customer satisfaction.

The bottom line is that simply having one or two part time finance people and calling it good will yield results that are far from optimal.  So, read on.

2)   Hire a full time F&I Manager.

This may seem like the best solution.  Once again, however, there are some important considerations.

  • Is your full-time F&I Manager really full time?  The process of completing financing for a single customer takes two to four hours.  This is not the total elapsed time from when the process starts to when the contracts are signed – which can be weeks – this is the actual time spent capturing a credit application, structuring the deal, obtaining approvals, presenting backend products and completing contracts.  Let’s be generous here and say the the time per customer is four hours.  If you are not financing ten customers a week, or over 500 customers per year, you F&I Manager has a lot of free time on their hands!  Even if it took eight solid hours of work per customer financed, you would need to be financing at least 250 customers per year, just to keep your F&I Manager busy.  Odds are that you are paying someone to do little or nothing.
  • If you are a true high volume store with customers being financed exceeding 500 year, how do you mange the rest?  Another F&I Manager?  What happens when your F&I Manager is off.  Your store is probably open 55-70 hours per week and your manager is working 40 hours per week – and he or she probably has the audacity to take two weeks off per year.  How do you handle customer’s finance requirements then?
  • If you are grossly underpaying this person at $30,000 per year (and that is about 35%-45% below the national average), your fully burdened cost (including payroll taxes, benefits, social security, etc.)  for this employee is $3,250 per month, assuming you are not paying commission.  (Frankly, if you have someone doing the job for this little, you have the wrong person.)  This means that every month, the first $3,250 of funding reserve and backend profit goes to your F&I Manager.  If your average amount financed is $20,000, your average funding profit including backend will be around $1,600.  The finance profit for two units a month is fully consumed.  If he/she is not managing at least five lending relationships and is not seeing approvals of 85% or better, you are spending a lot of money that good be going direct to your bottom line.

After looking at this, you may find yourself in the position of simply not having enough absolute volume to justify someone full time in this position.  There is a third option.

3)   Develop a partnership with a Financial Services company.

What is a financial services company?  At a minimum, they will be your outsourced F&I function – at a maximum, they will be much, much more.

What are the key advantages to working with an organization like this:

  • Your only cost is in the form of somewhat reduced profit on financing – there is no ongoing, regular employee expense.
  • These companies are experts on regulatory compliance.
  • They maintain large numbers of lending relationships ensuring high approval rates and better interest rates.
  • Having a neutral and knowledgeable source help with and review deal structures generates maximum profits.
  • There is someone to handle your finance requirements whenever you need them.
  • They understand the value and presentation of backend products and manage multiple relationships to provide them.
  • In some cases, these companies may provide services and expertise well beyond F&I which can help you generate significantly more profit.

So, what should you look for in partnering:Screenshot-2014-05-27-13.33.33-232x300

  • Does the company have approval rates of 85% or better?
  • Does the company offer attractive profit sharing with the ability for you to retain 60%, 70% or better?
  • Do they offer 24/7 access to your transaction information?
  • Can they provide online/offline tools to help your customers and your sales team?
  • Are they flexible in their approach such that you can retain key lending relationships or blend their functionality with whatever in-house F&I capabilities you may already have?
  • Can they sell backend products effectively with an eye toward customer satisfaction?  Do they put the customer experience ahead of pure profit motivation?
  • Can they provide assistance and expertise elsewhere, such as finance lead generation, web services, reputation management, etc.?
  • Do they offer a Rewards Program?  Are they fun to work with?

Get a worksheet to help you calculate your finance profit by clicking here.

 When you find a company that offers financial services and more, meeting the criteria described above, you should always develop a partnership with that company – there is only upside for you!

Is Your Store Ready For Live Chat On Your Website?

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You can see examples of live hat everywhere. There are literally hundreds of suppliers and virtually every e-commerce site you visit has some form of live chat.

Should you have live chat on your site? enterprise-ecommerce-live-chat-300x165

There are some very compelling reasons why you should seriously consider adding this technology.  While adoption in the marine and RV industries has been spotty to date, we can look at the effectiveness of live chat in the auto industry as a proxy.  Key benefits seen by auto dealers who use chat are:

  • Site visitors engage with sales people approximately four times more with chat than when only email or phone contacts are available
  • Visitors look at inventory detail pages three times more when chat is available
  • Just enabling chat caused visitors to look at the store contact details four times more often than sites without chat
  • Chat increases lead volume through the site by close to 100% – nearly doubling the site lead generation
  • Leads generated through chat convert to sales at a rate two to three times higher than other leads

So, it’s a slam dunk, right?  Putting live chat on your site is the obvious course of action.

Not so fast!

When Chat Goes Bad 

As good as it sounds, chat done wrong can cost you much more than just the cost of the chat product.  There are three major issues that can make chat go bad.

  1. There’s Nobody Home

Putting a chat button, banner or avatar on your site isn’t the same as staffing and managing the experience.  There is nothing more frustrating for a site visitor than seeing a chat option, clicking on it, and waiting, and waiting, and waiting for someone to answer them.  Most chat products will give some immediate response, so it looks like something is happening – and then, nothing.  There is no one watching for inbound chats, no one available to chat, and so the chat just goes unanswered.  This is worse than not having  chat at all.

There are solutions.  Some chat providers offer a hosted solution, with people who always answer, and can then locate and transfer the chat to someone at the store.  Some products offer “virtual assistants”, which are essentially automated knowledge bases.  Most products let you turn chat off when there is no one around – or turn it into a “leave a message” function.  Any of these are better than the unanswered chat.

