Keep Your Focus on the Future With a Certified Pre-Owned Program That Gives Independent Dealers an Edge With Millennial Car Buyers
An axiom of military history says that generals spend all their time planning to fight the last war, making them ill-prepared for the next war.
That same thing is happening with vehicle dealers today. They are planning for the future as they did with the past.
The past was about the baby boomers. The future belongs to the millennials, and they are very different shoppers.
Unlike their parents, millennials are ultra-frugal about their purchase of vehicles. Big box dealerships with their $20 million price tags that impressed their parents are a turn-off and an unneeded expense to this group.
The millennial generation likes to buy vehicles others have taken the depreciation on – but they also show a tendency toward the security provided by new car warranties.
That makes the millennial group perfect for the used car industry for a couple of reasons.
For one, used car dealers can couple vehicles that have depreciated with a remaining factory warranty. And they can certify pre-owned vehicles as a viable way to let millennial buyer enter into vehicle ownership.
Two factors make the millennial demographic predisposed to looking at the certified pre-owned option.
The first is their propensity to buy used cars, and with that, a higher rate of acceptance of CPO vehicles.
The second is their desire to be secure from the added expenses caused by mechanical breakdown. That makes a majority of millennial used vehicle purchasers open to a certified vehicle purchase.
Millennial buyers consider themselves much savvier buyers than their parents were because of their ability to use mobile devices. But they are not necessarily as educated on all aspects of CPO as their predecessors.
A study conducted this year by NADA Used Car Guide found 50 percent of 18- to 34-year-olds – millennials – said they were slightly or not at all familiar with CPO programs, a higher percentage than older generations.
They are, however, willing to learn, and they will add value to the product and increase their purchases of CPO vehicles when they are educated on those aspects.
Even though they are looking for the security provided by CPO, they are not sure about the parts of the certification process that provide that security. Millennials are much less likely to understand the value of the inspection aspect of the program, nor do they in general grasp the warranty portion.
But, like other buyers, when those components of the program are explained, millennials’ chances of purchasing a CPO unit rise. According to Autotrader’s 2015 CPO Study, 68 percent of used car shoppers said they would consider buying a CPO vehicle from the beginning, but once they learned the definition of what CPO really means, that number rose to 83 percent.
One of the most compelling aspects of marketing to the millennial generation is their willingness to learn and accept new ideas – that is, as long as the learning can be done via the Internet. That’s where millennials shops and learn about products.
Autotrader’s 2015 Automotive Buyer Influence Study found 74 percent of online shoppers say they use a smartphone or tablet to do their research – almost double the percentage from the previous year’s study – and millennial customer are at the forefront of that trend.
The Internet is the most likely place for a millennial to find out about certified pre-owned program, other than a personal visit to the dealership. The problem with customers finding out about the benefits of CPO after they’ve done their dealership research is, while it helps sell the vehicle, it doesn’t help convince customer s to visit your store.
Marketing to social media outlets with an educational message about CPO is the best way to reach this very valuable group of consumers. Millennials shoppers are much more likely to get their information from those sources – and to process and believe it – than the preceding generations.
Reaching millennials means getting those customers to your website. While they very much rely on in-person sales experience, their purchase process begins on their tablet or smartphone, long before they arrive at the dealership.
Carrying certified pre-owned vehicles that hit this group’s “cool factor” is the best way to reach the segment. Using search criteria millennials prefer increases the likelihood they will see you first.
Millennials may dream of Audi, Mercedes and BMW, but they are more likely to search for Honda, Chevrolet, Toyota and Ford, in that order. They also have a penchant for off-brand or discontinued vehicles like the Chrysler Pacifica, Dodge Magnum and Chevrolet TrailBlazer.
Factory certification programs only certify up to six years, so independent used car dealers who can find a reputable national certification program that will certify back to the mid-2000s and beyond, such as the NIADA Certified program, can attract customers who are looking for those special vehicles and still want the safety and reassurance provided by CPO inspections and warranties.
