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What kind of protection do you use?

By Tommy Ady

1-15 Tommy Ady blogIf you’ve been following the business manager’s story I’ve blogged about over the past couple of months, you know that she’s been trying to hit $800 for her deal average and she finally did. But you’re going to find that she used a little creativity to get her over this last month by listening to her customers and utilizing all of her product suppliers. As many business managers do, she felt an obligation to only use her aftermarket warranty and would rarely sign a customer up with the factory-backed coverage.

Before I wrote this, Polaris announced some of their research that says 82 percent of consumers want factory-backed extended coverage and 46 percent of consumers say that they’ll only buy extended coverage if it’s offered directly by the OEM. Something interesting about this research is that it’s telling you that you’re selling yourself short without two extended coverage providers. Nearly half of your customers will not buy an extended protection plan from you if you’re only offering them one brand. This isn’t a rumor. This is a fact. If you’re not sure you should believe it then let me ask you this: What’s your VSC penetration rate? Probably under 50 percent. Makes sense doesn’t it?

It’s not a secret that most dealerships typically have one warranty provider and they seldom sell another brand. You’ve got a warranty company (Interstate, Zurich, McGraw, etc.) and you’re loyal to them — which doesn’t help you make as much money as you should be making.

Right now we’ve got a business manager hovering around $550 and desperately wanting to make $800. She finally did it and here’s how it went down. In our classes we always review various coverage providers, not to decide who’s better, but only so a manager knows how and when to sell their secondary provider. In this case I wanted our manager to realize that, no matter how hard we try, some customers just won’t buy something that isn’t backed by the OEM. This is why you need to have a back-up warranty plan for your customers and you’d better know it as well as you know your other plans. If your main warranty that you’re selling is a factory-backed plan, then you need an aftermarket as a back up; but if you main warranty is already an aftermarket, then you need to use your factory plan.

Buyers were coming in to her office, she reviewed the menu with them and they’d pick a plan or they’d say, “No thanks, I don’t want any of your products.” So then she began to ask questions and remove the least desirable products from the menu until (cross your fingers) the buyers would end up getting some sort of back-end product. This is the point where she might add a deductible to the coverage or reduce the term in order to lower the price. But what about the people that still didn’t buy any coverage? There are a number of things that we can do. If we look at statistics, it usually says a business manager should be somewhere around 40 percent warranty penetration. But now Polaris comes in and says 46 percent of your customers will only buy a factory-backed plan! This is great news if you’re only selling one brand of warranty.

Check out my math: You sell 100 units in a month. Of those 100 units, 40 percent of your buyers buy an Acme service contract and 60 percent of your buyers leave without a service contract. Out of the 60 people who didn’t buy a service contract, 46 percent (27) have stated they would only consider a factory-backed service contract. You’re not going to sell 46 percent of them a service contract but our research shows that you will be able to sell about 18 percent (11) of them your factory contract. Now you’re probably asking, “What if my first service contract that I try selling is already the factory-backed plan?” Well, you switch over to your aftermarket plan. After all, it’s probably less money and you’ve got a ton of great reasons why they should buy it.

To help our business managers, I’ve put together some of the simplest word tracks I know. Here you'll find a few unique assumptive closes to switch warranty providers with customers that won’t buy a warranty — which means if you're looking for the generic, "So why don’t you want to buy my warranty?" you've come to the wrong place.

Try saying this after they have turned down your warranty: "Something that I didn’t realize is you’re probably a person that would feel more secure if you had a factory-backed coverage plan. Let me show you what that means.”

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