Car Biz Today | May 2016

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CAR BIZ TODAY The Official News Source of The Retail Automotive Industry

May 2016

Volume 3, Issue 5

Entire contents ©2016 Car Biz Today. All Rights Reserved.

A TEAM APPROACH TO F&I IN THE SERVICE DRIVE

JOHN STEPHENS

GOOGLE CHANGES SEARCH AD LAYOUTS What do these changes mean to your ad costs and queries? ...see PAGE 08

... See Page 14

SELF-DRIVING VEHICLES OFFER OPPORTUNITY Advanced technologies will require dealers to carry new insurance coverage and risk management strategies

25 QUALITIES

OF A-LIST EMPLOYEES

MICHAEL ROPPO ... See Page 18

CREATING CHEMISTRY TO BOOST YOUR BOTTOM LINE

...see PAGE 28

BALLARD SUBARU OF SEATTLE

fights consumer flight with value and price

ANNE FLEMING ... See Page 36

KEY MEASURES

TO ENSURE YOUR FIXED-OPS HEALTH

JOHN FAIRCHILD ... See Page 20

CBT Automotive Network 5 Concourse Parkway Suite 2410 Atlanta, GA 30328

...see PAGE 06

...see PAGE 22

20 THINGS TO KNOW ABOUT UDAP ...see PAGE 30

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CAR BIZ TODAY M

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Letter from the editor

Vice President/COO Bridget Fitzpatrick

My mother was a stickler for the truth. She would be less mad if we told her of our transgression upfront than if she found out from someone else. And, she would always say, she would eventually find out. The truth, she preached, always comes out.

Managing Editor

Email newsroom@cbtnews.com Phone 678.221.2955 President And Publisher Jim Fitzpatrick

Dear readers,

MARY WELCH

CAR BIZ TODAY MAGAZINE

Transparency is what is setting Carter Subaru in Seattle, Wash., free. Two years ago they decided to take their case to their customers and compare service prices on their websites — the good and the bad. They told the truth when a service cost more than the independent shop down the street and they laid it out when they were more expensive. The purpose was, not only to erase price as a reason to go elsewhere, but to show customers that there is value in coming back to the dealership’s service department. To Carter, which has two Subaru dealerships and one Volkswagen, it’s all about relationships, value, trust and the truth. I know you we enjoy reading what they are doing and their success rate at returning customers back to the service department.

There are a lot of good lessons to learn in this May issue. Jim Radogna lists the 20 things all customer-facing employees should know about compliance and the Unfair and Deceptive Acts Practices. In this case, knowledge is not only power, it’ll save you from some unneeded headaches.

Anne Fleming doesn’t have a Top 20 list, but she does have her version of an elements chart, all designed to help establish a proper relationship with women customers. I didn’t count the number on Michael Roppo’s list but he has several characteristics of someone who brings their A game every day and wins. John Fairchild offers a check-up on your service drive’s health.

Managing Editor Mary Welch Creative Director Brandy Brewer Graphic Design Ashley Race Director of Marketing & Events Karen Locadia Digital Marketing Associate Erin Mumphord Subscription Manager Emily Wiggins Producer Danny Ramos

These are just a few of the awesome stories in this month’s issue. Please read it and share it with your colleagues because these esteemed columnists are sharing your their years of experience and learning and yes, they are telling the truth.

Production Assistant Chris Riggins Jillian Kaszubski

Mary Welch

News Anchor Joe Gumm Bridget Fitzpatrick

ADVERTISING Jim Fitzpatrick jfitzpatrick@cbtnews.com d 678.221.2955

In This Issue 06

16 Industry News Changes in Google Ads

By Aurko Chatterjee, Director of SEM, DealerOn

8 The Future of American

18 25 A-List Employee

Qualities To Hire For

By Michael Roppo,

Director of Fixed-Ops & Training, Automotive Domain Results

20 Key Measures To Ensure

Your Service Department’s Health

By John Fairchild,

Auto Dealershkips

By Jody Devere, CEO of AskPatty.com

10 New Models Attractive For

Digital Content

By Dennis Gailbraith, Cheif

Marketing Officer of Dealer E-Process

14 Using F&I to Grow Fixed-

Ops Sales Potential

By John Stephens, Senior VP, EFG Companies

President, Fairchild Automotive Services

22 Dealership Profile: Seattle Dealer Fights Customer Flight With Price & Value

By Mary Welch

24

Passing Your Business Through Generations

By Chuck Sujansky, CEO, KEY Group

26 Ask The Pros

28

Self-Driving Cars Present New Income Opportunities

By Jonathan Charak, Zurich American Insurance Company

30 20 Things You Need To

Know About UDAP

By Jim Radogna, President, Dealer Compliance Consultants, Inc.

32 2016 NADA Coverage 35 Association News 36 Creating Chemistry to

Boost Your Bottom Line

By Anne Fleming, President, Women-Drivers.com

38 On The Set

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Please send address changes to the above email or mailing address.

Permission to reprint or quote excerpts granted only upon written request.

Advertising rates are provided upon request.

– TJ Quinton, Sales & Leasing Davis Buick GMC Ltd., ALB, Canada “I went from $19,200 in one year to $23,000 in just 3 months with JVTN®…”

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• Working the deal at the desk to deliver more at max gross.

• Transitioning to Finance, then to Service before delivery.

RDE SAL VE ES E

1985–2015

198 5 – 2015

• We had another great year at our 30th NADA Convention in Las Vegas. Best of all, we got to say ‘hi’ to hundreds of 2nd and 3rd generation dealers who’ve been with us for 20 or 30 years. They say that they keep training with us because their bottom line always proves it’s worth it. Thanks for stopping by, it was great to see all of you again!

• We participated in the ADESA / NADA auction again this year for Canine Companions for Independence. They provide service dogs for veterans and others who need them most.

What a great auction it was. It raised 10 times as much money as it did the first time just 5 years ago. The $12,000 Harley brought in $128,000 plus. Thanks again to everyone who participated or supported it again this year.

• Then, some things never change...

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DIGITAL MARKETING

CHANGES ITS SEARCH ADS LAYOUTS -

Now What?

What Do These Changes Mean To Your Ad Costs And Queries?

BY AURKO CHATTERJEE

G

oogle recently confirmed a major shift in how ads display on desktop searches for commercial queries. We thought we’d share some insights on how we think this might impact dealerships who spend ad dollars on pay per click advertising.

FIRST, LET’S DEFINE “COMMERCIAL QUERIES” FOR CAR DEALERS:

Per Google, these are keywords that show a heavier commercial or shopping intent. We ran a quick test and found almost all major keywords a dealer should buy have moved to the new format and are treated as “commercial queries”

ad placements available), and the same demand (the number of cars manufacturers are producing isn’t going down because of this change), your actual cost-per-click is going to increase.

Google has always charged more for the ads on the top of the search results compared to the ads on the right-hand side. It is critical that you vigilantly monitor your Adword performance in March to make sure that your cost per visit, lead, phone call and acquisition are not ballooning.

LOWER SUPPLY + STABLE DEMAND = LIKELY HIGHER COST-PER-CLICKS:

YOUR BID AND BUDGET MANAGEMENT TOOLS/ PHILOSOPHY JUST BECAME THAT MUCH MORE IMPORTANT:

The simple facts here are that for each Google search, there are now only 7 ads can appear on the first results page, as opposed to the previous 11. Basic economics dictates that if there is less supply (4 less

Both AdWords and tools like Kenshoo, Marin, Searchforce and Acquisio (depending on what your agency uses) offer a bid-to-position algorithm or a bid to CPA model. Most agencies have pivoted to

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setting a target for position 2 or position 3. You might actually find that bidding for position 4 gets you a slightly lower cost-per-click without impacting the volume and quality of traffic your ads generate. If your current provider does not use any bidding method or system – it’s high time you adopt one, otherwise you are looking at a drop in traffic or being outbid regularly.

LOOK AT BOTH YOUR AVERAGE POSITION AND YOUR IMPRESSION SHARE:

Dealers that currently see their average position regularly in the top 3 may not have much to worry about. As we pointed out earlier, it might actually benefit you if your Quality score stays intact and your cost-per-click (CPC) drops should your ad move down to position.

But don’t focus solely on ad position. Viewing ad position data in isolation can be dangerous. You need to look at your impression share as well to make sure that your impressions, clicks, visits, leads etc. aren’t being hurt by a lower average ad position. You might find over time that your ad position isn’t impacted much but your impression share is falling if your CPC’s rise if you don’t adjust your strategy. You don’t want to lose sales opportunities by focusing your Adwords strategy solely on Ad Position without also viewing Impression Share – this would be akin to missing the forest for the trees.

CURIOUS TO SEE IF YOU’RE GOING TO BE SERIOUSLY IMPACTED? USE THE TOP-VS-OTHER SEGMENTATION IN ADWORDS:

The simplest way to see if you’re really going to be impacted is to segment your campaigns in AdWords by “Top-vs-Other” and measure what percentage of your ads are not being served in the top spots (prior to Feb 15th). If you find that a large percentage of your impressions (greater than 30%) are coming from “Google Search: Other,” you definitely need to adopt a slightly more aggressive bid strategy.

BING ADS AS AN INDICATOR:

Bing tends to be the after-thought in many instances.

However, Bing has been showing 4 ads on the top of the SERP for the longest time and in this case might actually prove to be a treasure trove of data at least to glean cursory insights. If you’re running campaigns on Bing Ads, it might be a good idea to see how traffic flow and metrics vary at different ad positions (including position 4). To do this, the best way is to use Bing Ads keyword distribution graph option and filter down to see the difference in traffic and CTR at the various average position levels.

STAY CALM AND FOCUS ON MOBILE FIRST, DIVERSIFY LATER:

the space, some that might even point you to spending larger chunks on Bing, Yahoo or Facebook Ads. In all the hype and hoopla don’t forget the single most critical factor to the future of your business – the world and your traffic is going mobile. If you’re watching your analytics data closely you’ve already seen a massive shift in traffic patterns (in the case of our customers, almost a 60:40 ratio between mobile and desktop).

In conclusion, it’s important not to make hasty bid and budget decisions. No agency or in-house team has yet had a chance to collect a statistically significant sample size and form definitive conclusions about the impact of this change. We can only predict and estimate what the impact might look like.

Our advice to dealerships is: 1. Ask your SEM team about the impact.

Have them show you the change within your metrics (CPC, Cost per Visit, Call, Lead, Acquisition, even Cost per Vehicle sold if your provider can track at that level—if they can’t give us a call!).

Google strategically moved to enhanced campaigns a while ago, anticipating this trend. Moving your advertising spend away from Google because some of the desktop traffic may cost slightly more would be a knee-jerk reaction that could waste a lot of money. Most dealers are already under-invested in Google’s mobile advertising, so rebalancing your Google Ad spend to focus more on mobile may actually provide better results than what you had before this change.

Microsoft and Bing aren’t quite the masters of mobile yet, so it’s imperative that you maximize your efforts on Google (with an emphasis on mobile) and then diversify over time – remember -- just because Google reduced the number of ads, doesn’t mean consumers are going to change their search habits. Your goal is to be where your consumers are, and Google’s share of mobile search is roughly 90%!

WHAT SHOULD WE DO?

2. Try testing different bid management approaches and have your vendor/ in-house team run a pre and post optimization analysis.

Dealers with small SEM budgets (less than $2500/month) need to be especially vigilant about how this change impacts their traffic patterns.

3. Try investing more in Mobile Adwords Campaigns and see whether you can maintain or even increase your Cost per Acquisition by focusing more on where the consumer market is going.

We will be monitoring this closely across our own accounts and will publish more studies as a critical volume of data is available. Stay tuned!

ARKO CHATTERJEE

Director of SEM at DealerOn In this role he oversees product and operation of the Digital Advertising team. Prior to joining DealerOn, Aurko served as the Manager of Ad Strategy at Haystak Digital Marketing (A Cox Auto company). Before that he worked for Google as an advertising strategist helping small businesses with their advertising needs.

There will be a lot of blog posts written by folks in

“The simple facts here are that for each Google search, there are now only 7 ads can appear on the first results page, as opposed to the previous 11.”

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CUSTOMER RELATIONS

H C A O R P P A C I R T N E C R E M O T S U AC Y T L A Y O L R E M O T S U TO C

THE FUTURE OF THE AMERICAN AUTO DEALERSHIP: CHANGE YOUR CULTURE

BY JODY DEVERE

T

he need to make major changes in culture at the dealership level is now. These changes are not just for profit and growth; they are for survival. We know the Internet has changed us all. In fact, many professionals in the auto industry believe that vehicle consumers in the future – as soon as five years – will not only be making their purchase choices for new and used vehicles Online, including financial approvals and payment plans, but will have their vehicles delivered to their door, never having to even show up at the dealership.