Millennial customers are going to spend more time on third-party and dealer websites than their older counterparts. People who spend the most time on those sites tend to be CPO shoppers – or they become CPO shoppers during the shopping experience.
The more time customers spend looking on the Internet, the more they are able to focus on specific models and equipment and the more time they have to learn the advantages of a particular dealer’s services, commitments and ethics, which can be broadcast on the dealers’ sites and are an integral part of a CPO program.
Millennial shoppers are looking for security in their vehicle purchase and ownership, and having a warranty can create that peace of mind for buyers who cannot afford a new vehicle or just want to spend as little as possible to avoid the depreciation attached to the purchase of a new vehicle.
CPO is more important to this frugal generation because they don’t want to save money by buying a used vehicle only to discover they have bought someone else’s problems. Using tools such as Carfax, AutoCheck or any of the vehicle history reports gives a sense of the vehicle’s past, and an inspection and a warranty provide additional peace of mind.
That has a real tangible value in the view of the millennial buyer. Even frugal car buyers see a real monetary value and willingly pay a premium for a certified vehicle. In fact, according to Autotrader’s 2014 Certified Pre-Owned Study, millennial CPO purchasers pay an average of $2,000 more for a vehicle that has been certified.
Finding the right vehicles for that group of buyers and a certification process that they can buy into – along with announcing on your website a commitment to the certification process and a great partnership to deliver the coverage to the customer – is a sure way to attract millennials’ business.
The most common reason consumers don’t purchase certified vehicles is simply a lack of awareness of CPO programs. Autotrader’s 2015 CPO Study showed that while consumers’ familiarity with CPO is steadily rising, only 49 percent of used car shoppers surveyed said they were familiar with certified pre-owned vehicles.
But when they learn about what’s involved in the CPO process, most consumers see the value in the inspection and warranty. The same Autotrader study found the peace of mind that comes with certification and warranty are the two top reasons cited by customers for buying CPO vehicles.
That means if you can get the millennial customers to your website, it becomes a matter of selling the customer on the right car – one that fills their needs but still leaves room for the protection that generation demands in the products they buy.
In other words, if you can get your message to where millennials shop, 90 percent of those shoppers are going to see value in the CPO inspection process and the warranty attached to it.
It is very apparent from market research that the places millennials prefer to get their information are online from third-party sites, and the dealer’s own website is the next-most popular place. Where they do not go for information are OEM sites – they prefer unbiased accounts to what they perceive as propaganda from the manufacturer.
Millennial customers are the future of the automotive industry, which should be music to the independent used car dealer’s ears. Those buyers are not going to behave as their parents did. Things that turn on their parents, such as the glitz and glamour of new car facilities and the prestige of new car ownership, are not the kinds of things likely to ensnare millennials.
While many auto dealers continue to approach their target marketing from a baby boomer mindset, those who tailor their marketing and operations toward the millennial generation will find their stores staying relevant to a huge vehicle buying demographic for many years.
So how do independent dealers move forward from yesterday’s playbook of success and prepare for this buying segment’s preferences?
They must first recognize this is a different that is going to behave in a different manner from its predecessors and must therefore be approached in a different manner.
Independents will have to find ways to reach millennials in their favorite social media spots. Dealers might have to stock vehicles to which today’s younger buyers assign a certain cachet of ownership.
Millennials are not willing to forgo the security of warranties and service contracts to get these older vehicles. That makes it important to find a national partner for the certification process that has the three items it takes to be a good finance product – claims, coverage and an overall drive toward customer service – and can reach back to the early 2000s to cover the vehicles the millennial generation values and can afford.
Aligning with a program like NIADA CPO that does all that allows independent used car dealers to attract millennial buyers to their vehicles and deals using their lower overhead.