The bottom line is that chat must be that – chat.  It takes not just customer and the button, it takes a real person, ultimately in your store, to make chat work.  The hosted solutions can be very efficient and can work exceedingly well, without tying up your staff – as long as there is someone in your store who can be located and who can ultimately handle detailed product questions.

  1. Aggressive Chat

You have to remember why people are chatting in.  They did not want to pick up the phone.  They did not want to send an email.  They wanted answers to questions that they could not find on your site.  They wanted those answers quickly and easily and privately.

Some chat products require full contact information before a visitor can even start a chat.  These completely defeat the purpose and ignore the desires of the visitor.  They will fail.

Some agents, salespeople, etc., are simply too aggressive and try to be too clever in their effort to extract personal details from the site visitor.  Courtesy can transition quickly to aggression.  Starting a chat with, “Hi, this is Myril Shaw, with whom am I chatting?” is courteous and appropriate.  When the customer either does not answer that question and simply proceeds with their actual question, or when they simply give only their first name, that has to be okay.

Be over-persistent in trying to capture name, phone and or email, especially too early in the chat will result in chat drop-outs.

The people handling chat in your store need to be prepared to give complete, and accurate answers without forcing the visitor to “pay” for that information with their personal details.  Doing so builds trust with the visitor and once trust is built, personal information will follow.

The good chat providers offer excellent scripts, approaches and training for best practices when engaging chatters.

  1. Unprofessional Chat

While related to aggressive chat, unprofessional chat is a broader category.

USING ALL CAPITAL LETTERS WHEN CHATTING IS UNPROFESSIONAL.  People feel like they are being yelled at.

Using abbreviations like BRB (Be Right Back) or IDK (I Don’t Know), is unprofessional.

Chat responses should be well structured, roughly grammatically correct, properly spelled sentences or questions.  Most chat products offer shortcut keys that allow a single keystroke or two to generate the professional response you are looking for.

Responses must always be courteous, calm and helpful.  Anything rude, angry or inappropriate is worse than unprofessional, it is dangerous for your entire store.  Keep in mind that unlike an unprofessional comment on a phone call, which, while it may be remembered and repeated by the recipient, it does drift into the ether., a chatted comment is recorded and you end up seeing it tweeted, FaceBooked, Yelped or otherwise rebroadcast throughout the internet world for years to come.

When Chat Goes Right

Done correctly, live chat on your site offers all the benefits described above, and more.  What ensures that chat is done right?

Management commitment to making it so.

First,  ensure that you are fully committed to having qualified people available to handle the chats.  Again, if you use a hosted chat product, the necessity for this people to be tied to a desk is reduced, but they still must be available.

Second, commit to receiving and providing training on best practices.

Third, commit to monitoring and reviewing the chat communications that take place.

Fourth, commit to the research required to install the chat product that is right for your store and your site.  There are few industry leaders, and while not the least expensive, they can definitely help ensure that the chat experience you provide will deliver the results you want.  If you have the right technical support and solid chat performers, you may be able to work with a less robust, less expensive solution – but don’t save a few dollars to lose a lot of leads.

Conclusion

In a short period of time any website without live chat will be at a serious competitive disadvantage over those that do.  Chat will, when properly managed, deliver significant positive benefits quickly – and when implemented improperly will turn your website experience into a disaster (for which you won’t be able to blame chat, but only yourself.)

It is time to look into live chat and to implement as soon as you, your team and your store are ready to make the investment needed to turn chat into a the winning technology that it clearly can be.

More Financeable Buyers Please

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Everyone would like their buyers to finance there purchase, right?  Financing is a profit center in and of itself.  In addition, backend products like extended Credit-Score-1service agreements, GAP and Credit Life, which can add significant profit, are far easier to sell when the deal is being financed.

So how do you get more buyers financing their purchases through your dealership?  We are going to look at the four best ways to drive more financing.

Ask

What do you do when one of your customers tells you that they are paying cash?  If you just say, “Thank you” and move on, you are missing an opportunity.  What you need to understand is whether they are arranging financing elsewhere, or if they really are just reaching into their savings account.

One simple question will clear this up – “Will we be putting a lien on the vehicle?”

If  they say that there will be a lien, then they are financing their purchase…just not through you – yet.  At that point, you are well within your rights to suggest that you have some great programs right now and that you may be able to handle the financing for them.  If they were going through a Credit Union, you can almost certainly offer them a longer payment term and probably lower payments.  As long as you have sufficient banking/lender relationships, you should be able to put together financing as good as or better than anything that they received outside of your store – and it should be far more convenient for your buyer.

The moral of the story here – always ask about financing.  Even they really are just pulling money out their savings, ask if you could try and put together a program for them.  Paying only 10% down and keeping their money in the bank may look more attractive once they see what the payments are.

Get More Finance Leads

Are you capturing enough finance leads from your website?  Most of you are saying, “No”.  That then begs the question, what are you doing to capture those leads?  Again, for the majority of dealerships, the answer is something like, “Well, we have our Credit Application right on the site.”

Credit Applications are intimidating, time consuming and, frankly, unwelcoming.  People with real questions about their financibility are often reluctant to fill these out for a couple of reasons: first, they are generally aware that pulling credit can lower their score – so they don’t what to fill out a credit application too early in the shopping/buying process; second, people are reluctant to provide their social security number when they are online, before they are fully confident in the trustworthiness of the site and business.

There is a simple way to to dramatically increase your finance leads though.  Using the “soft credit pull”, you can offer consumers a chance to get prequalified without giving up their Date of Birth or Social Security number.  With this “soft pull”, you will get their credit score, as well as their name, address and phone number and there is no negative impact on the consumer score.

The soft pull yields many more qualified finance leads than hoping that someone will fill out a credit application.   This should be a required piece of functionality for every dealership website.