This is not a new premise, as pioneering companies such as Model E in San Jose in the early 2000’s were doing this very thing. Model E also set up car care and maintenance programs in which the customer’s vehicle was secured in a van and transported to and from the desired service, as well as providing a comparable quality loaner vehicle. And there is a move nationally with more and more auto organizations doing this, exampled by companies such as vroom.com and beepi.com.

READY OF NOT, CHANGES ARE COMING. Are you going to be ready for changes? An excellent detailed dissertation of this developing automotive “phenomena” is taken from a recent online quote from Randall J. Miller of EY, an international consultant firm: “Automotive retail will shift from a product-driven to a customer-centric approach to drive customer loyalty and to adapt to changing customer behavior and expectations. The rise of new mobility preference of private and commercial customers (e.g., private-and business-car sharing, electric vehicles and an increasing role of used cars and fleet) are causing automakers and automotive retailers to rethink their current business model.”

Another adjustment we will have to accomplish at once is with women, and their part in our growth.

It is no longer “Them.” “They” are now “We.” The

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industry can also no longer avoid the importance and developing awareness and demands of the woman vehicle buyer, who is responsible either directly or by influence for 85 percent of all vehicle purchases.

Additionally, their position and shared needs in the strongly influencing Millennial group is now a major factor in the need to not only offer an auto purchasing environment that will actually attract them as sincere buyers and develop long-term loyalty, but also provide them with respect and equal considerations in pricing in both sales and service. Women are tired of the unpleasant treatment they have received from

macho salesmen and even dealerships. They are aggressively demonstrating their aversion to this annoyance by shopping either online or directly with others, until they finally communicate with a business that provides them this respect. The cheap-dressing cigarette-puffing macho salesman of the past has to be eliminated.

TECHNOLOGY’S ROLE And what about technology? Sarah Jones, reporter for “Luxury Daily,” writes of the Apple Store effect in “Dealerships of the Future May Resemble an Apple Store.” “The Apple Store ethos – seamless customer interaction, effortless problem solving,

CHANGING THE CULTURE So. How do we change our culture to ensure a successful future in our dealerships? Here are some of many suggestions we need to implement as rapidly as possible:

"The majority of today’s buyers are women and they are not into negotiating, nor do they enjoy any parts of the process at all." speedy service – has become the benchmark for retailers of all stripes. This customer experience is an integral to Apple’s success as its elegantly simple product designs, compelling the company’s faithful to line up to buy its new products.”

Jones’ report also underlines Frost & Sullivan interviews with automotive OEMs, stating that “By 2016, 20 to 30 percent of the space in a traditional dealership is expected to be allocated for technology. Automakers in Europe and the United States are preparing for this shift toward in-store technology with investments planned for 2016 anywhere from $500 million to $5 billion.”

Hey. It IS 2016. Let’s wake up. We are already there.

IT’S ALL ABOUT PLEASURE It’s finally happening: The demise of “Horse Trading.” The days of this type of behavior occurring at the dealership level is rapidly becoming unacceptable to consumers. The majority of today’s buyers – with the largest segment being women - are simply not into negotiating, nor do they enjoy any parts of the process at all. Nor have they forgotten the tensionfree pricing experiences of Saturn and Scion’s “Pure Price,” and other programs with Mini and

TO SEE MORE FROM JODY DEVERE GO TO CBTNEWS.COM

1

We need to lean forward from our chairs, eager to examine new trends. Putting awareness off to a more “convenient” time will leave our organizations in the dust behind those which are exploring new avenues, new trends, and listening to ever-changing needs.

Complacency contributes directly to eventual failure.

2

Eliminate antiquated customer interface programs that may be interpreted as “game-playing,” such as “4 Square,” and stop telling our customers that we will “talk to our managers” for better pricing. Transparency is the operating word. Continuing to use these programs insults our customers. They are more informed and knowledgeable than ever before, and will take their business elsewhere if they feel a lack of respect.

3

Start thinking from the needs of the customer, and avoid programs that pit “them versus us.”

Example? Evolve from the wornout “Customer is always right,” to

Tesla, which are experiencing great success in attaining both customer approval and increased profits.

Realists in the industry know where this is heading. Customer pressure is off, and they are enjoying genuine positive customer experience. A positive customer experience not only translates into additional program participation but increased loyalty return and positive referrals.

Not to mention glowing Yelp postings for their organizations.

It has to become a pleasurable experience. As Jeff Zurschmeide points out in “Digital Trends”: What is the bottom line? “Competition to bring you the car you want at a better price and with less stress. (This) is driving innovation throughout the automobile industry. More efficient competition to buy your old car and sell you the next car is going to give you better prices at both ends of the transaction.”

Keep in mind also that today’s higher quality manufacturing processes have provided us with dependable vehicles in almost every brand, taking that much of that concern away as a major consideration.

There you have it: At least partial considerations for changing the culture and the future of your business.

“We can both be right.”

4

Re-focus our programs to focus on trust issues, improved positive customer experience at all levels of the organization, and consistent transparency.

The information presented in this article is solely the opinion of the author and is not intended to convey or constitute legal advice, and is not a substitute for obtaining legal advice from a qualified attorney. You should not act upon any such information without first seeking qualified professional counsel on your specific matter.

JODY DEVERE

CEO of AskPatty.com Inc. Her company runs a website and blog, and offers training, education and marketing support on how dealerships and other automotive retailers can more effectively target women consumers. She speaks at conferences held by sponsors ranging from the National Independent Automobile Dealers Association and Mercedes-Benz to the Car Care Council Women’s Board. Visit her website at www.askpatty.com.

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DIGITAL MARKETING

THE GLOW OF

NEW MODELS

New Models Bring Attention to Showroom and Sales for All Inventory

BY DENNIS GALBRAITH

N

ew model launches are critical to any brand’s success. New models tend to absorb a disproportionate share of the manufacturer’s advertising budget and attention, and rightly so. It’s also critical for the dealership. When it all goes right, the dealer often realizes higher sales and average gross profit per unit in the early phase of a vehicle’s life cycle than it will later on. Additionally, new model launches can attract attention to the store, resulting in the sale of other vehicles and position the dealership as a leading authority.

The time to start working on a new model launch is months or even a year before the product arrives.

In the era of digital advertising, online shopping, and social media, dealers who are proactive regarding model launches enjoy a bigger advantage than ever before over those who simply react once the product is available. The cost to generate marketing advantages in advance of a vehicle launch is usually very inexpensive, or simply generated by in-house staff.

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CUSTOMIZE YOUR CONTENT; LET SHOPPERS KNOW WHAT’S COMING!

Custom content on the dealer’s own website often formulates the core of the dealer’s proactive strategy. Letting shoppers know what kind of product is coming to the store may sound like

Your content should appeal to fans and enthusiasts and enhance the factory and store brands.

HOT> Facebook 66% cheaper 44% BETTER NOT> Google AdWords Are your AdWords costs per click skyrocketing? Savvy dealers are shifting their spend to Facebook.

AD

But many dealers and their vendors have already been experimenting with Facebook. Some have thrown up their hands and said, “We can’t make Facebook work. It’s just cheap traffic that doesn’t convert.”

To win with Facebook, you need the right technology.

LOTLINX BRINGS 3 ELEMENTS TO HELP DEALERS DRIVE MAXIMUM VALUE FROM FACEBOOK: • Laser-focused targeting to find the truly qualifed car buyers • Dynamic VIN-specific ad-serving to put your matching vehicle in front of them • Deeplinking directly to your VDP when clicked With LotLinx Deeplinking™ for Facebook, dealers are reducing their costs by 66% while increasing their VDP conversion rates by 44% over AdWords.

Go to http://www.lotlinx.com/fb to see how much YOU could save.

LOTLINX Deeplinking

FACEBOOK

PROMOTING NEW MODELS PRIOR TO LAUNCH Everything else being equal, the first content to go live online enjoys a lasting SEO advantage over later content.

This benefit often persists long after the model launch.

A portion of the shoppers interested in models before they launch are early adopters who will be willing to pay a premium to be among the first to own the new vehicle.

A portion of the people interested in models before they launch are vehicle enthusiasts who may or may not purchase the vehicle themselves, but often influence the purchases of others.

Content regarding pre-launch vehicles helps to establish your dealership as a place for expert advice. Millions of shoppers recall poor shopping experiences where the salesperson knew less about the vehicle than they did.

The dealer’s website must set the store apart from the shopper’s perception of dealers in general.

Ranking high in organic search results helps establish the dealer as a trusted authority before the shopper even arrives on the page.

If the dealership puts on events for new model launches, custom content can be used to generate a list of interested people far in advance of the launch event.

Regardless of the percentage in attendance who are likely purchasers of the vehicle, a large and/or influential crowd can positively persuade those who are likely purchasers. This also warrants an effort at attracting local press coverage.

Website content regarding coming models may be newsworthy, and is certainly social media worthy. When the vehicle is not yet for sale, friends and followers are more likely to see the information as interesting news rather than a sales pitch.

Information about the exciting new model can provide credibility for why the existing model is such a great value at its current price. A low price can signal undesirability, but if the only vehicle truly able to best the existing model is the one to come, then the current model price is explained.

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“In the era of digital advertising, online shopping, and social media, dealers who are proactive regarding model launches enjoy a bigger advantage than ever before over those who simply react once the product is available.” a risky move. After all, there is usually something comparable already in the showroom still needing to be sold. However, the chart below demonstrates the many advantages associated with promoting future models on the dealer’s website.

Of course, not all launches are the same. The Acura NSX is a halo car. It was not designed for high unit sales like the MDX, RDX, or ILX. A large part of its purpose is to raise the image of the brand, which can ultimately increase demand for other models.

Leading Acura Dealer, Pohanka Acura, created a plethora of unique content for the NSX tailored to communities the store competes in. The graphic below shows all this content linking from the main menu bar (via mega menu) for superior SEO advantage. Any content linked directly from the main menu bar of the website is seen by search engines as having more authority than if it had not.

the page is both written and tagged properly.

Written properly no longer means stuffed with keywords. Search engines are much smarter than they were even a few years back. The custom content that best meets shoppers needs is more likely than ever to also be the custom content scoring highest in organic search results. Eliminating any space between these two objectives is Google’s stated goal, and they are making rapid progress. Nonetheless, content authors still benefit from doing their keyword homework before they write.

Compliance with manufacturer standards and guidelines is essential. There is no point in establishing the benefits of posting early only to see the content brought down later. Professional writers in this industry know what the manufacturer’s standards are for existing vehicles and new model launches. More than ever, SEO and compliance go hand in hand. One cannot sustain the former without adhering to the latter.

Automotive retail is dominated by month-tomonth thinking, and the importance of monthly goals is as important as ever. It is how dealerships survive. However, long-term planning and investing is how the best dealerships thrive. No matter how well one executes in June of 2017, the results will not be as spectacular as they could be if the appropriate new-model content is developed in June of 2016 and the months that follow.

These articles appeal to fans and enthusiasts. The store knows most readers will never purchase a new NSX, but the articles meet the needs of those who might, while enhancing both the factory and store brands among those who will not.

Other launches are for big-selling models in hotly contested vehicle segments. The Toyota Tacoma competes head-on in the rough and tumble pickup truck market. The graphic below shows the custom content on Thomas Toyota of Joliet’s website placing even higher in organic search results than the factory content.

Note that the search is extremely generic and covers the dealer’s entire state, “2017 Tacoma IL”.

SEO ADVANTAGE STANDS FIRM Once this kind of SEO advantage is established, it is difficult to displace it. To achieve this advantage,

Make sure everything on your page is written and tagged properly so get as many views as possible.

DENNIS GALBRAITH

Chief Marketing Officer at Dealer E-Process Dennis produces a weekly video series for dealers called “Automotive Marketing Facts” and is the author of two marketing books, “Sales Integration” and “Online Automotive Merchandising.” Previously in his career, he ran the automotive Internet division of J.D. Power and Associates, was VP of advertising products and training for Cars.com, and owned two companies that served dealers and vendors. He also has taught marketing for the NADA Academy.

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F&I

A Team Approach To F&I And The Service Drive How to Use F&I to Grow Income Potential

BY JOHN STEPHENS

C

oming out of the 2016 NADA Convention, one of the most discussed topics was the importance of F&I and fixed operations in a sales environment that has the potential to plateau.

