10 Simple Principles for Maximizing Sales Success

Earn More Profit In A Down Market, a Win-Win Situation!!

A. How does the customer win?

B. How does the dealer win?

C. How do I (the DEALER) capitalize on this win-win situation?

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By Rod A. Heasley

Peak Performance Team

Director of Business Development - IADAs,

Director of Peak Performance Team University

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Mr. Dealer, i would like to challenge you to find a product that provides more benefit to your customers than a vehicle service contract (VSC), without mentioning the vehicle itself.

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If you are really concerned about your customers and your reputation for selling quality vehicles, then you probably offer some type of VSC to every one of your customers.

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New car manufacturers keep extending warranty terms and have experienced huge success in offering "certified pre-owned" (CPO) programs for their used cars. Why? Because they realize that the general consumer is "warranty wise" and it is important to help sell the vehicle and obtain extra profit. So why does the number of vehicle service contracts sold keep increasing each year? I believe there are many reasons, but I wish to discuss my top three:

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First, automobiles are much more complicated, technical, and much more costly to repair, nowadays. Obviously, Joe's Corner Garage in the neighborhood back alley can't properly make such repairs, so customers usually need to take their vehicles to certified repair garages. If you sell an extended vehicle service contract, it can keep the customers' costs down to a small and manageable deductible. It also increases the likelihood that the customer will return to your facility for service.

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Second, the industry is conditioning the consumer to expect warranty coverage on their vehicles. If there isn't any, or the original factory warranty is going to expire while they own the vehicle, they will generally be receptive to purchasing one plan from you, when the option is properly presented by your salespeople of your F&I department.

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Third, most smaller dealers that are happy with their realized profit on vehicle service contract penetration are those offering these warranties as part of the asking price (in states where it is permissible), and not offering it as an "aftermarket" product that can be negotiated as a separate part of the transaction. Let's be realistic about the process and ask yourself the following question: whom does the customer fault when the vehicle goes down with a problem? The answer is YOU, Mr. Dealer, of course! So, whether you include it or offer it separately after the sale, presenting a quality (and fully insured) VSC program is definitely a win-win situation. The customer wins with peace of mind coverage and YOU win with customer appreciation and a profitable bottom line!

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OK, SO HOW DOES THE CUSTOMER WIN?

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Limited out of pocket expenses for repairs - A VSC is usually a very small percentage of the total sales and typically accounts for about 5% to 1-% of the price of the vehicle, with deductibles ranging from zero to $200. Today's customers usually have little or no cash to outlay toward major mechanical breakdowns. So, for about $25 per month (when financing), they can protect themselves from large repair bills and the number of claims they have during the contract period doesn't matter. 

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Fixed monthly payments - When a customer fully understands all the benefits of getting an extended VSC, he or she also knows what to expect in the form of expense for a specific amount of time (the length of the contract). Their monthly payment will be lower without the VSC, but the outlay of their own hard-earned money can vary according to the type of repair needed. Also, do not forget about the various charges added by labor and parts, that one can experience, especially when traveling away from home.

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Ensures the best repair facility fixes the vehicle - Normally, it will usually cost more to have a franchised service department (or national service chain) repair a vehicle as compared to an independent garage. But in defense of big boys, it costs an enormous amount of money to invest in the sophisticated equipment, tools, and technician training that is required to properly repair today's vehicles. So, a customer that has a good VSC from a reputable company will, in most cases, have fixed costs, regardless of which type of facility works on the vehicle. This ensures that a professional does it right the first time, and a cheaper option isn't selected.

 

OK, SO HOW DO I, THE DEALER, WIN?

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Income - The VSC can provide additional income for numerous areas of your dealership, especially if you have your own repair facility. An in-house service center isn't the only are in which a VSC can add to your bottom line, though. Additional opportunities for profit exist in the sales, finance, and parts departments.

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Customer Satisfaction - In today's competitive market, you cannot afford to have a customer buy a car from you only once. Your VSC is an excellent way of tying the customer back to your dealership and helps enhance customer loyalty. After all, don't you want to know when your customer has a problem so that you have an opportunity to stay in the loop when a claim has been filed? When a customer buys a car from you and it costs them money out of their pocket to keep it on the road, they normally blame YOU! Afterall, you sold it to them! On the other hand, with your VSC behind them, the repairs are paid for by the provider and the entire repair experience becomes only a slight inconvenience for ANY of the parties involved.

