Mopar’s F&I product volume last year reached 1.5 million contracts in the United States and nearly 2 million contracts worldwide. That’s significant, Mopar chief Pietro Gorlier says.
Mopar is the global parts and service brand for Chrysler Group and parent Fiat S.p.A. The unit’s handling of extended service contracts, maintenance plans and other back-end products sold at Chrysler Group and Fiat dealerships stands out in the automotive industry. Typically, manufacturers assign that duty to a captive finance company or third-party provider.
Gorlier discussed Mopar’s F&I progress with Automotive News Special Correspondent Jim Henry this month at the New York auto show.
Your F&I products are sold under the Mopar brand name. Why is it important to have branded products?
Four years ago when we started the new company, a clear target was retaining customers in our dealer network, as a result of the fact that in 2008, 2009, 2010 the [number of new cars on the road was] declining. We identified service contracts as an important tool in our effort to retain customers.
The first thing we did was rebrand them so they were sold under the Mopar Vehicle Protection brand. We wanted to clearly state that these products were backed up by the factory. What happened in 2008 and 2009 was that some other smaller [extended service contract] companies had gone out of business. This is a brand we use worldwide.
[Chrysler emerged from bankruptcy restructuring in 2009. Fiat S.p.A. completed a buyout of Chrysler in January 2014.]
What were total sales in 2013, including extended service contracts, prepaid maintenance and other products?
Contracts were just shy of 2 million contracts worldwide, a pretty important number. More than 1.5 million were in the United States.
How has that number changed over time? Is that a big increase?
The number of contracts sold in the last three years has doubled.
What’s your penetration level among the dealership network?
I would say 90 percent of our dealers are selling our products. But I think it’s more like 50 percent that strongly represent the products.
How does that impact service retention?
We find that every contract is generating on average at least three [service] visits. That’s an average. So some are seven visits, some are one. That means with almost 2 million contracts, you could say we generated almost 6 million visits for either maintenance or repair.
How do service contracts impact repurchase intention -- the likelihood the customer will buy another car from the same dealership?
Selling factory-backed products is not only good for service retention, but there is a very clear relationship that customers with service contracts will more likely repurchase from the same dealer and the same brand.
How does having a service contract impact the likelihood that a customer will come back to the dealership for service?
A customer with a service contract increases service retention by 9 percentage points. It’s a large number.
Customers with service contracts are more likely to come back for service. But in terms of market research, can you isolate that one factor?
There can be other factors in play. One is the service contract. Another may be the extra service that service contract generates. Retention may also be up because we have expanded service hours and the number of dealers who offer a quick service, an express-lane sort of service. A couple of years ago, I was surprised at how few dealers offered this. We tell dealers that the average dealership has 37 independent garages in their territory -- 37! That’s Firestones, Jiffy Lubes, etc.
Do you encourage dealerships to offer service contracts in the service lane?
Four years ago, we also started a project to sell service contracts in the service lane.
Besides service contracts, what other F&I products are hot right now?
Maintenance contracts, I would say, are becoming more popular. Road hazard, with all the potholes we have, has also grown tremendously. We have dealers selling hundreds per month.
Do you offer dealers reinsurance programs for service contracts?
Not yet, maybe in the future. We are working with the dealer council to see if we will enter that arena. We have a vision of service contracts as a tool for retention and for customer satisfaction.
You can reach Jim Henry at firstname.lastname@example.org