Everyone from Roger Penske, chairman of Penske Automotive Group, to Bob Carter, senior vice president of automotive operations at Toyota Motor Sales, U.S.A., agrees that if the retail automotive market experiences a plateau in unit sales, the industry will need to focus their efforts on F&I and fixed operations to augment income potential.

This is especially important given the current auto finance compliance climate, with lender settlements capping or shrinking dealer finance reserve.

MISSED F&I OPPORTUNITIES IN USED SALES In addition, dealers are coming to the realization of a missed opportunity in F&I within their used vehicle sales, as manufacturers of some of the top selling used vehicle makes are changing their warranties to reduce terms based on either the model year, or the current owner.

For example, Chevrolet has changed its powertrain warranty 2016 model-year vehicles, reducing the coverage by 40,000 miles. This type of change is prevalent in domestic brands, like General Motors and Chrysler. Among Asian brands, the manufacturer’s powertrain warranty changes based on the current owner. For example, Hyundai’s powertrain 10 year/100,000 mile warranty only covers the first owner. The second owner only receives a 5 year/60,000 mile warranty.

Combined with the potential unit sales plateau and regulatory environment, this is creating an opportunity for dealers to increase their F&I profit margin by addressing a growing exposure risk and pressing consumer need. The good news is that F&I

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and fixed operations have the potential to work well together to exponentially increase dealership profitability, regardless of economic or compliance pressures.

Starting in F&I, consumer protection product sales have the potential to directly correlate with service drive traffic. For example, most everyone knows the benefits of a vehicle service contract (VSC) driving people back to the service department in the event of a major mechanical breakdown. That’s part of the reason why VSCs are widely considered table-stakes.

However, there are a plethora of other consumer protection products that can be just as effective at driving traffic and repeat business, as they directly relate to current consumer challenges. According to research firm IHS Automotive, the average age of vehicles on the road in the U.S. has climbed to 11.5 years. Consumer ownership trends have permanently shifted in recent years to longer loan terms and longer ownership cycles.

PUTTING CUSTOMERS FIRST Today’s consumers are demanding more value from the brands and companies to which they choose to give their business. This has resulted in shifts in servicing models in almost every industry in the U.S., from transportation to technology and retail services. Now, the retail automotive industry is undergoing significant change, and those dealerships that face that change head-on will find themselves leading the industry in the years to come. One of those changes is in the F&I space to provide consumer protection products that consumers and dealerships find beneficial.

According to Melinda Zabritski, Experian Automotive’s senior director of automotive credit, “getting the most out of the vehicle they purchase still appears to be top of mind for consumers.” Everyone knows that F&I managers are now faced with a more informed and demanding consumer.

But, what few have taken into consideration is

that this could be a good thing. With consumers hyper-vigilant about stretching their dollars, and getting more value from the companies with which they choose to do business, dealerships have the opportunity to create lasting relationships by aligning with their needs.

The consumers sitting across from the F&I manager know what it takes and the difficulties involved in maintaining older model vehicles. Imagine talking to a consumer who has dealt with three or more costly vehicle repairs within a single year. While they are concerned with current-model dependability, they still expect to keep their vehicles longer than historically normal.

KNOW YOUR CUSTOMERS’ NEEDS By structuring your F&I products to meet their current needs, you can significantly enhance your dealership’s brand and generate lasting consumer relationships. Of course, this starts with knowing your customers. Before shopping around for a new product menu, it’s important that dealerships conduct the research to understand their customer base.

Research the demographics in the area where the dealership is located. Evaluate the top-selling vehicle models and the price points at which they are sold. Compare those top-selling models to their service drive history. Is there a function that needs addressing sooner or more often? Do customers who purchase these vehicles tend to be concerned with trade-in value? This research can provide a general picture of a typical customer and where their needs lie.

With the sheer number of F&I products available, it is vital that dealerships take their customers into consideration before tailoring a menu. This helps product sales and demonstrates to customers that their needs are put first, alleviating any concerns in the F&I office. In addition, by consulting with the service department, dealers can better determine which products will have a higher claims rate than others.

“By structuring your F&I products to meet their current needs, you can significantly enhance your dealership’s brand and generate lasting consumer relationships.”

THE F&I PRODUCT MENU Other than a VSC or GAP policy, some of the most common F&I products include: • pre-paid maintenance; • tire and wheel protection; • paintless dent repair; and, • paint and interior protection.

Each of these products has the potential to increase service drive traffic, and provide beneficial protection and services to both lease and finance customers. Although to truly be effective, their benefits need to be adequately presented to customers so they know what they are purchasing.

For example, with pre-paid maintenance, which potentially has the greatest opportunity for service drive traffic, customers have the ability to avoid the rising cost of oil changes and routine maintenance by paying for them in advance and at a reduced price. In addition, by utilizing prepaid maintenance, customers are better able to meet manufacturer requirements to keep warranty coverage, and keep track of vehicle maintenance records with automatic record keeping. In addition, customers have a better ability to negotiate their trade-in with a well-maintained vehicle.

With tire and wheel protection, paintless dent repair, and paint and interior protection, customers have the ability to protect their vehicle from environmental factors, such as road hazards, small-but-visible body damage or paint/fabric fading from exterior elements. With these three products, customers can again help preserve their vehicles resale value, and ensure they have a safe ride.

If a customer knows all the benefits and that the product is meant to be used, why shouldn’t they return to the dealership to use it? According to NADA, regular service customers are 17 times more likely to buy their next vehicle from their servicing dealership. In addition, an increase in customer retention rates of just five percent improves dealership profits by 35 percent.

Now, there have been examples in the past of a few F&I managers skimming over benefit presentations or packing F&I product payments into an auto loan.

Other than significant compliance ramifications, that practice also hurts overall dealership and service drive profitability, for when customers don’t even know what they have, they are less likely to return to the dealership to use the product.

PRODUCT UTILIZATION If dealerships are struggling with F&I product sales, or product utilization in general, it could be due to not having the right mix of products in place, lack of product training, ineffective compensation incentives, or poor handling of product claims and negative consumer service from the administrator.

Each of these areas work hand-in hand. Effective product administrators: • are nimble in developing products that can accomplish your business goals by meeting your customer needs; • provide training and one-on-one coaching with your F&I and sales managers on the benefits of the products, how to sell them, and how to overcome objections;

• work with dealership management to implement incentivizing pay plans based on training and performance; and, • are transparent with the company’s administration practices, including call handle times, number of claims paid, average claim amount paid, speed of payment, industry experience and certifications.

The customer service provided during the claims process can have significant impact to your brand and your customer retention levels. The better the service provided, the better experience the customer associates with your dealership, and vice versa. That is why it is vital that dealerships work with product administrator’s whose business practices and values are aligned with their own.

Dealers have the opportunity to cultivate longterm repeat business and referrals by evaluating how their F&I department can better serve their service drive with relevant and valuable products.

By implementing an F&I menu that is tailored to your customer base and backing it up with effective training and compensation models, along with effective product administration, dealers have practically unlimited growth potential from F&I and the service drive.

So, whether vehicle sales level out or more lenders begin capping finance reserve, those dealerships that invest in their F&I and service drive departments now, will be better able to meet their profitability goals without putting excessive stress on their dealership.

JOHN STEPHENS

Senior Vice President of Dealer Services at EFG Companies John directs the company’s direct sales and service channel, providing EFG’s solutions and engagement to auto dealers. John serves as a strategic copilot in guiding his clients’ businesses to greater profitability, and they will tell you that they rely upon his recommendations and leadership as a trusted partner.

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INDUSTRYnews FCA US NAMED ONE OF AMERICA’S TOP CORPORATIONS SUPPORTING WOMEN-OWNED BUSINESSES The Women’s Business Enterprise National Council (WBENC) has named FCA US LLC one of America’s Top Corporations supporting Women’s Business Enterprises (WBEs).

WBENC’s Top Corporations award is the only national award honoring corporations that promote policies and programs that support the growth and sustainability of women-owned businesses.

WBENC was founded in 1997 and is the largest third-party certifier of businesses owned, controlled and operated by women in the U.S. “FCA US is committed to creating a diverse and sustainable supply base that directly reflects our customers,” said Tom Finelli, Vice President, NAFTA Purchasing and Supplier Quality, FCA US. “Supporting members of organizations like WBENC enables FCA US to operate efficiently, while bringing innovative new products to market that resonate with a diverse customer base. These programs also ensure that the economic benefits of our business are shared with members of our communities.”

FCA US was was among 62 organizations that met the rigorous standards to be recognized as one of America’s Top Corporations for Women’s Business Enterprises. This elite group spent more than $34 billion in this area in 2014.

FCA US supplier diversity goals require that 8.5 percent of a Tier 1 supplier’s procurement buy be sourced to certified minority suppliers. The goal for women-owned suppliers is 3 percent. FCA US itself spent $2.9 billion with approximately 215 minority and women–owned suppliers in 2015, representing 8 percent of the Company’s total annual purchasing.

Since 1983, the Company has purchased nearly $53 billion from minority-owned, women-owned and veteran-owned suppliers. The Best Deals in Off-Lease Used Cars

HOLMAN AUTOMOTIVE ACQUIRES KUNI AUTOMOTIVE Holman Automotive, of Maple Shade, N.J, will acquire Kuni Automotive, of Vancouver, Wash., in a deal that not only creates one of the largest privately owned dealer networks in the country, but also ensures a long future for a major charitable foundation.

The acquisition, expected to be finalized this summer, will create a bi-coastal dealer network with 33 dealerships and more than $3 billion in overall annual revenue, doubling Holman Automotive’s retail holdings. Holman currently has dealerships in New Jersey, Pennsylvania and Florida. Kuni Automotive, with dealerships in Washington, Oregon, California, Colorado and Kansas, will maintain its brand name and will be known as “Kuni Automotive, a Holman Enterprise.” The terms of the deal will not be disclosed.

As a result of this deal, the majority shareholder in Kuni Automotive, the Wayne D. Kuni and Joan E. Kuni Foundation, a charitable foundation that has supported cancer research and worked to enhance the lives of developmentally disabled adults since 2005, will be able to fund its work well into the future. Additionally, the foundation expects to be able to broaden the scope and geography of its charitable outreach.

COX AUTOMOTIVE DELIVERS DIGITAL RETAILING SOLUTION Cox AutomotiveTM announced it is bringing together Dealertrack® and Dealer.com® with MakeMyDeal®, the innovative online deal-making platform, to deliver a powerful and comprehensive Digital Retailing solution. The combination of these products will allow consumers and retailers to safely and securely start and agree to deal terms online, then smoothly transition to in-store to finalize the deal and deliver the vehicle.

The Digital Retailing solution integrates MakeMyDeal into Dealertrack’s secure credit application and its Sales and F&I portal. This enhancement will allow consumers to quickly, easily and securely submit a credit application through the dealership’s website after coming to agreement on the terms of a deal. Dealership personnel can then work the deal in-store through the Dealertrack Sales and F&I portal, the Digital Retailing Showroom app, and with CRMs, such as the VINSolutions CRM.\ MakeMyDeal will also be incorporated into the Dealer.com Websites solution as part of several enhancements to be announced soon, that will make the website experience more engaging, secure and efficient.

NEW THIRD-PARTY SERVICER OF SUBPRIME AUTO LOANS DriveTime, the nation’s largest used car dealer and financing company that helps people with credit issues find and finance vehicles, announced the official launch of Bridgecrest Acceptance Company. The new company will be a licensed third-party servicer, servicing loans for DriveTime and other affiliated finance companies.

In addition to managing DriveTime’s existing lending portfolio, Bridgecrest Acceptance Company will also be fully compliant with FDCPA and able to service loans for DriveTime-affiliated finance companies. All retroactive and new loans that were previously serviced by DriveTime Acceptance Corporation will now be serviced by Bridgecrest Acceptance Company.

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VOLKSWAGEN DEBUTS THE T-PRIME CONCEPT GTE AT AUTO CHINA 2016 IN BEIJING Volkswagen previewed its future SUV at the Auto China 20016 show.

The T-Prime Concept GTE is a full-size sport utility vehicle with a plug-in hybrid powertrain and all-wheel drive. Volkswagen’s new Curved Interaction Area is a completely new digital display and control concept.

The innovative curved infotainment display merges with the interactive displays and controls, resulting in a new human-machine interface (HMI) that is intuitive, precise, and fun-to-use. This SUV show car combines the best of many automotive worlds: the comfort and spaciousness of a saloon, the superior traction of an off-road vehicle, the agility of a sport sedan and—thanks to innovative drive technologies—the efficiency of a compact car.