Millennials want to be able to shop using smartphones and texting for communication until they are ready to meet face-to-face, but they also want a dealership experience and a demo ride when it is time to buy. Millennial buyers care most about the warranty and inspection and will pay a premium for it, and will become your loyal customer for life.
While others are still chasing the boomers, you can set up a program geared toward the future, selling to the millennial generation via the media they dwell in.
ABOUT THE AUTHOR: William Carr is a longtime auto industry veteran in sales, management and training and a regional training manager for Warrantech Automotive, Inc. administrator of the NIADA Certified Pre-Owned program. For more information on the NIADA CPO program, visit www.niadacertified.com/dealers.
This article originally appeared in the January 2017 edition of Used Car Dealer magazine and can be found online at: http://bit.ly/2ihlGVx
Filed Under: Car, certified, customers, Dealer, millennials, NIADA, pre-owned, Used
Having an extended service plan program that fits your business model is important. But it’s just one piece of the puzzle. Have you considered how your program is supported? Without the proper infrastructure, it might not be as effective as it could be. Making sure your customers are taken care of is as essential as the contents of a well-designed service contract and vital to the overall success of your business.
At Warrantech, we continuously strive to improve the quality of service provided to all customers. We believe that quality has to be the foundation of everything that we do and everything that we represent. To us, customer service is not just a team or a process, it does not have a starting point or an ending point – it is part of the culture in everything we touch.
To bolster this approach, Warrantech employs a dedicated Quality Assurance Department that reports directly to our Call Center Director, identifying strengths and weaknesses, and effectively managing the workforce to optimize service delivery. This department serves as the foundation for our call center as they monitor all personnel on a daily basis and provide performance feedback on:
• Customer interaction
• Procedural adherence
• Claims adjudication
• System usage
• System documentation
• Call lengths
We also make sure that customer service is readily available. Customers can file claims through a dedicated toll-free phone number, email, web chat or Claims360, our proprietary online platform. We even support mail and faxed claims as well.
To handle escalated customer issues and complaints, we have created a Presidential Team. This team, which is located within the call center, maintains a close relationship with each of our partners, the Account Manager(s) and executive teams. Their task is to work with a client in the event of an escalation to ensure the best possible service. This team receives referrals from the call center associates, direct from our clients, from executive escalations and from all forms of social media.
Any customer who seeks to speak to a supervisor or is contacting us for the same issue on more than one occasion is immediately transferred to the Presidential Team. These associates are equipped with advanced customer service training and problem resolution and have the full power and authority to make the appropriate decision by working with the client to ensure that together we are achieving customer satisfaction. The Presidential Team member owns the service experience through completion and documents every aspect of the resolution.
The information that is recorded by the Presidential Team is reviewed monthly by call center management and Warrantech executive management, as well as the training department to identify process and procedure improvements needed to avoid future escalations. Supervisors use the feedback from the Presidential Team in their weekly meetings and individual coaching sessions with their associates. This approach creates a customer who is not only satisfied with the outcome of the transaction, but a customer who walks away from the experience with a positive outlook on the service contract, Warrantech and, most importantly, our clients.
Warrantech Support Process At A Glance
Every customer contact is recorded and stored
Appropriate staffing levels are maintained and based on program, time, date and SLAs
Unique telephone numbers and websites are utilized for each client
IVR is used to appropriately route calls based on program, contact type, etc.
IVR provides contact center associates with customer information prior to transfer
OEM and/or partner calls can be immediately routed to the appropriate entity
All customer contacts are monitored in real time to ensure that all service-level agreements are met
Visit warrantech.com or give us a call at 800.833.8801 to learn more about how we can support your business.
Filed Under: customers, quality, satisfaction, service, support, Warrantech
Sean Stapleton, president and CEO of Warrantech/AMT Warranty will be presenting at the 2015 Warranty Chain Management Conference on March 11 in Miami. The following is an excerpt from Warranty Week in anticipation of the event.