One word of caution on soft pull providers.  There are two kinds of soft pulls: marketing/research pulls which happen in batch and may be 90 days or more out of date; real time soft credit pulls.  There is only only provider of real time soft credit pulls nationally – so do you homework well on this, and then get the functionality on your site.

Know What You Are Working With

In order to get as many of your buyers financed as possible, you should know what you are working with as early in the process as possible.  Once you have some idea of the credit profile of your buyer, you can get a sense of how much financing they can get , what it will cost and how much down payment will be required.  With this knowledge you may be able to redirect them to a different vehicle that is more suited to their financial capabilities earlier in their shopping process.

Finding out all this information is far simpler than you might think.  As mentioned above, the soft credit pull can give you almost everything you need.  Once the consumer is in your store, just the simple process of having them complete a “Customer Information Form” with their name, address and phone number gives you everything you need for a soft pull.  You don’t even need the customers permission to complete the pull.  You’ll get the real time credit score, tier, 24 x late, revolving debt, co-signor indicators, all without the need for SS# or DOB.

Keep in mind that score, by itself, may not be sufficient to give you all the information you would like.  (Some providers offer only Tier – and that is never enough.)  Some lenders will simply pre-qualify based on a sufficiently high score.  Others also consider the debt – credit and debt-income ratios, as well as other factors,  regardless of score.

Nevertheless, the more you know and the earlier you know it, the better your chances of guiding the buyer into a financible deal.

Credit Improvement Programs

Not to be confused with Credit Repair programs which tend to be either scams or very long term processes, legitimate Credit Improvement programs allow you to understand whether you buyer’s score can be quickly improved and by how much with tactical and targeted actions, such as transferring balances, opening or closing accounts, using disposable cash to pay down certain balances, etc.

Every dealership finance department should have access to a Credit Improvement program.  It is possible, in some instances, to improve scores by 20 – 30 points in just a few days.  That kind of change can have a dramatic effect on the financing terms and can significantly effect your ability to finance your buyer.

Conclusion

Driving more financing through your store is neither magic nor is it rocket science.  More financing starts by simply asking for it.  You need to increase the number of finance leads that come through your website.  Make sure that you understand your shoppers credit profile as early as possible.  Take advantage of a legitimate credit improvement program to help the financibility of your buyers.

Drive more financing – drive more profit.  Who wouldn’t want that?

People Love You – So What?

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The Virtuous Cycle – Part IV: Popularity

popularSo people leave your store loving you.  Sure, they paid good money, but they had a great time, got an awesome experience, they love the products they bought from you and truly believe that they received terrific value.  They are happy campers, or boaters.

What does this do for you?

According to Joe Girard, reputed to be the best car salesman in the world, each of these happy buyers will tell seven friends about you.  If it was a very well connected couple, maybe you’ll get fourteen mentions.

Given how often people are “in-market” for your product at any point in time, just being satisfied with these seven or so complements probably won’t move the needle for you.  So, was delivering that great experience worth your effort?

You definitely can make it so!

Popularity Drives The Virtuous Cycle 

Success breeds success.  Best practices everywhere in your store drive dynamic  profits.  You drive traffic into your store from your website, as well as your other marketing efforts.  You maximize the value of that traffic by selling all your products.  You maximize your profits by delivering a great experience and selling value.

Your customers are delighted and tell their friends…but that is not enough to power the virtuous cycle.  You don’t want organic growth, you want viral growth – you want buzz.

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Buzz fuels the engine that drives the virtuous cycle.

Using Your Popularity To Generate Buzz

When Joe Girard was selling cars, he had to result to some pretty extreme efforts to generate more than organic growth.  He would go to sporting events and throw handfuls of his business cars in the air when he was cheering.

Technology has made viral popularity much more accessible.  Are you capitalizing on your happy buyers and leveraging their satisfaction with all of the available technologies?

Are you taking pictures?  Are you taking lots of pictures?  Do you start taking pictures when your customers are out on test drives and continuing through delivery and then on to customer appreciation days?

Let’s assume you are taking plenty of photos.  Are you asking you customer’s to tweet them?  Do you have pinterest page with awesome pictures and great captions?  How do you get these photos on your FaceBook page…and more important, how do you get them on your customer’s FaceBook page?

Make it easy for your customers to become your Fan Club.  If they are not social media savvy, give them simple instructions as to how they can help you.  If they have kids, get them to help.

How about videos?  Are you getting action videos of your buyer’s taking delivery?  How vidoes of vehicle prep that show how hard your store works in making sure that the buyers are satisfied?  How about a contest with some simple prizes for the best videos of people using your products?  Did you think to have the customers who win the contest come into your store and video them getting their prize and talking how much they love their boat or RV?

Okay…you have videos.  Do you have YouTube channel?  (If you don’t, start one!)  Point to it from your FaceBook page and use FaceBook to promote your videos.  Videos are exciting.  They generate emotion.  Emotion drives buzz.

Your happy customer won’t influence seven people…they’ll influence hundreds…even, and especially, people they don’t know.

By the way, don’t be afraid to be bold.  When you run you best videos contest, get a local TV station involved.  Have them be the judge.  Give them rights to the videos.

Don’t neglect the power of Instgram as you build your visual library.  Make sure you have some very short and attractive vidoes that work for Instagram or as Vines for Twitter.

The objective to make each sale a gift that keeps on giving.  You want everyone to know just how much fun your customers are having.  It takes a little time, but the benefits are more than worth it.

Are you asking your buyers for reviews?  Do you send out feedback forms?  Do you direct buyers to review sites?  Are your shoppers posting reviews on their pages?

reputation-on-search-engines-300x233

90% of all shoppers look for reviews online before buying.  If you are not generating reviews (by asking for them – which is legal – versus writing fake reviews yourself – which definitely is not legal), you are losing customer opportunities every day.