TOYOTA TEAMS WITH MICROSOFT

U.S. AUTO SALES KEEP WINNING

Toyota said that it had established a new subsidiary in partnership with Microsoft to accelerate data-science-based development of technologies for vehicles. The new entity, Toyota Connected, will explore advanced ways to integrate artificial intelligence and data analytics into various aspects of the automaker’s business, including vehicle infotainment systems, communication between cars and smartphones, and dealership operations. The ultimate objective is to “help to humanize the driving experience while pushing the technology into the background,” Toyota said in a statement. Microsoft holds a minority ownership stake in the venture.

U.S. auto sales will extend their winning streak in 2016 for a seventh consecutive year of increases, reaching a record high before sales begin to retreat in 2017 as interest rates tick higher and pent-up demand eases, according to a new report by TD Economics, an affiliate of TD Auto Finance and TD Bank, America’s Most Convenient Bank®.

Led by a strong economic backdrop and attractive financing conditions, TD Economics projects U.S. auto sales will reach a peak of 17.6 million units in 2016, before edging down to 17.3 million units in 2017.

The U.S. economy is on solid footing, with healthy growth of at least 2 percent expected for this year and next. Domestic demand has been the key driver of overall growth – a trend that is likely to continue going forward.

Ongoing job creation is projected to bring the unemployment rate down to 4.6 percent by the end of next year, while employment income

USED CAR INVENTORIES RISING Car dealers who’ve suffered through several years of depleted used-car inventories are seeing the situation reverse itself as a large volume of two- and three-year-old vehicles will be coming off leases in the months ahead, according to Forbes magazine. According to data compiled by the J.D. Power Information Network, the number of off-lease models returning to market will increase by around 800,000 units this year, which represents a 33 percent boost over 2015.

LEXISNEXIS RISK SOLUTIONS AND EQUIFAX LAUNCH POWERVIEW SCORE LexisNexis Risk Solutions, a technology, data and analytics company, and Equifax Inc., a global information solutions company, announced the launch of PowerView Score, a new, three-digit credit score tailored specifically for use in the automotive industry. The new scoring leverages alternative data sources, including telecommunications and utility payment history from Equifax and public records information from LexisNexis, to help automotive lenders identify creditworthy car shoppers.

PowerView Score will serve as a complement to traditional credit risk scores without requiring lenders to replace their existing models.

The new alliance now allows auto lenders to have one-stop access to Equifax’s National Consumer Telecom and Utilities Exchange (NCTUE) and traditional credit bureau data partnered with LexisNexis Risk Solutions decisioning data. Combining this data to construct the PowerView Score has demonstrated a strong ability to be highly predictive and allows for improved risk models that can be used to support credit analysis of applicants from prime through subprime. In back-testing, the new scoring showed significant improvement in model performance across portfolios.

growth is likely to remain above 4 percent. Combined with rising wealth stemming from a recovery in the housing market and stronger household balance sheets, consumers will be well positioned to loosen their purse strings and consider purchasing big-ticket items such as autos.

The low cost of credit, longer loan terms and the rise in leasing have all worked to lower monthly payments, making the purchase of a vehicle less of a financial burden for consumers. Interest rates on 48-month new car loans are hovering around record lows of about 4 percent, while the average loan length increased to 67 months in the fourth quarter of last year.

Average transaction prices have also been rising – up 2.2 percent in 2015. However, this is not entirely due to higher price tags. The shift in demand toward luxury vehicles and light trucks – with crossover SUVs and pick-up trucks recording the largest increase last year – means that consumers have been purchasing more expensive vehicles, which will ultimately raise the average price paid. Without the extension in loan terms, leasing and low interest rates, consumers may have instead opted for smaller, more affordable vehicles, according to the report.

SHELBY GRANDSON JOINS BOARD Aaron Shelby, grandson of the company founder has joined the board of Carroll Shelby International, Inc. In his new role, Mr. Shelby will work directly with Ford Motor Company and help expand CSI globally.

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MANAGEMENT

ONBOARDING

'A PLAYERS' SHOULD BE YOUR NO. 1 PRIORITY!

Check Off 25 A-Lister Qualities

BY MICHAEL ROPPO

W

ith all the industry gurus out there, which by the way I find some of them to be very knowledgeable, influential, encouraging and motivational, I’m continuously surprised how difficult it is to find the real ‘A’ players in the automotive dealership industry. I’m even more surprised by how many people think, that they are one those few the industry considers to being “A” Players!

Keep in mind that being an ‘A’ player is no easy thing to do. An ‘A’ player in one role may not be an ‘A’ player in another, but in my opinion, if you have these characteristics, then you’re likely to perform at a high level no matter what the context.

WHAT’S THE BIGGEST SINGLE FACTOR? The biggest single factor in determining a dealership organizations success (or failure) is the talent the management team possesses and the alignment of that management as a team. It is being able to manage through the sometimes volatile market conditions, external factors, which are beyond the business control, the business performance and planning strategy, its execution and management talent.

Of these, management alignment and talent has proven to have the greatest level of business impact. The question is who? Not what? What refers to your business strategies, the products and value added services you sell and the best practices you use and the people you put in place to make the

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what decisions. Who is where the value begins, or where the problem starts”.

player knows when to put aside the differences for the common good.

It’s been stated that onboarding mistakes can cost 10 times an employee’s base salary in “hidden activity based costs” lost productivity and profitability, so it is important to get it right from the start by onboarding ‘A players.’

PROMOTES AUTONOMY: Helps the coach-ee to independently diagnose problems and consider solutions; makes informed choices regarding development.

ALL A-LISTERS MUST HAVES: Here’s my list of what I believe ”A” player characteristics should include.

COMPETENCY: When we work with competent people, we’re confident and trusting, knowing they’ll deliver quality. Because one person’s performance affects the functioning of the whole team, competency takes on great significance.

Competency builds a strong team. Competency erases any cause for needless anxiety and is good for our mental health, as well as the health of the team.

IS “A” REAL PARTNER AND TEAM PLAYER: “Hey, you’ve got a problem, let’s work on it together,” interested, engaged, respectful, and respected.

COLLABORATION: Is at its essence, contribution.

It’s what happens when we “step outside of ourselves” and honor the space we share more than where we each individually come from.

Collaboration is what we create when we come together. Strong team members value the power and synergy of collaboration.

ENTHUSIASM & COMMITMENT: An exemplary team member has enthusiasm for the organization and commitment for its cause. An outstanding team member stands behind the organization’s ideals, vision and mission. A team

POSITIVE: Is supportive, builds confidence, is an enthusiastic motivator. Uses praise and recognition for progress and accomplishment.

Never ridicules. Is passionate. Has a sense of humor.

TRUSTWORTHY: Is honest and open. Maintains confidences. Admits when wrong. Doesn’t overpromise.

CARING: Is compassionate, empathetic, and sincere.

PATIENT: Understands how hard it is to change. Is tolerant and reasonable.

RESULTS ORIENTED: Focuses only on important issues. Is proactive and infectiously committed to helping coach perform. Follows through on all promises.

PERCEPTIVE: Understands coach-ee’s strengths, shortcomings, goals, and needs.

AUTHORITATIVE: Is knowledgeable and wise. Is clear and specific in feedback. Has common sense.

Generates valid measures of improvement. (Don’t confuse authoritative with authoritarian, which means dictatorial.)

ACTIVE LISTENER: Plays back content and underlying feelings. Summarizes, clarifies.

MICHAEL ROPPO A DESIRE TO COMPETE: “A” level players skip excuses. Their drive to compete leaves no time for excuses when pursuing various strategies to win.

HAS A CHAMPION’S MINDSET: A top performer will have unwavering faith in your company’s ability to achieve. A champion’s mindset includes the belief that winning is inevitable, not a remote possibility.

SELF-DISCIPLINE: A dealership environment is always changing because it is growing so fast or quickly pivoting to survive. With so much in flux, an employee needs to have self-discipline and confidence in their ability to endure failure, recover from it, and persevere.

INTEGRITY: This should go without saying. One shouldn’t pursue to win at all costs. How you treat the customers who use your product or service, how you collaborate with others, and how you choose to follow through on your word can make you or break you in the long run. Integrity is foundational and sets the parameters for the organization’s success.

THINKS AHEAD, ANTICIPATES, AND TAKES ACTION: By understanding what to expect in each situation, great competitors know how to best position themselves see opportunities developing ahead of time.

LANGUAGE:

Language is the conduit for growth and self-expression. While progress can happen without words, it’s language that brings forward our learning and experience. Language is the context for commitment. Language connects us

Director of Fixed Operations and Training /QPS at Automotive Domain Results Michael has more than 30 years experience in training and consulting for Automotive Domain Results and its parent company, The Mironov Group. He helps dealers attain maximum profitability, customer satisfaction and retention by improving the quality of their management teams and the personnel who come in contact with their customers. Visit his website at AutomotiveDomainResults.com.

and is a primary conduit for self-expression.

CREATIVITY: and “outside the box” thinking is key for organizational transformation and problem solving. Having creative thinkers on the team moves the organization forward in ways that can’t be anticipated. Nurture your creative instincts and don’t be afraid to share what you think might be unconventional ideas. Change would never occur if we didn’t have bold “outside the box” thinkers!

SENSE OF HUMOR: Lightness holds the team together as much as shared values and vision.

Dedication and commitment to shared values doesn’t preclude team members from having fun!

Lightness adds perspective and helps to keep team members balanced. Keep your life sane so you maintain your sense of humor; laughter is healing, healthy and fun!

PERSEVERANCE: Comes easily to those who are committed. When one is committed, one is steadfast in their belief of possibility. Nothing gets in the way of the vision. Obstacles are steppingstones en route to fulfillment of the vision.

UNDERSTANDS THE POWER OF ASKING BETTER QUESTIONS: Questions open communication; statements don’t. “A” Player team members are inquisitive by nature and are open to hearing other points of view. Team members who appreciate the power of questions demonstrate strong teamwork skills. Questions move the team (and organization) forward in all directions.

RELIABILITY & FOLLOW-THROUGH: When we give our word, we create an expectation for others.

When we deliver, others consider us reliable our word carries weight and means something. An ideal team member understands the power of the word and how strongly our integrity is based upon our word. Reliability is keeping your word, time and time again.

As you can see, nobody is perfect, but if you want to be an ‘A’ player, these characteristics and traits are fairly important. Everyone has one or two that they need to work on, but true “A” Players are likely contain strengths in more than a couple of these areas and are able to at least tread water with their weaknesses when required.

No matter what role you have or looking to hire for, start with these characteristics. Look for people who will have the confidence to wear many hats, the capacity to take on more than an average person can handle, the natural inclination to take initiative, and the ability to grow with your business.

How about you? What characteristics have you found in your best “A” Player onboarding? Are there other strengths that you believe ‘A’ players typically exemplify? Is there anything on the list that you don’t believe is essential in order to be considered a top performer?

Even with a core set of competencies, it still takes more to reach the top and become an “A”-level player.

TOSEE SEEMORE MOREFROM FROMMICHAEL MICHAELROPPO ROPPOGO GOTO TOCBTNEWS.COM CBTNEWS.COM TO

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FIXED-OPS

Checking

YOUR SERVICE DRIVE’S HEALTH Key Measures To Ensure Service Department Retail Health

BY JOHN FAIRCHILD

flabbergasted; not all the measurements need to be taken instantaneously and not all modifications to process must be implemented at once. Small incremental steps well thought out are much healthier than making a few hasty jumps.

O

wners and general managers need to feel the pulse of the Service Department constantly. Service retail metrics can be misleading and frankly overwhelming. Knowing what to measure is the first step, but knowing what to do with all those numbers to deliver positive change, isn’t always crystal clear. Let’s explore key service department retail measures and why to watch them.

When used properly, relative metrics provide lasersharp insights into a dealership, showing areas of strength and weakness in sharp contrast. Many dealers and GMs look to the service department as a financial buffer but don’t thoroughly understand the key drivers of success.

When bearing in mind metrics, don’t get

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The following are some service department retail measures dealers should consider and ways metrics can be used to analyze your retail service business and implement continuing progressive changes. By no means is this a comprehensive list, but these metrics are worthy beginning points to see how proficiently and successfully the service department is running.

THERE IS NO MAGICAL FIGURE

Dealership consultants and factory representatives alike love benchmarks. But, statistical criteria can be crippling; what’s important is continuous improvement, Dealers shouldn’t use service metrics to aim for a generic benchmark. Incremental improvement over historical performance is a great place to start.

Also they must be examined regularly, some preferably daily, and measured month-to-date. Too often, measurements are taken infrequently and if they look good, they’re not revisited on a regular basis. This is a huge mistake.

CP Repair Orders Written: Looking at the number of tickets an advisor should be able to write in a day and as a department as a whole, are we slower or busier than we need to be for the staff we employ?