The technology is changing. The need for repairs is changing. Even the concept of ownership is changing. And the way people shop is changing. Two industry experts describe how they see these changes impacting warranty and service contracts.
At this year's Warranty Chain Management Conference, attendees are immediately going to be challenged to face the changes that new technology is forcing upon our industry.
It's going to be a bit upsetting, especially to those who like the status quo. Rather than hearing about the latest best practices in the break/fix business, and how everything is slowly going to get incrementally better, attendees are going to be told how driverless vehicles will challenge the whole idea of automobile ownership, and how comparison shopping apps that seek out the lowest prices have made it tough to earn a living in retail.
A pair of warranty industry experts will deliver a one-two punch of keynote presentations at the WCM Conference on March 11 in Miami, about the impact of disruptive technologies upon warranty. We spoke with both of them this week about their presentations.
John Estrada opens the morning session with a talk about how driverless transportation will change warranty and service contracts, followed by AMT Warranty's Sean Stapleton talking about how warranty and service contracts can help save retail from its downward spiral, by making value and customer relationships as important as low prices.
WCM's Morning Schedule
In the WCM program, Stapleton's 45-minute presentation is called "Combating the Retail Pandemic," a title he said he came up with a few months ago when the Ebola scare reached the United States. They're by no means the same thing, but in economic terms, the current state of the retail environment provokes a comparable level of fear for many veteran merchants whose iconic organizations are facing possible extinction.
"I certainly wanted to grab everyone's attention, but more importantly I felt that the title set the stage for a discussion about a very serious and widespread situation for retailers and manufacturers," he said. "A pandemic is a disease that has a disastrous impact felt both locally and globally." And he said that many colleagues and friends in the retail industry are dealing with a profound change in both customers and the marketplace where a low price seems to be the main determining factor for product purchases. So either they lose the sale, or they get the sale but lose money anyway.
In other words, the sales slump that's hurting many of them comes not just in terms of revenue but also in terms of profitability. "Margin erosion has impacted retailers in ways never seen before," he said. Price will always be a factor when a product is purchased, he added. This is nothing new – the modern difference is the ease by which customers can obtain pricing comparisons and make purchases through multiple sources.
The Great Recession
Stapleton said some people blame the current retail challenges on the lingering effects of the Great Recession – the decline of household income, aging baby boomers, rising unemployment, or falling home values. Others say it's the lack of innovation, or the lack of exciting new "must-have" products.
"The reality is that there has been product innovation: smartphones, 4K and Ultra HD, wearables, advanced car tech, and highly functional tablets. You look at the growth the CEA expects for these segments, and it's tremendous. So the innovative products do exist."
Meanwhile, the economy may not be as strong as we would all like, but it's not as bad as some people make it out to be, he said. The U.S. Census Bureau pegs the January-to-January sales gain at 3.3%, which isn't great but also isn't dismal. Total retail sales for the November-to-January holiday period were up 3.8% from the same period a year ago. The U.S. unemployment rate is now down to 5.7% and the median price of existing home sales is up 6.2% since last year. So what is it?
Ironically, he said, in an era where retailers are perhaps more connected with their customers than ever before, thanks to social media and big data, those connections are more superficial than ever.
"The heart of what I'm going to discuss is that many retailers and manufacturers are just not achieving a high level of loyalty and commitment from their customers," he said. "Part of the problem is that we're living in the 'Age of Like.' We see this play out on Facebook every day, with users happily clicking the thumbs up icon for just about anything they see. However, that's where the customer commitment often ends. 'Like' should not be our collective goal. To be successful we need to aspire to win the love of our customers. The reality is that overall we aren't seeing the same level of affinity for brands that we used to enjoy."
For instance, Stapleton said, his father always bought Kenmore appliances. "He loved his Kenmore appliances because, in his mind, they earned his trust and loyalty year after year" he said. "He wouldn't dare shop for another brand. Sadly, we don't have that kind of an environment anymore."
