Johnson Automotive, which has seven stores in the South and two in the Washington, D.C., area, carries the Lexus, Hyundai, Subaru, Maser-ati, Porsche, Fiat, Alfa Romeo and Honda brands. The group sells about 10,000 new and used cars a year. F&I revenue per new vehicle retailed is four figures. But it didn't used to be. In fact, the stores were underperforming in F&I, Kostern said.
He decided the cause was the traditional menu-selling process, in which customers are shown a list of F&I products while F&I managers explain, one by one, the benefits of each. He had long believed the approach encouraged customer resistance and had come up with a new technique while an F&I manager at a Johnson Automotive store in 2010. He moved the menu to the end of the F&I process, teaching finance managers to flip it face-up and show customers payment options only after discussing all the F&I products in an informal conversation. "It gets the customer to lower their guard enough to hear about the products," Kostern said. "It gave us the opportunity to build the value in the product."
Now all nine Johnson Automotive stores use the conversational approach. Kostern, who trains the company's 16 F&I managers at least once a month with the help of an outside coach, teaches them specific word tracks and the use of body language.
"My managers sit back when giving the conversational presentation so that the customer feels more at ease and in control. We don't engage the customer until we show the menu. At that time we lean forward," Kostern said. "These techniques are what prevent the 'nah' type response."
Not everyone says yes, but because the technique builds a rapport, objections are often easier to overcome than with the traditional presentation, he said. "It usually comes down to making [the F&I products] fit in their budget," Kostern said.
Johnson Automotive was selling an average of one F&I product per customer before adopting the conversational selling approach. Now it averages 1.5 products per customer, and its average F&I revenue per new vehicle is up 35 percent compared with where it was before the technique was adopted. Customer satisfaction scores are close to 100 percent, Kostern said.
The number of chargebacks -- refunds of commissions received on sales of F&I products that are later canceled by customers -- are half what they were before the conversational selling process because customers leave confident in their purchase decision, Kostern said. Customers who hang onto extended service contracts and replacement plans such as tire-and-wheel tend to return to the dealership for service, keeping their contact with the store fresh. "The dealer principal wants customer satisfaction and customer loyalty, and the No. 1 way to increase that is by a great experience through the F&I sales process and increasing your product sales," Kostern said. "It drives the customer back to the store."