• 15 tickets a day per Advisor is a good place to be any, more may prevent cultivating quality transactions.

• Historical context versus the same month in the prior year and the previous month.

• Measure tickets written month to date divided by the number of days worked times the working days in the month to obtain your rate of travel.

• CP RO’s written speaks to your customer retention. Are your car counts climbing, stagnant or falling?

MEASURE YOUR SERVICE ADVISORS SALESMANSHIP

Service Advisors are a critical point of interaction between your dealership and your customer, nevertheless they often don’t get the kind of training a salesperson gets. Service Advisors, however, are actually a make-it-or-break-it employee for the service department. Are they upselling to your customers or just handing out the repair order

“Measuring a service writer’s efficiency and effectiveness is critical; what you find may enable you to increase sales dramatically.”

(RO) and taking orders? Measuring a service writer’s efficiency and effectiveness is critical; what you find may enable you to increase sales dramatically.

• Customer pay Labor Dollars per customer.

Two measurements diagnose performance here.

1. Effective Labor Rate (Average labor charge per hour flagged) TIMES the 2. Hours sold per Repair Order equals the Labor Dollars per customer.

• Customer pay Parts Dollars per customer.

A baseline of 1:1 Parts-to-Labor ratio is desirable in most scenarios with heavier parts sales attributed to selling Parts-heavy jobs like Tires, Batteries and Filters.

• Commodities penetration. How many key Competitive services are being sold per Repair Order? Maintenance commodities include Brakes, Tires, Wipers, Filters, Batteries and Fluid exchange services.

• Parts & Labor Gross Profit Percentage Retained. This is really how much money are we keeping from the transactions we have.

Low percentages may indicate excessive discounting and/or poor upsell penetration.

• One Line Repair Orders - Another useful metric when gauging a service writer’s efficiency and salesmanship is how many ROs have only one item on them. A high incidence of one line RO’s indicates a need for training, or worse, apathy to asking for the business.

Again, these measurements must be taken often and consistently to provide a definitive snapshot of efficiency.

the DMS system. In these cases, for a consistent measuring point, divide the number of flagged hours by the general time an employee is clocked on the job…usually 8 hours.

• Gross Profit Percentage per Tech – This measure tells us how profitable a technician is and the shop as a whole. It may indicate if the tech is over or underqualified for the job being worked on. If you’re “A” level tech is performing ultra-competitive services the GP% will be very low.

MEASURING FROM A CUSTOMER’S VIEWPOINT

When considering service department retail metrics, managers are in jeopardy of becoming so internally absorbed that they overlook that what’s truly essential, how they measure up from the customers’ perspective. There are so many critical measurements internal to our operations, but the key measurement external to us is customer satisfaction. Was a customer satisfied? Will he return for more service work or promote our department?

• Customer Satisfaction Scores – There is a huge amount of credence given by the manufacturer here so it’s likely that you are already intimately familiar with your standing here.

Be careful that you are not underrating your people based on “good” scores. A good score is a ZERO in t h e eyes of the factory but usually just means the customer was not informed as to how important the top box answer is to the Dealership or Advisor

involved.

• Customer Retention Metrics - A critical metric to evaluate is how many of your customers are going elsewhere for service. Are your car counts declining? Is there a large number of VIN numbers that have not been back in over 12 months?

ENDURING ANALYSIS PARALYSIS

There are hundreds of measurements of every aspect of your service department related to retail health and viability. Instead of feeling enlightened, you may be ready to pound your head against the Service Desk. You are suffering from information overload. Now what? You might have bitten off more than you can chew, but you can work your way out of the mess. First of all, keep it simple then add measurements gradually. These solid core retail measurements we have discussed above are an excellent starting point and the basis of ongoing success.

Armed with this retail metrics information, General Managers and Dealers can subjectively review where their dealership ranks and feel in step with the state of affairs in the Service Department at any moment.

ASSESSING YOUR TECHNICIAN CONDITION

The next area of attention is the tangible production in your shop. The productivity and efficiency of your Technical staff is an area that tells a lot about the health of the overall department. Here are the things to be attentive to regarding techs.

• Technician Productivity – Defined by the number of flagged hours versus time on the clock. So if a Technician is at work 8 hours and flags 8 hours, his productivity is 100%. Be aware that in a lot of shops there is not a religious accounting of “clock” hours recorded in

JOHN FAIRCHILD

President and Performance Coach of Fairchild Automotive Solutions John has more than 35 years of experience in fixed-operations management and consulting, and trains fixed-ops staff to improve performance and customer service. He started working in auto repair and parts at age 15 and over time held numerous positions at dealerships, including general manager.

Reach John at john@johnfairchild.net, or visit the website at www.fairchildautomotivesolutions.com.

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DEALERSHIP PROFILE

TRANSPARENCY KEEPS SERVICE CUSTOMERS FROM

STRAYING Dealer Fights Customer Flight With Prices and Value

BY MARY WELCH

N

eed a four-wheel alignment or cabin air filter replacement but am not sure the dealership will give you the best price?

Don’t worry. At Carter Subaru Ballard in Seattle, Wash., their prices as well as their competitors’ are on its website.

Sometimes they are cheaper. For instance a synthetic oil and filter change costs $69.95 using genuine Subaru OEM parts at Ballard versus $84.95 at Jiffy Lube using non-factory aftermarket parts.

Sometimes it’s a bit pricier. A battery replacement costs $137.35 versus $125 at the same Jiffy Lube or even $129.99 at Firestone.

IT’S ABOUT VALUE “Our biggest challenge in today’s climate is competing against the independents. It’s trying to convince our customers that our value is greater even if our prices are the same,” says Jennifer Moran, executive manager of Ballard.

“The perception that you fight is that people could get better service elsewhere, and for less.

We don’t ever view our competitors in the same brand as our competition; it’s always the independents.”

Moran, who has been at Carter Motors since 2007, says price perception is hard to overcome. “How do we convince our customers that the dealership that they purchased the car from is the right place to get service than over at an independent? And know you’re not going to pay any more with us than elsewhere? It’s a hard thing to overcome even if they had a great sales experience.”

Photo: Leo V. Santiago

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Kristina Kelley, service manager at Carter Subaru

“Our biggest challenge in today’s climate is competing against the independents. It’s trying to convince our customers that our value is greater even if our prices are the same.”

- Jennifer Moran, executive manager of Ballard Subaru

Shoreline, says one way is to do the price comparisons for their customers. “We decided to be completely transparent. We have nothing to hide.

I don’t look at our competitors’ websites and say we’ll do this job for $4 less. But I do see that they wait for me to put something on our website and will try to match or be less.”

Kelley points out that it’s not about being cheaper.

“We could be at any price, but if you’re not providing value, who cares? You’re willing to pay a price for the service that’s behind it. From my perspective our number one job isn’t just selling cars; it’s to build a service-based company. Why are you going to buy a nice car and then spend $14.99 for the cheapest oil?”

She admits that their website comparisons are not the industry norm. Not only do they run comparison pricing but they offer parts and service specials and coupons. They also run entertaining videos on common maintenance items and operations such as brake repair pods and rotors, battery replacement and checking engine air filters. For those who don’t understand about proper maintenance of such items as windshield wipers, shocks and struts and brakes, there are easy-to-understand that explanations that should be the extra impetus needed for a customer to make a service appointment.

HONESTY IS THE BEST POLICY

transparent stance for about two years now especially when they realized that dealers are selling parts to the independents at wholesale prices.

“Who’s winning here,” Moran recalls asking. “And, it wasn’t us.”

Every since the recession ended, the service business has increased year over year. They acknowledge that part of it is the Carter brand, which has been a fixture in the community since the 1960s. Wade Carter III opened his first dealership, a Volkswagen in Seattle in 1960 and Carter Subaru in Shoreline in 1976. In 2009, Carter Subaru in Ballard opened its doors. Wade Carter III passed away in 2001 in a helicopter accident and his son, Wade Carter IV and daughter, Sara, took over ownership. Overall there are 220 employees (full and part-time) and there are 27 service bays in Ballard.

THE VALUE OF A REPUTATION “If I were really being honest and giving one answer about why we’re so successful, I would say it’s the Carter reputation,” says Moran. “They’ve been here for an awfully long time and have been paying it forward in our community for a long time. We give and our customers give it back to us.

Sure, it helps the business getting our name out, but it’s really the right thing to do.”

“We aren’t an anomaly. But again, we tell our customers our goal is a fair price, not the cheapest.

We’re also not afraid to answer questions about cost from people on our website,” Kelley says. “People are looking for prices and services on websites and they should. I do everything on my iPhone and I assume everyone else is as well.”

Kelley has worked at Carter for 5 years, and says she’s never seen anything like the customer loyalty the dealership gets. “It’s family owned and people know the family. They know we support a lot of things — women’s professional basketball, the zoo, and a lot of environmental issues. We plant a tree for every test drive and three additional ones with a purchase.”

The women say they’ve taken this aggressive,

Also helping the dealership is the increased

popularity of Subaru. “We’re selling more cars,” says Moran. “Subaru has always been popular in the Northeast and in the Northwest, but in other parts of the country, particularly the Sunbelt states, they’re suddenly selling and there’s an increase in sales and market penetration. For a long time no one outside the Northeast and Northwest was interested in a Subaru.”

Jennifer admits that she knows that a relationship with the service department should start the day a vehicle is purchased. “I know the sales team should escort the customer to the service department where he or she can see our department and maybe even set up an appointment for the first check-up” she says. “But that’s in a perfect world and we don’t live in a perfect world. I don’t want pretend that we’re great at doing that but we just try to put our best foot forward. It certainly benefits the customer and us if they are introduced to the Service Department at the point of purchase. The dealership does regularly communicate via email, phone calls and mobile apps about when service is due and available times.

Regardless of whether its web presence, the reputation, the increased interest in the brand or its price transparency, it’s working. About 50 percent of those who purchased vehicles at the Shoreline location return to get them serviced there. “Our corporate goal is even higher,” Kelley says.

Let’s face it, Moran says, “Cars are better made than ever before. They’re not breaking down like they used to, which is good. They don’t need maintenance as frequently as even five years ago, so we have to be better than everyone else, and provide unprecedented customer service, or we will not retain that customer.”

Ballard Shoreline (L) and Ballard Subaru are both owned by Carter Subaru in the Seattle, Wash., area.

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LEADERSHIP

E H T G N I PREPAR

N O I T A R E N E G T X NE S R E N W O S S E N I OF BUS

How to Ensure Your Kids Have the Needed Skills

BY CHUCK SUJANSKY

F

amily-owned businesses are the bedrock of the American economy. They represent the most powerful promise of “The American Dream” … that hard work, persistence, and loyalty lead to long-term success. According to Forbes Magazine 90% of American businesses are family owned or controlled. In terms of dollars and cents family owned businesses represent 50% of the US Gross Domestic Product.1

But family owned businesses also face some pretty stiff challenges. Less than a third survive the transition from the first generation to the next. Apart from the financial challenge, family-owned businesses fail because the first generation holds onto the reins too long or is reluctant to step aside.

Sometimes the older generation simply fails to prepare the next generation for future leadership.

THE CHALLENGES OF A FAMILYOWNED BUSINESS Many businesses are common in the automotive industry. New and used car dealerships, auto parts stores, collision centers and mechanical repair shops all are passed down to heirs. But how many of these offspring are prepared for executive leadership? What skills and abilities will the succeeding generation need to run the businesses successfully?

To illustrate the challenges involved, consider the following case study.2 Bobby Hansen, the owner of a large suburban new car dealership, has a dilemma. A second-generation owner himself, Bobby expected his three children to join the family business following college. But the new car business is much more complex since the days when Bobby joined the dealership following high school. As each of Hansen’s children graduated from college they assumed positions in different departments of the dealership.

The oldest son, Rob, joined the sales department and gradually became one of the top-producing members of the sales team. When the top management position in the sales team opened up he was a natural choice to assume the position.

Bobby Hansen’s middle child, his daughter Katy,

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“When it comes to preparing the next generation of leadership within any family business functional knowledge and skills are not always enough.” spent summers during college in the dealership office processing paper work and managing records. Following graduation she came into the

dealership full time to manage the office staff. Due to her knack for details and understanding of procedures she was well-respected by her employees.

Hansen’s youngest son, Billy, was the “gear head” of the family. He was passionate about cars and trucks and was very knowledgeable about repairing and customizing them. When he wasn’t managing the parts department he could be found tinkering under the hood of a car.

Together the Hansen family was a formidable team when it came to running the dealership successfully. But when Bobby began to think about retiring from the business he realized he had a dilemma.