"As warranty and service contract professionals, we have a unique opportunity to affect customer loyalty," he said. "We have the ability to turn a negative experience into a powerful trust building moment with customers. Customers recognize and accept that product breakdowns can happen to even the most reliable products. The customer's perception of the product issues are more often driven by our responses."
Stapleton further noted that one of the greatest challenges with service contract programs arises when a customer's claim isn't covered under the contract, whether as a result of an expired contract or other reasons. "In such situations, there is still an opportunity to turn a negative into a positive."
He suggested that there are plenty of instances when no coverage exists, but accommodation can still be made to assist the customer and provide them value. Accommodations may take the shape of providing a product replacement or repair outside the service contract. However, there are other solutions that are less frequently utilized that can have a major positive effect with minimal financial impact.
For instance, Stapleton noted that broken products not covered under a plan can be purchased back from customers based on the products core value. Additionally, discounts on replacement products can be provided or even gift cards with token values which can be applied to future purchases can be offered to customers. The actual cash value is less important than the act of going the extra mile for a customer.
Discount Repair Services
Stapleton proposed another low-cost marketing idea: leveraging a claims administrator's repair network by making it available to customers who have a non-covered product issue. Why not offer loyal customers discounts on repairs for their customer-pay jobs related to these types of product issues, or even for other products they own?
"Here's how I see it: Warranty and service contract programs are developed by operations groups. However, the marketing departments of the retailers or manufacturers are rarely involved in the development of these programs. And I think that creates a level of disconnect. I see service contracts and warranty programs as one of the most powerful loyalty solutions out there. It actually is a game changer," he said.
Manufacturers and retailers might not know the name and address of every single customer, but they certainly have that data for those who needed warranty work or who made claims under their service contracts. With this information, a critical segment of their customer base can be identified and hopefully saved.
Stapleton suggests that marketing departments utilize claims data to establish a loyalty campaign tailored toward these affected customers. "The fact is that some of these customers may have been your best customers in the past. The data currently residing in a company's system can provide them the ability to know how and when a customer's perception of them soured. Moreover, that data combined with a strong retention plan can help return the customer to their former loyalist status. Further, this type of strategy can prevent the impacted customers from becoming one of your net detractors." He noted that with the power of social media, disenfranchised have the ability to shape an enormous population of existing and potential customers' views of your product or company.
Ultimately, he said, when structured and executed appropriately, warranty programs build trust and loyalty. Stapleton said it is inexcusable to allow one claim to impact a lifetime relationship with an existing customer. "Instead of spending the majority of available marketing resources to bring in new customers, let's keep the ones you have. Let's prevent them from getting out into social media and destroying your reputation based on one poor claim event."
The first step, Stapleton suggests, is to change the whole image of warranty within the retail industry. "If you want to change the perception of warranties and service contracts for customers, you have to change it internally first. We can't allow warranties and service contracts claims to be viewed as an unfortunate expense. We need to view them as a marketing opportunity that can potentially save a customer thereby leading to countless future purchases and maybe even a means to evoke positive customer emotions that go beyond 'like.'"
To read this article in its entirety, go to Warranty Week. And be sure to visit Warranty Conference for more information regarding the WCM Conference.
Filed Under: claims, Conference, customers, economy, retail, Sean, service, Stapleton, Warranty
Sean Stapleton, president & CEO of Warrantech, recently took part in TWICE magazine’s roundtable discussion on the state of the extended-service contract industry. The following is his response to the challenges and opportunities that lie ahead.
What is the greatest challenge facing the extended-service contract industry?
A significant challenge faced by our industry continues to be retail margin compression. As a result of the fierce competition between retailers for customers, retailers have few choices but to generate savings in other parts of their businesses. Extended service contract programs are certainly high on the list of many retailers as an opportunity to retain additional revenue. The result is that administrators and their respective underwriters are forced to try to become more efficient or reduce claims funds to compete.
