The Secret to F&I Product Penetration—A Customer Loyalty Program?

Let's face it — it’s tougher to make a profit in the sales department these days. Gross profits are being squeezed to a minimum on the front end by the ever present internet customer; government intervention and third-party competitors are taking their toll on F&I profits. Where does a dealership look to turn the tide? Consider the hidden benefit of a customer loyalty program — increased F&I product penetration.

Dealers with loyalty programs for their customers are discovering substantial increases in the number of products their F&I departments are selling. Why? The difference is in the customer’s state of mind as they enter the F&I office and prepare to sign their paperwork. In the typical dealership the F&I manager starts with a description of the various forms the customer is about to sign and then introduces the customer to the F&I products the dealership has to offer. In a dealership with a loyalty program, on the other hand, the F&I manager starts by introducing the customer to all the complimentary benefits they are entitled to just for doing business with the dealership.

Imagine the difference! How would you respond? Let’s say you go to the ABC Cell Phone Store to get that fancy new smartphone you’ve been dreaming about. The sales representative explains to you that they know you could buy your cell phone anywhere, but because you’re buying it at the ABC Cell Phone Store you will never have to worry about the screen breaking or cracking.

You’re covered, it’s the store’s way of saying thank you for doing business with them. If there is ever a problem with the screen you just bring the phone in and get a replacement — no charge. Chances are you would think that’s pretty awesome customer service and really like the fact that you chose to buy your phone at this store, right? Now when your rep explains that you can add additional coverage against theft, loss, and water damage for just $69.95, how likely would you be to consider the wrap-around coverage? In the real world experience of dealerships with loyalty programs the evidence is overwhelming: customers are much more inclined to purchase additional protection when they’ve just be given complimentary services.

Your dealership’s loyalty program can include a myriad of benefits — any combination of services like complimentary oil changes, a lifetime engine warranty, car washes, tire rotations, vehicle inspections, summer/winter checkups, a rewards point system for using the service department or a free loaner car just to name a few.

Dealerships with programs like these for their customers have seen their pre-paid maintenance penetration go from 5% to 40% overnight, and show real increases in service contract and gap policies as well. A loyalty program builds trust between the customer and the dealership, and nowhere is that trust more evident than the increased profits in the F&I department.

Dave Williams is a loyalty program consultant with Dealership For Life, Inc. in Boonsboro, Maryland. He is a graduate of The NADA Dealer Academy with 23 years of retail automotive experience. Davew@dealershipforlife.com.