Each of his three children possessed differing strengths and abilities and any of them could potentially be the best choice to lead Hansen Motors into the future.

The oldest son, Rob, was the obvious choice for future president of the dealership. But while he was good with people he disliked details and didn’t always see the big picture. His daughter was very detail oriented and well respected by her employees, but she didn’t necessarily understand the technical side of vehicles or possess the persuasive skills to work with sales staff. Billy, the younger son, possessed technical skills and a true passion for cars and trucks. But he showed little enthusiasm for managing others and showed no ambition for stepping up to greater responsibility.

FUTURE ON THE LINE When it comes to preparing the next generation of leadership within any family business functional knowledge and skills are not always enough. Family members with specific skills in sales, service or office procedures may not be effective at supervising dozens of employees or directing a multimillion-dollar operation.

And selecting a successor without considering his or her skill sets only serves to postpone problems into the future and possibly sow the seeds of future challenges.

For top leaders the question is not just “who is ready to step into the top spot and lead the organization now?” The problem becomes “what skills and capabilities will be needed by top leaders tomorrow to assure the dealership’s continued growth and success?”

Specifically, owner Bobby Hansen needs to ask himself two

TO SEE MORE FROM CHUCK SUJANSKY GO TO CBTNEWS.COM

questions: • Which of my children is the best candidate to succeed me now?

• How can they each acquire the skills necessary to guide the dealership into the future?

The answers to those questions will help Bobby prepare for transition to the next generation of family leadership. In our experience the best strategy is to start with a validated assessment tool to determine each offspring’s strengths, weaknesses and potential.

After all, an auto technician wouldn’t begin repairing an engine just because the “check engine” light on the dashboard is glowing. He or she would first use an Onboard Diagnostic Scanner to evaluate the engine’s performance and pinpoint the components in need of repair.

The same is true of all of the people charged with managing the dealership. Before making promotion or development decisions the owner should take steps to evaluate each candidate’s skills, potential and developmental needs. We believe the most effective tool for that job is the Profile XT® by Profiles International.

ASSESSING THE FUTURE Choosing a successor for the top leadership position of a family business, or any business, is tough.

It’s possible to gain an objective assessment of a candidate’s qualifications and capabilities using validated instruments like the Profile XT®. Unlike traditional “tests” this assessment doesn’t evaluate accumulated knowledge or measure right and wrong answers. Instead it examines what an

individual may need to succeed within a given position.

But it also pinpoints areas that person should develop to be effective within the job. It’s a reliable way to understand what an individual brings to the position as well as what the individual needs to learn to build on his or her success.

In the case of Hansen Motors, the oldest son might benefit from developing stronger financial management skills, learning performance management techniques, and understanding strategic planning concepts. Hansen’s younger son could benefit from improving his “people skills” as well as from receiving in-depth exposure to the dealership’s other departments. Bobby Hansen’s daughter could benefit from developing strategic management skills, receiving cross-department exposure, and gaining sales experience.

The final decision about which of his three children should succeed him doesn’t have to be made right way, so long as Bobby Hansen is committed to implementing a succession plan based upon the individual strengths, developmental needs and accumulated skills of each heir.

NOTES:

1. Aileron. “The Facts of Family Business.” Forbes. Forbes Magazine, 31 July 2013. Web. 11 Apr. 2016.

2. This case study is based upon the experience of several family-owned businesses to whom we’ve provided consulting. Those businesses are ‘exemplified’ here to illustrate the challenges faced by family owned businesses within the automotive industry.

CHUCK SUJANSKTY

CEO of KEYGroup/Applied Behavioral Insights KEYGroup/Applied Behavioral Insights is a Pittsburgh based human resources consulting, assessment and training company. Chuck consults to clients across many types of industries, including automotive, retail, financial and health care. Questions or comments can be sent to csujansky@keygroupconsulting.com

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ask THE

A

t CBT News, we are fortunate to partner with the best trainers in the industry.

Whether it’s information on sales, F&I, marketing, management or fixed ops, our contributors are the go-to professionals for reliable, relevant advice for dealership personnel. You have access to the foremost authorities in the retail automotive industry. Need a new closing technique? Wondering what’s the best way to increase sales in the service lane? Send us your questions at AskThePros@ cbtnews.com. We’ll forward your inquiries to our ensemble of experts.

pros

“time” it takes to complete each repair, any special tools needed for each repair, and potential damages that can be caused if the repairs are not completed properly.

When customers drop their cars 5. offUpsell. for a scheduled repair, one of their

biggest fears is an unnecessary upsell.

A short video created by the service adviser can help to alleviate this fear and provide “visual proof” that a repair is really needed. A landing page that includes your Value Proposition, Customer Testimonial, Introduction, and a “How To” video along with the Upsell Video will also help the customer trust your service team and feel good about their decision to move forward with the additional service(s).

I

understand how inventory video can help sales and drive traffic. Are there any benefits in doing videos for my service department?

-Steve M, Houston, TX

A: Tim James, COO of Flick Fusion.:

Absolutely.

Service departments can benefit greatly from producing videos. Here is a list of videos that we recommend for service departments, along with their benefits:

1.

2.

3.

4.

26

I

always try to have our dealership as attractive as possible. Are there other things I can do without costing a lot?

-Stewart, Troy, N.Y.

Service Manager/Staff Introduction.

People like to do business with people they like, so introduce your service manager and other personnel to potential customers. Videos convey personality far better than a photo, creating a sense in your customers that they already know you. This increases their comfort level in choosing your dealership.

Service Department “How To.” Select a dozen of your most common and profitable services. Create videos that talk about why they are important for the health of the vehicle and a quick tutorial of how the repair is done. This creates confidence in the customer that they are making the right decision. Be sure to discuss the additional damages that can be caused if the consumer does not have each issue fixed immediately, the

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CAR BIZ TODAY MAY 2016

We all know how nostalgic some smells can make us, and how catching the right scent at the right time can make us hungry, happy, or disgusted.

While nothing competes with a new car smell, your showroom likely doesn’t have a New Showroom Smell. It wouldn’t hurt to delicately bring a little science into play as a means to influence behavior, improve moods, and promote well-being.

D

o I really need in-store promotions with prizes, disc jockeys, social events to drive traffic and is my ROI worth it?

-Luis, Reno, Nev.

A: Russ Chandler,

Product Marketing Manager at PERQ:

A: Joe Webb,

Founder of Dealer Knows.:

Value Proposition. Many customers are afraid that dealership repairs will be expensive. A value proposition video addresses these fears by focusing on how your technicians are trained, the quality of repair work and trustworthiness.

Service Department Testimonials. In marketing “they said” is always a lot more powerful than “we said.” Create videos that feature happy and loyal customers.

into service. Air fresheners are often considered overwhelming but, with their consent, a spray of scent into the clients’ vehicle would benefit in different ways. Vanilla is said to be the “happy” scent, giving the highest level of happiness, while Citrus is the most awakening, exciting, or invigorating scent. Both could make the client either happy or excited to get back in their vehicle.

sales.

Smells, more than any other sense, connects to our memory. Realtors know that the smell of fresh baked bread and homemade cookies in an available property significantly improves

Based on the research, here are just a few of the ways dealers could leverage scents, smells, or oils to psychologically improve the mood of today’s automotive shoppers: Showroom – Lavender Lavender calms the senses, relaxes, and quells restlessness and irritability F&I Office – Jasmine Jasmine not only eases the nerves, but promotes feelings of confidence, optimism, and revitalized energy Vehicle Delivery Area – Chocolate This scent is said to contain 200 properties that induce a sense of love, satisfaction, and well-being.

Service Department – Vanilla or Citrus Both of these scents could be offered in spray form to customers bringing their vehicles back

The short answer is no, you don’t need these to be successful. However, there are many ways to win in today’s market and these options are real and can work. For most dealerships that utilize these tactics, successful ROI is dependent on how well you can manage the foot traffic.

Since your not driving consumers to your showroom using content related to shopping for a car, it’s likely you will have potential customers that aren’t shopping at all. Your ROI will be achieved through how many of those out-of-market shoppers you can convert to in-market shoppers to make a sale. You’ll need a strong sales team for closing customers in a fast paced sales process like this but the ROI is more often high.

I would take a good look at your dealerships brand, culture of your sales staff and consider how well you can close a deal under these types of circumstances. If you feel confident in your dealerships ability across all 3 of these key factors, then it’s likely a good option. My recommendation is that you take the time to evaluate whether or not it’s a good fit with your management team. It’s important for strategies like these that your whole dealership is bought it or it won’t work.

DEALERS Check out ServiceDriveToday. com for news, information, GENERAL MANAGERS best practices, training tips from the nation’s top fixed-ops SERVICE MANAGERS trainers, in-depth interviews with industry experts and more. It’s FIXED-OPS DIRECTORS completely FREE to all dealership PARTS MANAGERS service department personnel!

AD Jeff Cowan

Don Reed

Bill Wittenmyer

Steve Hall Featuring daily newscasts, guest interviews, and a monthly magazine with informational columns and articles from experts in the auto service industry, Service Drive Today is your trusted source for the latest news and trends in the automotive fixed-ops field.

SIGN UP FOR YOUR FREE SUBSCRIPTION TODAY AT: SERVICEDRIVETODAY.COM A Member of the CBT Automotive Network

RISK MANAGEMENT

SELF-DRIVING VEHICLES:

DEALERSHIP OPPOTUNITIES New technologies Will Require New Insurance Coverages and New Risk Management Strategies

BY JONATHAN CHARAK

for their risk management strategies and also new opportunities for the many F&I products that they sell.

THE RISK MANAGEMENT PERSPECTIVE

T

he inevitable march forward of automated vehicle technology (self-driving cars) has generated a lot of discussion about the impact on everything from the driver experience to how the legal system will have to adapt. As an insurance professional, I believe these are important discussions.

Insurers will play a critical role in ensuring the success of this new technology, both for individuals and businesses, and will continue to help protect them against unforeseen events. For auto dealerships, self-driving cars will present new challenges

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From a risk management perspective, an automated vehicle will pose certain new risks where the dealerships will need solutions. An important resource will be insurance providers that can help dealerships understand and protect themselves from risk.

Market analysis company IHS estimates that the technology in self-driving cars will add between $7,000 and $10,000 to the sticker price of a car in 2025, a price premium that will slowly decline in the years after that.

The placement of the technology (such as LiDAR, cameras, aerials, ultrasonic wheel sensors) on roofs, in bumpers, or within the wheels could increase the cost of repair once damage occurs. While it is expected that these vehicles will lower overall collision frequency on the roads, what about the cost of a dealership’s open lot coverage? Potentially hundreds of vehicles with a roof mounted LiDAR and external cameras will be costly to repair after a hail storm.

Further, garage/auto policies cover the customers’ autos when in the care of your professional mechanics. Not only will dealerships need to ensure increased training on the care of the new vehicles, but also how to operate them in a safe manner.

Some insurance companies may offer extended protection that will cover dealership liability from the work performed by the dealership’s repair shop

“For auto dealerships, self-driving cars will present new challenges for their risk management strategies and also new opportunities for the many F&I products that they sell.” in the event that the work or parts cause damage to the customers’ vehicle. This is another area where the introduction of automated vehicles could impact a dealership’s risk management decisions.

SALES OPPORTUNITIES FOR A SERVICE CONTRACT In addition to the risks, dealerships will need to manage, there are also potential opportunities for growth with F&I sales. It is likely that, compared to the service requirements for today’s vehicles, manufacturers of self-driving cars will recommend higher levels of service with frequent check-ups to ensure the systems are operating effectively. This could be a sales opportunity for a Vehicle Service Contract (VSC), or even the creation of a Vehicle Service Contract to cover only the technology needed for the operation of a self-driving car. Similar to how one can purchase protection on tire or glass, future insurance products may cover only LiDAR or camera protection.

A 2015 study by researchers at the University of Michigan’s Transportation Research Institute concluded that owning a self-driving car may allow families to own fewer cars than they do today.

That is because future features like a return-tohome mode increase the potential for trip overlap between different family members.

The researchers’ conclusion was derived by studying the U.S. National Household Travel Survey.

In the most extreme scenario, a household with a self-driving car could operate with 1.2 vehicles instead of 2.1. However, mileage per vehicle would likely increase by 75 percent. Consequently, the average lifespan of a self-driving vehicle compared to a traditional car would decrease due to increased wear. This is another potential reason a buyer will want a VSC. While a household may own fewer vehicles at any given time, their frequency of car purchase may increase. These factors should also balance out the overall impact on vehicle sales.

