Ian Dewsnap of Benchmark
Consulting concludes his three-part series – based on a series of
interviews with retailers – dealing with the use of PCP in the
dealer finance market.
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I
believe the PCP product to be an extremely valuable and powerful
customer retention and repeat sales tool – but it can be just as
powerful against us when we get it wrong. We go to significant
expense to create the resell opportunity, and it shouldn’t be going
to waste.
There are, of course, many
factors going into the process, but in this article I am concerned
with the impact of just one – the PCP contract itself. Overall, it
seems the end of contract is being handled reasonably well – but
are some customers being excluded from the chance to repurchase by
the initial contract not being as well handled as it might be?
After all, the first point of resale is the point of
sale.
Will the customer have a
higher mileage than the contract plans for? If the mileage is too
high, the customer definitely won’t enjoy the excess mileage bill.
Increasingly though, retail customers seem to have lower mileages –
I guess more working from home, the economic situation, and the
price of fuel is making us think more about making trips we don’t
really need.
But then, customers in a
two-year contract with only 10,000-15,000 miles on the car are
reluctant to realise their depreciation by trading in for a new
one. They might be more suited to a three-year, where although the
mileage might still be low, the flatter depreciation curve in year
three means they more easily accept that it is ‘time to
change’.
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By GlobalDataSelling PCP on a run-out
product can also be a recipe for disaster on a short-term cycle.
The marketing money which made the deal so attractive is inevitably
not available on the new model now in the market at contract-end,
making the payment walk based not only on the vehicle price
increase plus depreciation, but also on the ‘lost’ marketing
money.
If a customer finds their
instalment jumping up from £200 to £350 as a result (or the
unpalatable alternative of a substantial cash injection to change)
then their experience is not just likely to turn them off the PCP
product, but in fact away from a brand where they feel they have
not had a fair deal.
Is there an option to extend
the present contract for such customers for a further 12 months?
Not a refinance, which, to a point, loses the opportunity to resell
which PCP creates, but a genuine extension which retains the
benefits for all parties? Better to retain a quality prospect for
12 months than suffer a customer defection now.
Customers are more frequently
being contacted nine months or more prior to the end of the term –
which is good. My own experiences are that very few actually run
full term anyway. But the links through the chain from the
manufacturer CRM systems and the dealer network don’t always work
as well as they might.
This contact is an
opportunity to explain again – without the pressure of a sale under
way – the options and the processes which apply, such as condition,
mileage, hand-back fees or whatever.
Worse still, end-of-contract
return condition can cause real dissatisfaction. Much of this is
now outsourced to take the issue away from the dealer/customer
resell point. I can understand the desire for the financier to
recover any costs of damage and I can equally understand the
customer’s desire to try to ‘get away with a little
bit’.
But I hear of customers
taking their new replacement car and then, a couple of weeks later,
getting what they perceive to be a substantial bill in the post.
It’s not widespread I’m sure, but how would I feel if that happened
to me? Not well disposed towards the brand for sure.
So what has been the point
and the lessons from this series of articles? Well, we already have
PCP penetration levels high and rising. We can learn about better
qualification for the next ‘new’ customers, but more pressingly we
now have a large portion of the customer parc locked into PCP
products.
It seems to me that a wave of
renewals work will be coming in late 2011 and 2012 for all of these
cars. The captive finance companies will get the largest part of
this, and there is a serious job to do. The manufacturers perhaps
have their eye on a different ball and need help to
focus.
As ever, it is the dealer who
speaks to the customer and does the real work face-to-face. I hope
they are well equipped and supported to do so.
Perhaps now is the time to check and re-check that the
processes needed are upgraded and in place. After all, don’t all of
them share the same objective? More sales, more often.