Solicting reviews does carry with it the burden of watching your online reputation.  You have to watch the review sites (like Yelp and Reputation.com) and your reviews as they are scattered across multiple online properties.  Make sure you set a Google Alert for your store.  You should look into monitoring tools such as HootSuite or trackur.

As you start to collect reviews, you will get some bad ones.  Don’t panic.  Try to reach out to the reviewer directly and resolve the issue.  Do not, ever, under any circumstances, respond publicly online.  Bad reviews add legitimacy to your online profile.  No one is perfect.  These negative reviews should be learning experiences.  You should should to keep you positive to negative ratio at about 7 or 8 positive reviews for each negative review.  As long as you are doing this or better, your reputation will drive business.

 

Having delighted buyers is great and it is the starting poing for driving buzz.  However, it is only the starting point.  You have to use all available technologies to turn a few referrals into dynamic lead generation.  Photos, videos and reviews are your buzz generation fuel.

Once you have buzz, the virtuous cycle continues its happy spin, delighting you with ever increasing profits.

Want Profit, Sell Value!

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The Virtuous Cycle – Part III: Profits

valueandprofit

Sell something for more than it costs plus what it costs to sell and you are left with profit.  Seems like a simple equation, right?  Well, the equation is simple enough – making it work for you can be a lot more complicated.

Why Is Profit Hard?

A week ago Liz Keener published a piece in Boating Industry titled “What are you touting? Discounts or value?”  In that piece, she mentioned the dealer whose pitch is that they “will not be undersold.”  As long as you are selling on price or with a fear of asking for a fair price, profit will be very hard to achieve, at least to the level you would like.  ( A good friend of mine, Jim Ziegler, the Alpha Dawg, one of the leading trainers and consultants in the Automotive Industry, consistently holds that, “Full price is fair price.”  His belief in that mantra makes it work.  You can find him on Facebook at https://www.facebook.com/jamesaziegler)

Profit and the Virtuous Cycle

The Virtuous Cycle occurs when you begin doing the right things across all functions of your dealership, success in each area breeds success in the other areas.  Once you are doing things to drive leads into your store, whether those are internet leads, phone calls or walk-ins, you have to be sure that you sell all possible products every time.

Selling all your products properly results in profits and results in delighted customers, because they believe that they have paid a fair price for the value they received everywhere.  These excited buyers say great things about you.

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That increased popularity creates Buzz.  That buzz drives traffic or more people and the Virtuous Cycle is is in full spin.

If you fail to sell value though, if you are just pushing products however you can and are too often taking the low resistance path of dropping the price, the Profit portion of the Virtuous Cycle collapses.  Your buyers don’t appreciate the value they are receiving, so don’t reward your store with a  stellar reputation, so traffic does not increase and the cycle grinds to a halt with a lot of sand in the gears.

Driving Profit With Value

Your manufacturers go to a lot of trouble to build value into their products.  They don’t want to just build vehicles that makes consumer reaction a bland, “Huh, that’s interesting.”  The features, the extras, the bells-and-whistles are there to create delight and excitement for your buyers.

If you and your sales team and your service team and everyone else that works in your store can’t be excited by your products, it is time to either change people or products, or maybe even industries.  Your shoppers know if you are excited.  Enthusiasm is contagious.

This positive, good feeling will permeate every aspect of your store and that will change the customers perception of their experience.  Maybe they can drive a 100 miles and get a lower price…or maybe can can stay 25 miles closer to home and get do a few dollars better…but they won’t.  Buying anything expensive is emotional and people buy the whole experience.  It starts with you.

Now, some products simply are lower price than others.  The point is not that you can take a higher price product and beat a lower price one – although you certainly can do that sometimes.  The point is that you can, and should, get full price, or close  for whatever your product is.

People want to be able to walk away and spread your enthusiasm for every feature as they brag about their new purchase to their friends.  When their friend asks, “What did you pay, couldn’t you have gotten it cheaper?”, you want their answer to be, “Maybe I could have done a few dollars better for the vehicle, but I have never seen people more knowledgeable and excited about their product.  I know that I can trust them and if I have have questions or problems later, they will take care of me.  A couple of bucks is nothing compared to the experience I just had.  Oh, and by the time we were all done, I felt really good about the entire package.”

Okay, so you have your buyer nodding and smiling about a fair price.  What about financing?

If you are not offering financing, do it.  It is that simple.  Offering financing will increase unit sales between 20% and 30%.  55% of people who leave your store to arrange financing never come back.

Some people say they are cash buyers, meaning that they have arranged their own financing.  The convenience of doing everything in one place will certainly improve their purchase experience.  That improved experience is added value.

As you offer financing, don’t be afraid to maximize your profits here as well.  You will get a buy rate for the loan and a sell rate.  Take the points. How do you justify them when a buyers says, “But I can get .25% better somewhere else.”  First, you have to make the process as easy as possible.  Make your credit application accessible.  Make the entire finance process a convenience and a pleasure for your buyer.  Your value is ease of purchase.

Of course, you have the shoppers who say that they can get better rates at the Credit Union across town.  While they may get a better rate, though won’t get anywhere close to the term, so, generally speaking, they will end up with a higher payment from the credit union.  They will also be inconvenienced by needing to go to multiple places and work with multiple people.  Remember that credit unions have build a substantial part of their reputation on how friendly and easy they are – they treat people like “old friends”.  Well, you can do that too and increase your value in the eyes of the buyer.