INCREASED MILEAGE MEANS MORE REPAIRS Furthermore, at the 2016 J.D. Power and NADA Automotive Forum, John Krafcik, CEO of Google’s

self-driving car project, said he believes people who purchase a self-driving car could see annual mileage upwards of 100,000 miles (compared to a household average of roughly 13,500 miles annually today) because the car could be used by multiple people, including driving for things like ride-sharing services. These projections make it easy to imagine the increased need for people professionally trained to service the technology unique to the make and model. This is another reason a VSC could become an even stronger tool in the F&I room.

For the foreseeable future we will have a situation where the roads are shared by vehicles having various, increasing levels of autonomy (and, of course, by other road users). It is likely that fully self-driving vehicles will be available to the car-buying public of some countries by 2025. With that in mind, it’s best to start thinking through your risk management (and sales) strategies early. Your insurance provider and F&I partners are a good resource for you to start having those conversations.

JONATHAN CHARAK

AVP, Business Performance Management and Execution Charak works at Zurich American Insurance Company where he participates in the planning, execution, and measurement of strategic initiatives for Programs and Direct Markets, which sells both property and casualty insurance and F&I products to car dealerships. In his over 10 year career within the insurance industry, he has spent the majority of it as an actuary in both pricing and reserving roles, both in the US market as well as Australia.

Self-driving cars may need more service check-ups to ensure all systems are working properly, which is an opportunity for the Service Department.

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LEGAL

S G N I H 20 T W O N K O T ABOUT THE

UNFAIR AND DECEPTIVE ACTS AND PRACTICES STATUTES

claim an oral warranty with an “as is” contract can lead to a UDAP (and breach of warranty) claim when a sales consultant states “this vehicle is in great shape. Our service department completely reconditioned it before we put it on the lot. If you have any problems, believe me, we’ll take care of it.”

Keeping It Real — And Legal

BY JIM RADOGNA

U

nfair and Deceptive Acts and Practices statutes (UDAP) cover virtually every aspect of a dealer’s sales, finance and fixed operations. Everything from advertising and marketing to consumers, staff conversations with customers, managers’ conversations with salespeople, how prices and payments are quoted, how deals are handled in F&I, how repair estimates are handled – you name it. Everyone in the dealership who deals with or markets to the public is subject to UDAP statutes and can create liability for the dealership and for themselves.

UDAPs are extremely broad and provide for enforcement by both federal and state governments to stop the practices and individual actions for damages brought by consumers who are allegedly hurt by the practices. The FTC and state attorneys general actively pursue UDAP claims against auto dealerships and they are a favorite weapon for consumer attorneys who specialize in “auto fraud.”

What is most concerning about UDAP statutes is that they are “catch all” edicts - interpretation and enforcement of them are constantly evolving. Just because a particular act or practice isn’t specifically prohibited by law, it can be litigated as a UDAP violation if it is viewed as improper merchant conduct.

These statutes allow for almost any unresolved customer complaint to snowball into a potentially devastating lawsuit.

PERCEPTION IS KEY When you look at actual enforcement actions and court cases against dealerships, there is typically one common element: the perception that the

dealer was less than completely honest with a consumer. So if a dealer employee is accused of being dishonest with a customer, either by commission or omission, they may end up in a courtroom or worse.

So, here are 20 things all customer-facing dealership employees should know about UDAP statutes:

1

2 3 4

No customer complaints are necessary and even inadvertent violations are actionable.

Advertising violations are a common example of these principles. A noncompliant ad in itself is enough to create a violation even if there is no evidence that consumers have been harmed.

Even innocent misrepresentations can be actionable under UDAP statutes. All that is required is proof that a practice has a tendency or capacity to deceive even a significant minority of consumers. This usually involves a situation where the dealer employee should have known or could easily have found out that his statement to the plaintiff was false, but didn’t bother to verify his statement before making it.

A common misconception by dealership staff is that only written agreements are enforceable and oral agreements are irrelevant once the customer signs a contract.

This is simply not the case with UDAP claims which can be founded on oral misrepresentations, oral promises made to the customer that the dealer fails to deliver upon, the failure to disclose, or ambiguous statements that are technically accurate, but deceptive as interpreted by the consumer.

A dealer employee’s oral misrepresentations (or overly enthusiastic sales claims) may violate UDAP statutes even if they’re subsequently corrected by a written disclosure statement. For example, attempting to dis-

GOOD FAITH MAY NOT BE ENOUGH

5 6 7 8 9

In many cases, the consumer need not prove the seller’s intent or knowledge. The seller’s good faith does not excuse technical noncompliance and may not be a viable defense.

A violation of a state or federal statute meant to protect the public may be a per se UDAP violation (for instance TILA, FCRA, ECOA or Used Car Rule). Attorneys love to combine regulations for more remedies and higher fees.

While Common Law Fraud often must be proven by clear, convincing evidence, the UDAP standard is likely to be just a preponderance of the evidence. A preponderance of evidence has been described as just enough evidence to make it more likely than not that the fact the claimant seeks to prove is true.

Where there is a statutory defense for “bona fide error,” this defense typically applies only to clerical errors, such as typographical errors or mistakes in computing numbers, not to a seller’s other unintentional misrepresentations. A bona fide error is an unintentional, honest mistake. Commission of a bona fide error, if corrected immediately upon discovery, normally does not call for a punishment.

Unilaterally crediting the consumer’s account with the amount the consumer has sought in a lawsuit does not moot a UDAP claim, nor does a defendant’s offer to refund the consumer’s money after suit has been filed. Once lawyers get involved, settling

“What is most concerning about UDAP statutes is that they are “catch all” edicts interpretation and enforcement of them are constantly evolving.”

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the claim will likely get far more expensive.

IS THE CLAIM HARMLESS?

10

To prove that a claim is mere puffing, the seller will have to show that the exaggerated claim is harmless, purely fanciful, or a spoof, calculated to amuse and with no capacity to deceive. A claim is not puffing where the claim promises a specific act, or where the claim’s truth or falsity can be determined. Thus, offering the lowest price or highest trade value can create liability unless true and verifiable.

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It’s no defense to a UDAP claim that the challenged practice is engaged in throughout an industry or is “customary” business conduct.

Regulators frequently penalize those unlucky dealers that get caught in order to intimidate others.

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Literally true statements can be deceptive.

A practice is deceptive if the overall net impression of the representation, not just the specific explicit claim, is deceptive. One example might be advertising a prior rental vehicle as a “one-owner”. Another could be an ad that claims a “$0 Down!” lease but in reality the first payment and various fees are due at signing.

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A statement or omission may convey more than one reasonable meaning, and if one of those meanings is deceptive, it violates UDAP statutes. A good example would be where a dealer employee claims that a service contract is “included” in a payment quote. A reasonable meaning to a consumer is that “included” means “free” or “at no additional cost.”

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Representations are deceptive if necessary qualifications are not made, if material facts are not disclosed, or if these disclosures or qualifications are too inconspicuous.

Omission of information may be deceptive if disclosure of the omitted information is necessary to prevent a consumer from being misled. These are commonly-cited advertising violations. A favorite mindset among regulators is that “what the large print giveth, the small print can’t taketh away.”

MAKING SURE THE DISCLOSURE IS CORRECT

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The public is not under any duty to make a reasonable inquiry into undisclosed aspects of a representation or advertisement.

Deception can occur if there is a “tendency or capacity to mislead the public” or when “reasonable inferences may be drawn.” In the automotive world this, unfortunately, is a VERY LOW BAR. An omission is considered material if a significant number of unsophisticated consumers would attach importance to the information in deciding on a course of action.

17

been found to be deceptive even though the dealer discloses that negative equity is added to the purchase contract at the time of sale. So the old “see dealer for details” disclaimer may not protect you as much as you would like.

A merger clause or a contract provision that “no agreement between salesman and customer is binding on the company” or otherwise disclaiming oral representations does not defeat a UDAP action based on an employee’s misrepresentations. The presence of a disclaimer does not necessarily guarantee that the terms of the disclaimer will be recognized and enforced in a legal dispute.

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High-pressure sales tactics have been cited as unfair trade practices in lawsuits and regulatory actions. Examples include intimidation, coercion, personal disparagement, emphasizing social difficulties, refusing to let customers leave until they sign contracts, using relays of salesmen until the consumer succumbs, and preventing consumers from taking the time to consider a decision and its consequences. So while you should Always Be Closing, care should be taken not to step over the line.

19 20

AVOID UDAP TRAPS Train ALL employees who deal with the public on compliance and ethics, not just management – people don’t know what they don’t know.

Have written policies and codes of ethics in place – all employees should be held to the same standards.

Hold staff accountable through compliance audits.

Often the correct disclosure to which the seller points can be shown to have been untimely. Disclosure of important missing information just as the contract is being signed does not prevent the previous failure to disclose from being deceptive.

Institute a complaint resolution process – strive to take care of your customers BEFORE they contact the attorney general or a lawyer.

Misrepresenting the nature or import of documents being signed is likely to be considered deceptive. Keep in mind that statements like “just sign next to all the Xs” can lead to problems.

Tell the truth, the whole truth, and nothing but the truth – every time.

JIM RADOGNA

President, Dealer Compliance Consultants, Inc. Jim is a nationally-recognized auto industry consultant specializing in dealership sales and finance department legal compliance. His background includes founding and operating a national compliance consulting firm, Dealer Compliance Consultants, Inc., as well as having spent over 15 years in various dealership management positions. Being well-versed in all aspects of dealership operations, Jim has used his knowledge and industry experience to develop unique, no-nonsense compliance and reputation management solutions for automobile dealerships of all sizes.

All customer-facing employees need to be trained on compliance and ethics.

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A practice is deceptive even if subsequently clarified. Point of sale disclosure is not sufficient to clarify deceptive media advertising. For example, the claim “we’ll pay off your trade no matter what you owe” has

TO SEE MORE FROM JIM RADOGNA GO TO CBTNEWS.COM

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EVENT COVERAGE

ROAD TO NADA 2016

THE

LAS VEGAS

Dale Pollak of vA

David Martin of Mar-Kee Group with David Kain of Kain & Co.

Grace Huang of Manheim with Jim Fitzpatrick of CBT News

Mark Tewart of Tewart Management Group

Darren Howard of Answer Financial with Jim Fitzpatrick of CBT News

Zach Klempf of Selly Automotive with Joe Gumm of CBT News

Matthew Rocho of JD Power with Jim Fitzpatrick of CBT News

Dewayne Wiggins and Neil Matthew of American Financial & Automotive Services Jim Fitzpatrick of CBT News

Joe Gumm of CBT News

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Michael Roppo of The Withum Group with Joe Gumm of CBT News

CAR BIZ TODAY MAY 2016

Andrew Capone of NCC Media with Joe Gumm of CBT News

Bridget Fitzpatrick of CBT News

Paul Garrity of Dealership for Life with Joe Gumm of CBT News

Pete MacInnis of eLend Solutions

Joshua Sonnier of American Financial & Automotive Services with Joe Gumm of CBT News

Auto with Jim Fitzpatrick of CBT News

John Grant of Desert 215 Superstore with Jim Fitzpatrick of CBT News Jim Fitpatrick, Danny Ramos, Bridget Fitzpatrick, and Joe Gumm of CBT News

Joe Gumm and Bridget Fitzpatrick of CBT News

Scott Pechstein of AutoBytel

Hugh and Judy Hathcock of Elead1One

Jim Roche of XTime with Jim Fitzpatrick of CBT News

Gary Tucker of DealerRater

Jonathan Ord of DealerSocket with Joe Gumm of CBT News

Paul Faletti of NCM Associates with Jim Fitzpatrick of CBT News Brian Finkelmyer of Conquest

Joe Verde of The Verde Group with Jim Fitzpatrick of CBT News Captain Keith Colburn of The Deadliest Catch with Joe Gumm of CBT News

Mike McFall of Black Book with Joe Gumm of CBT News

MAY 2016

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CBTNews.com 33

EVENT COVERAGE CONTINUED

Susie Heins of Manheim Paul Potraz of Patraz Automotive Ad Agency with Joe Gumm of CBT News Chris Ivey of National Video Monitoring Joe Gumm of CBT News

Ron Stouffer and Doug Frey of Allstate with Jim Fitzpatrick of CBT News

Mike Goicoechea of DealersLink with Joe Gumm of CBT News

Bridget Fitzpatrick and Jim Fitzpatrick of CBT News

Chip Perry of TrueCar

Clint Burns of NextUp with Joe Gumm of CBT News Bill Wittenmyer of Elead1One with Jim Fitzpatrick of CBT News

Ian Cruickshank of Speed Shift Media with Joe Gumm of CBT News

Bruce Thompson of Pearl Solutions with Joe Gumm of CBT News

Peyton Manning of Denver Broncos - Key Note Speaker

Mike Dodd of Carphoria Sean Gardner of The Verde Group with Jim Fitzpatrick of CBT News

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CDK Global pool party

ASSOCIATIONnews CHARLOTTESVILLE DEALER AWARDED LIFETIME ACHIEVEMENT AWARD AIADA presented Charlottesville, VA., dealer H. Carter Myers III with the 2016 David F. Mungenast Sr. Lifetime Achievement Award. The award is named after the late AIADA chairman who was known throughout the auto retail industry for his commitment to his community and the industry. A third-generation dealer, Myers joined his family Ford dealership in 1965. Since then, he has grown the business into 12 franchises throughout central and western Virginia.

