IN THE SECOND PART OF HIS ANALYSIS AT HOW F&I PAY PLANS CAN NEGATIVELY IMPACT THE BUSINESS OFFICE, CHRIS SCHULTHIES FOCUSES ON THREE MORE ASPECTS THAT SHOULD BE ANALYSED.
In the last issue, we laid out five criteria dealerships need to carefully examine when crafting an effective F&I Pay Plan. We then looked more extensively at two of them, firstly that the plan motivates the employee to peak performance and secondly that it aligns with the short and long-term goals of both the dealership and the employee. Here, we take a closer look at three other factors to consider.
1) THE PAY PLAN PROMOTES AN ETHICAL AND CUSTOMER-FRIENDLY ATTITUDE AND APPROACH
I don’t want to suggest business managers that are paid a percentage of F&I gross are unethical. There are many outstanding business managers across Canada that truly have their customers’ best interests at heart. However, percentage of F&I gross pay plans are more likely to promote a cut throat attitude towards the maximization of gross at the expense of customer satisfaction. Is the product being pushed in the best interest of the customer, or in the best interest of the business manager?
2) THE PAY PLAN IS COMPETITIVE WITHIN THE TRADING AREA AND RETAINS VALUABLE EMPLOYEES
If you have a terrific business manager, chances are that other dealerships in your trading area also know it and may be trying to solicit them away from you. If your pay plan simply pays a percentage of F&I gross, then it becomes that much easier for “qualifiers” in the pay plan and the greener pasture sought is actually brown.
3) THE PAY PLAN IS EASY TO UNDERSTAND
Many dealer principals and general managers prefer percentage of F&I gross pay plans for this specific reason. However, too often this may be the only reason. Furthermore, because this type of pay plan is common and perhaps even the norm, it is easy to adopt and explain to a business manager.
CONSIDER TWEAKING YOUR SAME OLD, SAME OLD
If you still want a percentage of F&I gross as a component of your pay plan, create a two tiered plan whereby you pay a percentage of F&I gross across the board, but if your business manager reaches a certain penetration level for each of your core business office products, the percentage is increased. For example, you might pay 18 or 20 per cent of F&I gross across the board.
If, however, your business manager achieves 50 per cent extended warranty penetration, 25 per cent creditor insurance penetration and 50 per cent protection package penetration, you might pay 23 or 25 per cent across the board and refer to this as your “Elite” pay plan.
In order to achieve “Elite” status, however, all penetration levels must be achieved. This ensures that all of your business office products are being consistently offered to all of your customers. I should note here that the percentages and penetration levels are purely examples and may not reflect your desired percentages or penetration levels.
FLAT RATES
Pay a flat rate commission for each business office product sold. For example, pay $100 for each extended warranty sold, $125 for each creditor insurance policy sold and $100 for each protection package sold. If, however, your business manager achieves 50 per cent extended warranty penetration, 25 per cent creditor insurance penetration and 50 per cent protection package penetration, you might pay a retroactive $125 for each extended warranty sold, $150 for each creditor insurance policy sold and $125 for each protection package sold. This type of pay plan allows you to pay more for F&I products that you want your business manager to focus on.
With this type of plan however, it is important to set and “hold” retail pricing for all of your business office products so that there is no discounting of retail pricing to simply earn the flat rate commission. Again, these numbers are for example purposes only.
It is also important to note here that many dealerships across Canada are offering far too many F&I products. Business managers selling more than four products feel under pressure to rush through their turnover and, as a result are not able to give each product a thorough presentation. Customers also feel like they are being barraged with an assembly line of products and grow weary, or worse, agitated. The fundamental questions that need to be asked when selecting (or reviewing) F&I products sold in your dealership are:
1) Does this F&I product or service offer my customers “real value” or is it “gimmicky”?
2) Is this F&I product or service priced fairly for the consumer?
3) Is this F&I product or service proven in the marketplace?
4) Does the F&I supplier honour its claims or guarantees?
If you can answer “yes” to these questions, then your F&I products are “keepers”. Value-add F&I products combined with a well thought-out, motivating F&I pay plan ensures a healthy, profitable business office and satisfied, long term customers.