While competition should be seen as a positive force in business, this continued underwriting pressure could lead to administrators underpricing programs to win opportunities. This will likely result in programs being underwater, thereby leading to frantic attempts by the administrators and their underwriters to reduce both administration expenses and claims costs. The likely downstream effect will be negative customer experiences and further diminished customer loyalty.
Conversely, where do the industry’s greatest opportunities lie?
The greatest opportunity for our industry will be the development of protection solutions that allow customers to cover a broad spectrum of devices and equipment utilizing diverse payment mechanisms. Warrantech has developed solutions that better enable customers to purchase protection plan products in a convenient manner, covering more items, and providing additional value that ultimately will result in additional revenue and customer satisfaction for our partners.
What is your biggest takeaway from last month’s International CES?
The consumer appetite for connected products is gaining momentum at an astounding pace. Manufacturers are clearly listening to consumers and are focusing their efforts on smart products, which are able to communicate and synchronize in ways never before imagined.
With this enhanced communication functionality being developed for devices, we believe that consumers will demand a unified platform that can seamlessly monitor, control and report back to the consumer on the status of their connected equipment.
The next logical step will be a protection solution that is able to provide coverage for each connected device. In order to provide a comprehensive single solution, providers of protection plans will need to be able to provide protection for connected products ranging from smart appliances, televisions, mobile devices and even automobiles.
Please share any new programs or services that would be of interest to our readers.
AmTrust [Warrantech’s parent company] has been an innovator in the telematics space with regard to protection offerings. Last year we launched our Connected Protection solution, which provided vehicle service contract purchasers with the ability to protect mobile devices connected to their vehicle’s WIFI network.
For 2015 we plan to provide our retail partners with the ability to offer monthly protection plans to their customers, which will provide comprehensive protection for an extensive array of equipment owned by the customer. Customers will enjoy additional benefits for products purchased through the retail partner, including disappearing deductibles and in-store service. The goal is to drive both recurring protection plan sales and traffic to the participating retail partner’s stores. The offering, known as our Loyalty by Warranty™ program, will provide retailers with an innovative way to increase revenue as well as customer loyalty.
Visit twice.com to read the extended service roundtable discussion in its entirety and for more industry insight.
And be sure to keep up with Warrantech on Facebook, Twitter and LinkedIn so you can learn more about our innovative products and services as they become available.
Filed Under: CES, contract, customers, extended, industry, Sean, service, Stapleton, TWICE, Warrantech
Sean Stapleton, president & CEO of Warrantech, recently spoke with Dealerscope magazine about the importance of extended service plan programs for retailers. The following is an excerpt, providing a brief glimpse of what the company has in store for 2014 to help businesses increase their extended service plan offerings and give customers the most value for their money and a worry-free shopping experience.
Warrantech Corporation works closely with its retail partners, field training teams and consumer focus groups to develop innovative programs designed to drive extended service plan sales. Through this collaborative effort, new program offerings are developed and tested. Once beta testing has been completed, successful programs are rolled out to Warrantech partners.
Based on recent beta-testing results, Warrantech is making available to its partners a number of dynamic offerings designed to increase both partner revenue and customer retention. One such offering is Warrantech’s Verify & Protect program, which is a real-time missed point-of-sale extended service plan program for online retailers. This program utilizes multichannel marketing solutions to offer customers who have not purchased an extended service plan as part of their product purchase an additional opportunity to do so on a real-time basis. Additionally, the program is designed to create a white-glove experience for customers by providing them with real-time purchase detail and shipping confirmations on their recent purchases.
Look for the full article in the March 2014 issue of Dealerscope or online at www.dealerscope.com.
And be sure to keep up with us on Facebook, Twitter and LinkedIn so you can learn more about our innovative products and services as they become available.
Filed Under: &, customers, Dealerscope, extended, plan, Protect, retailers, Sean, service, Stapleton, Verify, Warrantech