AIADA NAMES CALIFORNIA DEALER GREG KAMINSKY 2016 CHAIRMAN The American International Automobile Dealers Association (AIADA) announced El Cajon, Calif., auto dealer Greg Kaminsky as its 2016 chairman.

Kaminsky is the president of Toyota of El Cajon and Honda of El Cajon, both of which he runs alongside his brother, Gary. A member of the AIADA Board of Directors for several years, he is an active member of the auto industry and was selected as a 2014 finalist for the Time Dealer of the Year Award, which recognizes the country’s most successful auto dealers.

Founded in 1990, Toyota of El Cajon is the first LEED certified building in El Cajon. The dealership is the recipient of numerous awards, including Toyota’s President’s Cabinet Award, the President’s Award, the Toyota Board of Governors Award, and the Better Business Bureau Torch Award.

It also supports multiple community organizations and causes, including the Navy Seal Family Foundation and the YMCA.

TIME DEALER OF THE YEAR Dennis Ellmer, president of Priority Auto Group and a member of the Virginia Automotive Dealers Association, was named TIME Magazine Dealer of the Year. Elmer started working at JC Penney and later at Cycle World Honda while in school. In 1975 he began working at Colonial Chevrolet and then at several other dealerships.

He purchased Chevrolet and Toyota franchise from Jimmy Kline in 1998 and how he has nine franchises and employees 2,500 people.

OHIO ASSOCIATION MEMBER RECEIVES LIFETIME ACHIEVEMENT AWARD Bill Reineke, Sr. recently received the Lifetime Achievement Award from the Seneca County Industrial Economic Development Corporation. Reineke came from humble beginnings and started his first dealership in 1960. Then called Reineke Buick Oldsmobile, the dealership was located in Fostoria, Ohio. Reineke grew his business to what is now the Reineke Family Dealerships, with 7 different locations and 6 franchises between them. From a start of only 5 employees back in 1960 to now nearly 400 employees present day, the Reineke family and their stores contribute greatly back to their local communities.

CNCDA AND OADA NAME AUTOAP A STRATEGIC PARTNER The California New Car Dealers Association [CNCDA] and the Oregon Auto Dealers Association [OADA] have named AutoAp, Inc. a strategic partner, and will recommend their safety recall management solutions to their member-dealers.

Franchised auto dealers are looking for ways to increase customer safety, reduce the growing liability associated with selling vehicles with open safety recalls, and leverage safety recalls for net-new service revenue and increased customer loyalty. OADA and the CNCDA chose AutoAp for its unique approach and industry-best method of identifying vehicles with open safety recalls.

Selecting AutoAp as a strategic partner assures California and Oregon new car dealers that AutoAp’s highly accurate and effective safety recall management solutions have met their strict criteria and have proven value in the marketplace. Both OADA and CNCDA selected AutoAp because of its proven ability to reduce dealership liability and generate additional service revenue from knowing the accurate, daily recall status of dealer inventory.

“Our California dealers are facing increased pressure on the safety recall issue, and becoming more aware of the impact recalls can have on their business,” said Brian Maas, president, California New Car Dealers Association. “They are looking for an effective solution to help them manage recall liability, and AutoAp has a proven proprietary data and technology solution that makes this possible.”

Greg Remensperger, executive vice president, Oregon Auto Dealers Association said, “Oregon’s Department of Justice has recently issued new administrative rules for auto retailers, making recall disclosure mandatory at the time of sale. We have been looking for a strategic partner to help OADA members with an effective compliance solution and AutoAp’s Dynamic Recall Management service does just that.”

WASHINGTON DEALERS PARTNER WITH ETHOS GROUP The WSADA Board of Directors has voted to welcome Ethos Group as our official F&I Income Development and Recruiting partner. Ethos Group has been in business for twenty years partnering with retail automotive dealers to create an ethical, customer-focused approach to the sale, financing and servicing of automobiles.

Ethos Group offers a full suite of F&I products as well as world-class dealer participation programs. Through this partnership, WSADA members have the opportunity to obtain F&I sales training, recruiting services, and income development from one of the country’s leading full service F&I companies.

Ethos Group’s mission of increasing dealer revenues while lowering their overhead and reducing their risk of doing business requires Ethos Group representatives to maintain the lowest account loads in the industry. This allows them to become intimately involved in the details of daily business, working alongside the dealer’s leadership team.

ASA -CT AIMS TO HIRE VETERANS The Automotive Service Association of Connecticut participated in a job fair with more than 1,200 veterans participating. The ASA-CT had a booth and collected resumes and applications for candidates and forwarded them to dealers by zip code.

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CUSTOMER RELATIONS

COMBINE

THE PROPER INGREDIENTS

TO BOOST YOUR BOTTOM LINE Creating Great Chemistry With Women Customers

BY ANNE FLEMING

C

hemistry between people is discussed in many types of relationships, and it is an important ingredient in a customer relationship. Many combinations of formulas can work, but finding the optimal combination can seem complex.

Use this handy chart from Women-Drivers.com as a guide for creating the right synergy with your female customers and reap the benefits of a better bottom line.

WEBSITE Think of the dealership web site as the first stop in the shopping experience for your potential customers and leads. The idea for a new car may come late at night, and having a easy-to-use, informative web site a few clicks away can be the means to a successful engagement.

Facebook, Twitter and your dealership’s web site are likely to be a shopper’s next stops after your

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CAR BIZ TODAY MAY 2016

web site. What kind of Internet chemistry are you creating? Is your web site appealing and personal?

More importantly, will it engage your buyers? A good web site is one that lets a shopper follow an easy path to desired information, including reviews and car searches. And don’t forget about demographics. Web sites should always show your target demographic, including women in various life stages. Value-add content will help to bring shoppers and customers back again. In today’s mobile-enabled world, a web site needs a proper mobile version that can be easily navigated and viewed. Lead generation is a must, and short and sweet is the right formula in the Internet world.

SOCIAL MEDIA Social media is a great way to engage customers in a more personal way. Fun and interesting tweets and posts will send your message across the social network. Responding to customer questions and comments is a must-do. Daily posts show that your dealership is actively engaging with your customers, prospects and leads. Video testimonies from your happy customers can deliver a powerful message to social media followers. Facebook and Twitter are perfect ways to get the word out about special events and offers. But, be clear, never

lead with offers and “do you wanna buy” posts. Be a trusted resource and provide educational and engaging lifestyle and life-stage content. Be sure to pay attention to demographics. Reviews by women for women will bring great results, as women rely on reviews more than men.

ADVERTISING The objective of a web site and social media activities is to provide effective communication and digital advertising, but traditional advertising still matters. Anyone can advertise a car; good advertising sells the dealership and service center, too.

Offer women-centric ads that address what matters to women buyers, like safety and practicality.

Differentiating from the competition is critical.

Everyone offers the best price and experience so it is important to seek ways to convey trust and show that your dealership is more convenient and will be there for her during servicing and for her next car purchase. Advertising chemistry should be one of engagement and service.

ENVIRONMENT Perceptions about a dealership will begin to form as soon as a woman prospect or client walks in the

“A good impression

is mandatory, and goes beyond a good appearance and friendly demeanor.” front door. Aesthetics matter, so be sure to make a good first impression. Flowers, artwork, fresh paint and a warm environment can add comfort to what can be a stressful experience. When your customers see a balanced workforce that reflects your demographic, it shows that you are heading into the future.

SALES When a woman shopper walks into the showroom, sales advisors have the task of creating the chemistry of direct engagement. A good impression is mandatory, and goes beyond a good appearance and friendly demeanor. Successful sales advisors will be respectful, trusted advisors who can quickly discern needs and priorities. Emotional Intelligence is a key part of a successful formula. Being able to perceive a woman’s emotions during the buying process can make the difference between a good sale and a lost sale – a reaction that ignites or fizzles. Effective sales advisors are excellent listeners who understand that they are selling the dealership and years of potential service. A woman client is buying things that go beyond transportation, including freedom, confidence or caring for her family.

F&I The Finance and Insurance Department typically

TO SEE MORE FROM ANNE FLEMING GO TO CBTNEWS.COM

can create stressful reactions, and a customer may engage in self-doubt in this phase. Did she get a fair price? Can she really afford the payments? Is this really the right decision? At this stage, a woman buyer will look for reassurance, a seamless transition and straightforward answers. If she becomes frustrated and leaves, odds are 6 in 10 that she will not return and she will buy from a competitor. The deal is nearly done; don’t let it fizzle out.

SERVICE Creating good service chemistry is every bit as important as finalizing the car buying deal. This critical relationship can deliver revenue to your dealership for five to eight years, and can result in a customer returning again to buy a new car. Don’t wait for your customer to have to make a choice when it comes to service. Create the chemistry immediately by offering coupons for the next oil change.

Showcase comfort and convenience during this less than welcome task. A courtesy vehicle is a must, as well as a comfortable waiting area with Wi-Fi. Dealerships that build great chemistry go beyond the standard offerings and provide healthy snacks and beverages, PlayStations and child play areas as well as a workout room and business lounge. A waiting customer can be offered educational videos to learn more about her car and servicing. Consider adding retention programs like birthday cards and coupons, bring a friend events, women’s seminars and frequent customer rewards. When she picks up her car, she will thank you for that car wash and

vacuum. Be sure she knows that the service you provide is trustworthy and safe.

REPUTATION What is the best way to create chemistry that ensures a good reputation? A Director of Customer Experience can take a true pulse of your customer’s journey and chart course corrections if necessary.

Solicit fair and accurate reviews, thanking and acknowledging your customer’s contribution to your dealership’s success and fostering transparency. Be sure to use reviews by and for women in your advertising, outbound emails, web site and social media.

YOUR IDEAL BUYER Knowing the chemistry of an ideal woman buyer will help create goals during the sales and service process. Continually refining the customer journey can increase the number of ideal buyers at the dealership.

Fostering confidence and comfort during interactions means that a woman customer can drive away in a car that she loves, feeling satisfied and excited about the purchase. Feelings of empowerment ensure that communications are thorough and effective. If she has a question about her car deal, she knows exactly who to call. She is willing and eager to share her exceptional experience with others, and give glowing reviews and referrals. When it comes time to trade up, she doesn’t hesitate to return to your dealership for her next vehicle. And the chemistry continues.

ANNE FLEMING

President of Women-Drivers.com Prior to her involvement in the retail automotive industry, Anne spent 20 years in brand and strategic product development for several international consumer product companies. Her leadership training led to the founding of Women-Drivers.com, which has been featured in the Wall Street Journal, ABC News, USA Today, Working Mother, Smart Money and other national media. Visit her website at Women-drivers.com and follow her on Twitter @Womendrivers.

MAY 2016

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CBTNews.com 37

ON THE SET WITH

Gary Tucker of Dealerrater

Bruce Thompson of Pearl Solutions

Bill Wittenmyer of Elead1One

Jonathan Ord of Dealersocket with Joe Gumm of CBT News

Chip Perry of True Car

Joe Verde of The Joe Verde Team

Paul Faletti of NCM

Grace Huang of Manheim with

Jim Fitzpatrick of CBT News

Ian Cruikshank of Speedshift with

Joe Gumm of CBT News

Dwayne Wiggins & Neil Mathew of American Financial & Automotive Services

Ron Stouffer & Doug Frey of Allstate with Jim Fitzpatrick of CBT News

Dale Pollack of VAuto with Jim Fitzpatrick of CBT News

Jon Faris of Enterprise

Scott Karachunas with Protective Asset Protection with Joe Gumm of CBT News

Michael Dodd of

Carphoria Dealers

Lou Loquasto of Equifax

38

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CAR BIZ TODAY MAY 2016

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It’s natural for sales associates to choose to work a “fresh” lead in the CRM. In the auto industry, this behavior is called “cherry-picking,” and it is costing dealers thousands of dollars each month in lost auto sale.

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