With financing in place, you need to be selling back-end products such as extended service agreements and GAP insurance.  Offering these back-end products is also part of delivering a great customer experience.  (See Don’t Upsell – Right-Sell.)  Once a customer is obtaining financing through you, these back-end products are simply offers of a monthly payment “with protection” or “without protection.”  You have a lot of flexibility in pricing these products – “full price” is somewhat ill-defined.  You owe it to yourself and your customer to be fair and honest on pricing.

These products add true value for your customers and you are doing yourself and your customer a disservice by not introducing these products early and doing a good job presenting their value.

The moral here is clear.  You are not doing yourself any service by selling on price, without genuine excitement and enthusiasm and without demonstrating the clear value in everything that you are delivering to your buyer.

Once you start selling value everywhere, you are greasing the gears of the Virtuous Cycle machine and the profitability of your dealership will very quickly begin to grow dynamically.

What Products Do You Sell?

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The Virtuous Cycle – Part II: Products

 

Are You Selling All Your Products?Chapparral

RVThis may seem like a silly question.  You are selling everything legally available to you.  Shoot, you would probably sell your desks if it would help.  So, on the the surface, the answer, you say resoundingly, is “Yes!”

But are you?  Are you looking creatively at what your products could be?

Are you truly maximizing your ability to have your customers buy and to help your sales team sell as much as possible?

The Virtuous Cycle Continues

As we have discussed in previous posts, the Virtuous Cycle occurs when you begin doing the right things across all functions of your dealership, success in each area breeds success in the other areas.  Once you are doing things to drive leads into your store, whether those are internet leads, phone calls or walk-ins, you have to be sure that you sell all possible products every time.

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To be clear, you must be selling the value in these products, because that value is what allows to drive profit.  As people pay what they consider to be a fair price for the value being delivered, your popularity go up.

That increased popularity creates Buzz.  That buzz drives traffic or more people and the Virtuous Cycle is is in full spin.

Many dealers stumble when it comes to Products, however.  The cycle breaks here far too often.

Products For Profit

Your store exists to move your manufacturer’s vehicles. Whether you represent one manufacturer or several, the vehicles produced by these OEMs are, in almost all cases, your bread and butter.  These are the primary products that bring people in; these are the products that, often, allow you to sell the rest. of what you have to offer.

While it seems like this part of the product picture is obvious, there are nuances here that may well be missed.  Are you also a broker?  Can you get easy access to other vehicles which may be better suited to your customer, even though they came in to look at your specific products?  Are you selling your ability to take and offer top dollar on trades?  Extending your primary product offering through brokerage can make a huge difference.  Knowing that you have access to broad resale network allows you to sell differeniated capabilities with trade-ins.  These help drive product sales success in the Virtuous Cycle.

Are you selling financing?  If you are not, you are missing a major product opportunity.  If you ask your customers to arrange their own financing, you are definitely losing business.  55% of people who leave your store to arrange financing never come back.  By offering financing you increase unit sales by 25% to 30%.

Most customers need financing for a least a portion of their purchase.  To not offer financing is to provide poor customer service.  Moreover, by making financing easy and competitive, you can drive profit growth.  Even the buyer who says they are paying cash is a financing candidate.  “Are we going to be placing a lien on this vehicle?” tells you if the buyer is arranging financing elsewhere – and you have the opportunity to make life simpler and better for them

Offering the finance product also simplifies the sale of back-end products such as extended service agreements and GAP insurance.  Offering these back-end products is also part of delivering a great customer experience.  (See Don’t Upsell – Right-Sell.)  Once a customer is obtaining financing through you, these back-end products are simply offers of a monthly payment “with protection” or “without protection.”  These products add true value for your customers and you are doing yourself and your customer a disservice by not introducing these products early and doing a good job presenting their value.

Financing and back-end products continue to increase the velocity of the Virtuous Cycle.

Don’t forget to sell the products in your “Pro-Shop” or “Enthusiast Market.”  People love many of these items.  How often do you let them leave your store without even inviting them to look around?  These are no pressure, no effort sales.  These are sales that occur because people are basking in the excitement of their new purchase and just feel like this gadget or toy will just make their experience that much more special.

Finally, it is never too early to start selling your parts and service.  Make sure you sell your routine maintenance packages (and make sure you have a premium package to offer.)  Parts and service as a product will add consumer confidence in your store and even if nothing actually gets sold today, these products ensure future product sales.

Your product is not just a boat or an RV.  It is the full package of everything that a buyer can take away from your store.  You do not do your customer, your team or your store any service by offering less than the full plate of products.  Of course, it goes without saying (hopefully) that everything you sell is sold with integrity, fairly and full transparency.  Everything is sold based on its value to the customer.

When you sell all your products to each buyer, you add energy to that Virtuous Cycle and truly do maximize your sales.

Do You Have Enough Profit?

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The Virtuous Cycle – Part I: People

Bag-of-Profit-280x300Enough Profit?  How Do You Know?

Do you have enough profit?  If your answer to this question is “Yes”, then you don’t need to read any further.  Frankly, the only thing you need to be reading is a good novel sipping a refreshing beverage on a nice beach somewhere.  Now, if you said “Yes” because you hold the view that getting by is enough and you are happy with that, then I applaud your equanimity and would respectfully suggest that doing better than good enough is possible without having to change your world view.

In all candor, the question is a little unfair, and it was not really offered to spur a philosophical debate over wealth versus greed.  Asking about “enough” is a little like asking  “How long is a piece of string?” there really is no right answer.  Having said that, you may know that your answer is a resounding “No”.

The topic here is – how can you drive more profit at your dealership?

The Virtuous Cycle

It is easy to get into the weeds way too quickly and get hung up on little details.  The first thing you need to do is take a 50,000-foot view of your store.  What factors make up profit?  Where do you need start looking at ways to enhance your profit?

