ceiling is another man’s floor”. Why is it that where some see the
end of the road, others see opportunity?
Go deeper with GlobalData
It is not just attitude that counts – it is the combination of
attitude and action; those with poise grounded in preparation often
succeed when others fail.
So, as we face the challenge presented by the credit crunch, we
can either be inactive, continuing our processes exactly as before
knowing full well they won’t deliver; reactive, waiting for trouble
to come knocking and then tackling it with, no doubt, increased
levels of expenditure and stress; or proactive, taking an
opportunistic stance founded in wisdom and preparation.
Witness the sheer volume of negative news reported daily by the
media. “The NICE decade is over” says Mervyn King, governor of the
Bank of England, meaning we can no longer rely on non-inflationary
consistent expansion. Robust economic growth, favourable LIBOR
rates, cheap mortgages, bullet-proof property prices and the desire
and ability to take on ever-increasing personal debt are all also
threatened.
Add to this the escalating cost of motoring driven by the
relentless rise in fuel pricing and the plans to increase excise
duty and it is easy to see why some might feel less than
enthusiastic about their next car purchase.
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By GlobalDataHave we been here before?
We can recall the gloom of 1987 when interest rates doubled and
showrooms emptied. We remember the difficult conversations between
salespeople and customers who wanted to part-exchange their cars
after the government abolished car tax in 1992 (now there was some
serious negative equity to overcome!). We remember the last
economic slowdown in 1997 and the prolonged re-pricing exercise
which caused buyers to stay away during the Stephen Byers-initiated
“rip-off Britain” investigation of 2000-2001.
When enquiries begin to dry up, we appreciate the gold-mine that
is our live finance customer database. But if we have not ever
worked how to get the best results, then we might just have picked
the wrong time to learn, as the time to fix the roof is not when it
is raining.
Maybe our traditional approaches to re-solicitation do not
quite cut the mustard. Let’s look at them from a customer
perspective for a moment:
- We call it “timed approach”, customers call it “random
approach”: contacting our customers when the timing means something
to us, but not to them, e.g. peak settlement months through the
term. - We call it a “proactive approach” (really it’s reactive),
customers call it “snooping” or at best, “insincere”: contacting
customers out of the blue when they have requested a settlement at
a different supplying dealer. - We call it “hot prospects”, customers call it “irrelevant” and
“bothersome”: contacting customers with six months to run prior to
contract end, when we know that only 30 per cent of our database
keep their car into the final third of their contract anyway and
this is either because they wanted to – or had to – So we
expend a disproportionate resource on the least responsive 30 per
cent of our opportunity.
What is the foundation for success?
All retailers should perfect a renewals process and finance
companies can really help by developing and delivering thinking,
tools and training in order to support this. It is the effective
renewals process that will see us capitalise on the weakness of
others in these leaner times. Before we look at accessing a
renewals strategy, let¡¦s look at what else should be in place:
- Co-operation – The best results are achieved by working in
partnership with your retailer network. Proficient retailers
control the relationship with the customer and know them best. - Presentation – Retailers need encouraging to sell on payment,
not price. Presenting cars by model-walk and payment-walk is hugely
successful in America but hardly ever practised here. In such
circumstances, customers pre-qualify their budget by standing close
to both what they want and what they can afford. - Information – Most point of sale representatives are not
“market-aware”. When a customer presents a seemingly better offer,
they are not informed enough to sell the benefits of in-house
finance. A good finance partner will help to address this with
appropriate training. - Consistent strategy – How about favouring two-year PCP
programmes and equipping retailers with the plan, point of sale and
skills to sell on payment? You are only as strong as your weakest
link.
Let renewal technology take the strain
The most appropriate time to engage in meaningful dialogue with
existing finance customers is when equity becomes equal to the
original customer deposit. At this point, a new world of
opportunity opens up for the customer.
The difficulty arises when we attempt to pinpoint the precise
moment when the customer is financially able to re-purchase through
the same finance house, replicating the same term, maintaining the
same monthly payment without the requirement to part with any cash
(accounting for current market factors, such as change in interest
rates, marketing bonuses, and mileage and condition).
Though the above task is an arduous one if attempted manually,
there are now products which can do the job for you. In fact, some
of the leading suppliers of showroom lead management software
(electronic showroom diaries) are starting to build in such
functionality. This is worth investigating, since most of us do not
look for the ability to deliver intelligent finance renewal when
assessing these tools. Instead the focus is always on data capture
of showroom “walk-ins”, as if there is such a thing. The answers
are out there, if we only look for them.
Having started with Paul Simon, we may as well stick to the
musical theme and end with Billy Ocean: “When the going gets tough,
the tough get going”. How tough are you?
The author is sales director of Solmotive and a director of
Retail Science India
Motor Finance Issue: 44 – June 08
Published for the web: June 26 08 13:53
Last Updated: June 26 08 14:14