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Limits complaints - As a dealer, you should understand that significant sales and profits thrive in a positive environment, especially in a down market. Keep the atmosphere upbeat in your dealership to maintain positive attitudes of all employees and provide a great place for your customers to by their vehicles. The last thing you need is for a dissatisfied customer to jump on social media platforms to complain and make you look bad in the eyes of your other (or future) customers. You cannot eliminate mechanical breakdowns or the need for repairs to units that you sold, but you can limit negative publicity by offering the best VSC protection to every customer - with not exceptions!

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Repeat business and customer control - We all like to hear positive and successful sales references from satisfied customers. In my training classes, I always mention how many mornings I looked for customers in the service area or told my repair garage to call me each time one of my customers was having a mechanical breakdown problem. I cannot list the number of times that such a situation turned into another sale. This happened because the proper VSC tied them back to my dealership (or my recommended repair facility), to get their vehicle repaired.

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A win-win relationship - Ensures the presence of the fundamentals of a positive selling atmosphere at your dealership. It also says that your employees have a belief in the dealership for which they work, along with personal confidence in the VSC program you offer. Mr. Dealer, if you think that your employees' attitude, enthusiasm and confidence can not be transmitted to your customers, or you do not think that the consumer is looking for just that type of automobile buys atmosphere, we need not further discuss why your dealership sales and profits are falling short of your expectations - especially on the VSC side of your business.

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OK, SO HOW DO I, THE DEALER, CAPITALIZE ON THIS WIN-WIN SITUATION?

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You can structure a VSC presentation that speaks to the customer's belief that having their repairs paid for is a much better option than them taking more money out of their pockets to repair the vehicle that they purchased from you.

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AN EFFECTIVE VEHICLE SERVICE CONTRACT PRESENTATION IN 3 SIMPLE STEPS:

1. Qualify the customer's needs (length of financing term, miles driven yearly, type of use for vehicle, length of time usually keeping car, etc.) - Train your salespeople and/or F&I department to ALWAYS ask about repairs to the customer's previous vehicle (especially if a trade in is involved). Ask if a VSC was purchased on the trade and explain how it would have added value to their trade in!

 

2. Overcome the customer's objections to upgrading to a longer term VSC - You can train your employees to do this by asking the following questions and listening to the responses: A) Is it not true that most major or minor repairs come at the most inopportune and unexpected times, Mr. or Mrs. Customer? B) Do you need your vehicle every day? C) Does your monthly household budget include an extra (pick a figure) $1,500 to $4,00 for that unexpected repair bill? D) You are purchasing protection insurance. Let me ask you, don't you have homeowners insureance to protect your investment? so, when was the last time you used your homeowners insurance? Do you think the odds are greater that you might have a claim on your homeowners versus a claim on your vehicle?

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3. Get the customer to make a decision (...at point of sale...) - Your presentation should describe the program to the customer so that when its time to ask for the sale, they already see the need and the benefits in purchasing the VSC. It should also uncover their personal "hot button", that's the specific benefit that they cannot afford to be without. Once your employees have created enthusiasm for the product and its obvious benefits, it is time to make the customer decide on the upgraded term.

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Suggested closing questions:

A) Would you like to pay the difference in cash for the vehicle protection contract, or just have it included in your monthly investment? (Notice I do NOT say "monthly payments")

B) Would it not be easier to pay only $27 a month, instead of writing a check for $3,500; or even worse, possibly have to secure another loan for repairs to a vehicle?

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Remember to remind the customer that the insurance they are paying for now, (such as homeowners and car insurance), can go up every year and they have no control over that situation when it happens. Additionally, the policy could have cancelled, and they'd have to secure another company. The vehicle service contract price is fixed for the length of the contract and will not change or be cancelled under normal circumstances.

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National statistics state that about 50% of the people who purchase a VSC initially objected to the idea. That is why it is critical that you have an effective presentation program to obtain your total profit goals on each sale opportunity.

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Remember, Mr. DEALER, it is your responsibility to your customer that you give them a good feature and benefit presentation on the vehicle service contract, just the same as you should be doing on the vehicle itself!

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In conclusion, if you train your staff to really and truly believe, and recommend to your customer, that your VSC program is a benefit and an exceptional value for the dollar and not just as an afterthought - I guarantee you that you will personally experience the following:

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A) An increase in your total overall sales and profit fro your dealership!

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B) An increase in your overall personal income!

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C) An increase in new customer traffic to your dealership because of your reputation for partnering with your customers and offering ways to help them save money on unexpected repair bills.

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After all, are not the A, B, & C, listed above, exactly what you are striving for on a daily basis?

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Good luck and good selling on the Vehicle Serve (profit making) Contracts! Remember Mr. Dealer: your customers are looking for relationships, not transactions!

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