Profit is comprised of:

  • What do you sell?
  • How many do you sell?
  • How much do you sell them for?
  • How much do they cost?
  • How much does it cost to sell them?

Let’s start with something very basic…you want to sell as many as you can for as much as you can spending as little as you can along the way.  When you have all those dials set exactly right for each thing you sell, you are making as much profit as you can – which may still not be enough – but under those facts, it is all you can do until you can find a new thing to sell more of at a higher price and a lower cost.

Profit stems from a Four-P virtuous cycle – People, Product, Profit, and Popularity.  Each on feeds the next and back to the beginning – endlessly.  We will look at each P over the next few weeks.

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People To Profit

What is the root of profit?  Unless you can sell something for such and it costs so little that you can effectively take volume out of the equation, profit starts with customer traffic.  You can’t sell anything to no one.  You need the first P – People.

How are you ensuring that you are getting enough customers?  What do you rely on for getting potential buyers in the door?

Your possible answers probably include some mix of:

  • Traditional advertising – print ads, signs, possible radio or TV, physical mail, etc.
  • Sales people cold calling potential customers – and that probably means buying lists
  • Shows
  • Email marketing – and that again means having or buying lists
  • Social media
  • Your website – and converting your web visitors to leads for your sales people to follow up on
  • Digital advertising
  • Community/charitable sponsorships with branding (usually or hopefully accompanied by PR and media coverage)
  • Walk-ins due to location and drive-bys
  • Word of mouth

Let’s take a look at these and see how they do and how you are doing.

Traditional Advertising

Traditional advertising, in general, is expensive and horribly inefficient.  Today, unless these traditional ads are used in combination with an event, a show or a community or charity outing, they may be a great cost center, but they are probably doing very little to help your profit line.  The only possible excepting here could be billboards, which, remarkably, still demonstrate a solid ROI as long as the billboard views relative to your physical location make sense.  (One important note here – if you are the only selling a thing in a geographical radius that makes it prohibitively inconvenient for the customer to go anywhere else for that thing, then, by all means, you need to be visible to anyone who may want that thing.)  The recommendation here is that you turn down the expense dial on traditional advertising except in the specific cases I have mentioned.

Cold Calls

Sales people cold calling potential customers will almost always turn out to be an epic failure.  If you happen to have the next Joe Girard (reputed to be the best car salesman in the world), then disregard this section – I’ll bet you don’t.  The people you have in your store are there because they want to be selling face-to-face.  They are not telesales pros and expecting them to be good, or even competent at this will generally end in frustration for both you and them.  The exception here is calling on inbound leads.  They have to be good at calling these and you have to have discipline established around lead follow up.  The alternative here, if you have the volume to justify it, is to have a dedicated person or team do the phone follow-up and set appointments for your in-store team.  In most cases, in the marine and RV industries, having sufficient inbound lead volume to justify a Business Development Center is rare.  If you have sales people who are sitting around with nothing to do except cold call potential customers, I would submit that you have too many sales people.

Shows – The Bread Of Life

Shows!  Ah, shows!  They are expensive.  They are painful.  They are effective and you are going to do them.  They will, today, still generate a significant percentage of your sales.  You simply need to be sure that you maximize a show’s effectiveness.  Make sure people know about the show and about you being there.  Don’t rely on raw show traffic to get people in front of your sales team at the show.  Enough said.

Email marketing to a raw list of potential customers that you bought from some source that promises that these are “in market shoppers” without some uber-compelling call to action is a pure waste of money.  The open rates are somewhere between horrible and “like spit in the ocean” and the action rates are worse than that.  The problem is, if that weren’t problem enough, most of the compelling calls to action are “sales” so that the people who do take action are the true “bottom feeders” and you have to rely on effective upsells in your store to make this pay off.  If you are anxious to and excited to be painted as a “bait and switch” expert, then go ahead and try some raw email marketing.  You probably won’t do it twice.

Community and Charity

Community involvement and charity with associated branding is effective and can be cost-effective.  The caveat here is that you need to be genuine.  The old line, “Once you can fake sincerity, you have it all” should not apply here.  People will catch on to the fact that you don’t really care unless it drives business and that will ruin your reputation.  That said, it is fun and easy to actually care.  You can contribute, enjoy it and benefit.  To the extent that you can, you should.

Location, Location, Location

You are where you are.   You may change locations, but it takes time and money.  There is not much you can do about your walk-in traffic…but there is something you can do.  Make your lot and your store look inviting.   Have available, accessible and visible parking…move your inventory out of customer parking.  Put your eye-candy inventory where it is visible and keep it clean and inviting.  Make sure that your people are not standing around in front smoking.  Make your signage professional, visible and fun as appropriate – you don’t want people dropping buy for the circus when you want them dropping by to buy something.

Word Of Mouth

If your reputation is not awesome, get to work and change it.  When people talk about you and your store, it should be glowing.  Whether this happens in casual conversations between friends or online, word-of-mouth must be your friend.  You can use your sales people here.  They should check in with their customers at least 4 times a year.  They should make sure that they are still happy (and if they are not find out how they can fix it) and see if they have any friends who might be interested.  This is just good customers service and follow up – and it will drive traffic.

Digital Marketing

Digital advertising is tempting…and it is far more effective than traditional advertising.  Here are some guidelines for digital advertising: make sure your ads run on sites which are relevant to your shoppers – if you sell ski boats, advertise on water ski sites; if you sell RVs advertise on campground sites.  Make sure that when some clicks on your ad, make sure the page they land on is relevant and friendly and, please, don’t just have them land on a lead form – give them information, a brochure, a pretty picture, something, before you ask for their personal information.  Finally, maximize your ad effectiveness with remarketing.  If you ask to ask, you may need to find someone to help you…but remarketing places a cookie on your shoppers computer and your ads then begin to follow them around the Internet.  This is kind of creepy, really annoying and extraordinarily effective – do it.

Now for the biggies and the ones that will make you run screaming for the door – social media and your website.

FaceBook, Twitter, and OMG

Let’s start with social media.  How are you on FaceBook, Twitter, Google+, Pinterest and the rest?  I know, you don’t believe that your customers are on these…well, they are. The average age on FaceBook has moved into the 40’s (feel old yet?).  Social media extends even beyond that though, and it all ties together.  DO you have YouTube channel?  Are you using it?  If you sell ski boats, do you have great You-Tube videos of kids wake-boarding and doing spectacular tricks behind one of your boats?  The parents may not pick up on this, but the kids will – and who better to convince someone to buy a boat than their kid.  If you sell RVs, do you have videos of people parked by rapids with wild tube rides going on?  Social media is, well, social.  You need to be focused on capturing not the buyers, but the influencers.  These influencers will touch your buyers and that will drive them all to your website.  Social media is also reputation and reputation management.  Most shoppers check out your online reputation before they come and see you.  Make sure you are handling Yelp and Reputation.com and staying aware.  This is an area to double down on spending.

Rock Your Website

Finally, your website…ah, your website. If you are doing all the other things, and your website is properly constructed for SEO (Search Engine Optimization – and if you had to ask you do need help managing your website) then you will get traffic to your site.  What happens to that traffic?  Today, 98% of it comes to your site, looks around and without even so much as a thank-you, leaves.  You need to spend time, energy and, yes, money to make your website a conversion magnet.  In a recent survey we did, a large number of sites had only a Credit Application as the means of capturing information about their visitors.  Make it easy and desirable for your web traffic to leave enough information for you to follow up.  Offer something of value in exchange for their information.  Give them their credit score, without first asking for a DOB or SSN.  Partner with your local Subway and offer a free sandwich when they do a test drive (and have a Subway ad on your site – so there is no cost either way).  There are 100’s of ways to give to get – use them.  You can easily double or triple your website leads – and these will convert to sales at an extremely high rate.

People Equal Traffic

So, now you have traffic.  You use traditional media to bolster events and your community presence.  You maximize the effectiveness of shows.  Your walk-ins are better than ever.  You make great use of digital advertising.  You are the viral king or queen of You-Tube for your brand and you amplify that with your social media presence.  Finally, your website is consumer info capture friendly.  You are driving more traffic to your site because of everything else you are doing…and you, instead of getting a 2% conversion to lead, are getting a 10% conversion to lead.

Can’t you just smell those profits increasing?

The Best Rate – Bah, Humbug ! Service Delivers For Your Customer

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I don’t care if you do your own financing through your lending relationships, if you use a third party or if you make your customers arrange their own financing through their banks or credit unions.  However it happens, you see things like this all the time:

OUR CURRENT RATES

 Loan Amount                                  Rates                                 Max Term

$100,000-$10mil                              3.99% – 4.99%                  20-25 years
$75,000-$99,999                              4.49% – 5.50%                    20 years
$50,000 – $74,999                            4.62% – 5.75%                    15 years
$25,000 – $49,999                           5.37% – 6.49%                    15 years
• Fixed Rates as low as 3.99%
• Variable Rates as low as 3.66%

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 Rate sheet advertising.  I see this from banks, I see it from third parties and I see it all as hype.

Sounds a little like Scrooge, I know.  Bah, humbug, the rates are, well, for polite company, crap!  No, its not that the ultimate lender is lying.  Those rates are there.  The bah, humbug, bit is that anyone pitching these rates is not really better than anyone else.  They have no greater or lesser access to these rates than anyone else.  Money costs what money costs.  When someone hangs these rates out there like they are special, whether directly to your customer or to you as a provider to your customer, they are misrepresenting the market and financial realities.

Let’s talk about “rates”.  When rates are used as advertising, they are all about your super-prime customers.  Superb FICO, no credit errors-ever, no credit record blemish and plenty of credit relative to debt.  You get some of these customers and they get some of these rates.  When that happens life is good.

The problem is that life happens.  The vast majority of your customers don’t fit the perfect credit profile.  They had a problem or two.  They had issues.  They don’t have a perfect score.  They don’t have an unfinanceable 550, but they may have a 650.  They may have a tax lien.  Maybe they have a distant discharged bankruptcy.  They are not perfect – it happens – and they will still be approved for financing, as long as you have the right sources and put in the right effort.

Those magic rates that were advertised to attract you or your customer are completely irrelevant.  Your imperfect customer won’t get those rates. The rates they get now depend completely on the effort that you, your customer or your provider are willing to put in.  Multiple lending relationships, the quality of those relationships and the willingness to work and test those relationships determine whether your less than perfect buyer gets to buy from you.  That magic low rate has nothing to do with customer satisfaction or dealer profit.

Look, if you, your finance provider, or the lender your customer is working with can’t deliver the best available rates to the most prime buyers, you or your customer need to switch lending providers.  That will almost never be the case.  Prime rates for perfect customers will always be there.

How do you deliver to “real life” customers?  Can those buyers get reasonable financing?  How hard will you, their bank or your finance provider work to get reasonable rates and terms for real world buyers?  If the answer is not, “We’ll work as hard as it takes,” then look around.

I’m not unrealistic.  Some shoppers can’t be financed.  They have 600 or less FICO scores.  They are up to their eyeballs in debt relative to their credit lines.  They are 22 years old and have a gasoline card to support their credit history.  No one can work miracles.

The reality is this – your ability to finance or provide financing for your customers at the best rates available makes no difference at all.  It does not differentiate you and it does not get you one additional sale.  What matters is how you work with “I’m not perfect” customers.  If you can make it easy, make it safe, eliminate embarrassment, and find ways to get financing for them, you will sell more – and you will have customers for life.

Forget those magic rates, they are a given for the pristine.  Strive to satisfy your “real credit” customers and you will grow forever!

Do You Look Good In Stripes? Regulatory Compliance Failures Cost More Than Money

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stripes-137x300Running a dealership today is more complicated than ever.  That said, you don’t want to simplify your day-to-day experience by taking an extended vacation in a federal hotel with bar covered windows where your wardrobe choices consist of which stripes to wear.

It can be that serious.  Regulatory Compliance is no joking matter.  Enforcement is getting tougher and the reach is extending to more and more businesses, even very small businesses.

This is not just about Red Flag rules, although clearly they are a big part.  There is the Fair and Accurate Credit Transactions Act (FACTA), Risk-Based Pricing, Fair Credit Reporting Act (FCRA), Office of Foreign Assets Control (OFAC),  Gramm-Leach-Bliley Act (GLB Act), Equal Credit Opportunity Act (ECOA) and more.  So, with all these, just how bad can it get?

Well, the Consumer Financial Protection Bureau (CFPB, just to add another acronym), when enforcing the FCRA has the authority to impose fines of:

  • $5,000 per day for “negligent” violations
  • $25,000 per day for “reckless” violations
  • $1,000,000 per day for “knowing violation

Moreover, in cases of “unauthorized disclosure” of personal information, criminal penalties of up to two years in prison plus fines and penalties may be sought.

Violations of the Gramm-Leach-Bliley Financial Privacy Rule (what, you never heard of this?) could involve imprisonment for up to five years.  Similarly, failing to enforce the GLB Safeguards Rule might cost you as much as $100,000 and, perhaps, another five years behind bars.

You probably won’t end up in jail for failing to enforce the Red Flags Rule, but it could cost you $3,500 per violation, plus the potential for individual lawsuits from damaged individuals.

Of course, you are well versed with Form 8300, right?  If you receive cash in excess of $10,000 for a single or two or more related transactions, you have to file Form 8300 by the 15th day after the date of the transaction.  Don’t do it and, well, you guessed it, a fine of $250,000 dollars (or $500,000 for a corporation) and/or up to five years in the federal hoosegow.

How about this for a nightmare scenario (with credit to MicroBilt)?  A customer comes into your store looking at your top of the line vehicle fully loaded.  This particular customer is a highly paid and very successful attorney.  He is in a hurry to get the deal done, so he doesn’t negotiate very much on the price.  Oh, and he wants to finance through you.

Your Finance Manager is understandably excited.  The credit app looks great and the FICO comes in at 800+.  Instant approval, instant delivery – what a great day.

Sixty days later the other shoe drops.  Mr. In A Hurry Attorney turns out not to be who he said.  It was someone who had stolen his identity.  Now, whoever it really is, has elected not to make payments.  The bank sends the paper back to you because you violated the Red Flag Rules by not verifying the identity of the customer, which is a violation of your agreement with the bank.  Insurance doesn’t cover the loss.

Your prized vehicle is safely ensconced in South America.  You eat $100,000.  The actual attorney sues you with the help of the CFPB because you violated the Red Flag rules.

I assume you would think that this was a pretty bad run of luck…and it could have been avoided.

Every dealership has to have a written Identity Theft Prevention Program.  This program must be employed consistently for every non-cash transaction.  It can and should include items such as:

  • Asking for the physical production of items in the persons wallet (credit cards, Driver’s License, etc.
  • Careful scrutiny and the Credit Application and Credit Report, looking for suspicious gaps, mismatched addresses
  • Questions about personal information that go back beyond the seven year limit on credit reports

Whatever your program is, follow it.

It is so easy to run afoul of the regulations.  Let me count a few of the ways:

  • Failure to clearly define and enforce the processes for detecting “red flags” in identity verification
  • Failure to properly enforce privacy rules
  • Failure to have a written security plan, under the Safeguards Rule, to protect the confidentiality and integrity of customer and employee data
  • Failure to appoint and rely on a real Compliance Officer
  • Failure to identify and enforce processes regarding the disposal of information in consumer reports
  • Failure to provide proper notice to customers when their credit report is run and/or when adverse actions are taken (by the way, this also includes cases where your Finance Manager runs a credit report and makes an independent decision not to even try to finance the customer, or substantially change the terms of the deal
  • Failure to file Form 8300 on time or at all

I could go on, but I think you have the idea.

 

So, what can you do?  One option is to just throw up your hands and elect to never offer financing.  That will probably work from a regulatory perspective, but it is not a great business decision.

 

A second choice is to offer financing exclusively through a reputable third party financial services provider.  This will cost you some on the profit side of the equation, but you shift the regulatory compliance issues away from your dealership.  You also eliminate the risks associated with having consumer information sitting around on desks in your store that often may not be the most secure.

Your third choice is to take it all on yourself.  You definitely can do this…but don’t do it halfway.  Once you are committed, go all in.  Create all of your written policies and documentation and enforce them rigorously.  Hand-in-hand with this is the appointment of a Compliance Officer as a serious and senior position.

Finally, you can blend the second and third choices and use third party expertise to inform your in-store actions.  Contract your third party provider to serve as your Compliance Officer.  You still carry some risk, but you capitalize on external expertise to mitigate your exposure.

Or, you can do just some of what you are supposed to do and turn a blind eye to the gaps.  You can adopt the attitude that you are “not big enough” to care about, or that your violations are not really that consequential.  This is a fine choice too…just let me know when you would like me to bring you a cake for your federally imposed, striped attired vacation (oh…there won’t be a file in it-sorry.)