THE INHERENT DANGER OF UTILIZING “STATIC” DATA IN A SOFT PULL BUREAU PRE-SCREEN APPLICATION
Since “soft pull” or “pre-screen” credit bureau data is becoming the fastest growing tool of choice by dealers and dealer groups across the country, I thought it was appropriate to talk about this emerging technology that can change the way we do business. If utilized properly, it is a game changer. Unfortunately, as is with most emerging technology, most GMs and dealer principals don’t understand the difference between a “real-time” soft inquiry and “static” products. As is with most products in our space, the wrappers often don’t look the same, but what comes in the box is without a doubt a different animal.
Real-time bureau pulls, soft or otherwise, are a true-to-the-moment snapshot of a consumer’s credit profile. Static pulls are dated – at times as old as 90 days. Most dealerships are overwhelmed with enthusiasm at simply having the ability to pre-screen a customer without the utilization of SSN or DOB. What they fail to ask is, “is this real-time data?” To be clear, there are three players in the market space that have the ability to provide real-time soft bureau data – and there is a big difference.
When you pre-screen, if the consumer qualifies, you must, under the Fair Credit Reporting Act (FCRA), provide a firm offer of credit. The credit provider or facilitator must honor this offer, along with the specified terms and conditions, if credit parameters are met. Say you require a minimum of $2,000 monthly income, no late mortgage and no repossessions; if your pre-screen model delivers a green light, you are obligated to provide the offer of credit.
Here is where it gets interesting. If I am utilizing static data, which can be anywhere from 31-90 days old, how many payments can a customer miss in two months? How much revolving debt can a consumer devour in two months? That static 710 credit score can actually be a real-time 590. Guess who is holding the bag when you can’t get the deal bought, or if you can, but at a rate substantially higher than that which you provided? You guess it – you, the dealer. Given the current environment of regulatory oversight and intervention, I think we all would rather avoid the phone call from any agency asking “why” on behalf of the customer.
As with any technology, this application can only evolve. But in its current form, it can truly double conversion rates, and make a real impact on PVR and bottom-line profitability. The applications are truly endless – as long as the data utilized is correct and current.
So I will leave you with this thought, and hope to see some discussion: Would you let your doctor evaluate your prognosis with 60-day-old blood? Well, at least in that case, the doctor would be liable.
IS THE CONSUMER’S CREDIT DIRECTLY CORRELATED TO THE CUSTOMER EXPERIENCE? YES!
We all have taught it, preached it, spoke the words and vowed to be followers of the idea that we “treat every consumer with the same level of service, regardless of credit situation.” OK, now let’s be honest. The operational day-to-day reality is that we roll out the red carpet for that 810, and sometimes just “roll out” for the 590 consumer.
Make no mistake, I am in no way saying that the 590 is discriminated against, or treated unfairly. What I am saying is that we are human beings, and instinctively we see that 810 as someone with whom we would like to align ourselves. Here is the reality. We took a DMS sampling of 15 dealership clients, and correlated the APR with the front-end profit, backend profit and total gross profit per unit. Take a guess who made the most money for the dealerships in question. The secondary customer — every, single, time.
So, now ask yourself this question: “Do I provide a unique experience for my secondary customers?” If the answer is “no,” you are truly missing the boat. The ability to sell a secondary customer often takes a long-term investment and commitment by the dealer. The idea that any F&I manager can handle any secondary deal is in itself ridiculous. The relationships, knowledge and experience it takes to be a successful secondary F&I manager is a unique skill set, and one that brings exponential value to any dealer operation. If the right person is placed in charge of this area, the results can be staggering. It can result in that profit shot in the arm every dealer looks for.
So how, or more importantly where, do you start? Secondary lead providers? Trigger leads? My answer: Look no further than your own front door. Month in and month out, secondary customers flock to your Website. The question is, are you converting them? Let’s face it — the majority of customers who fill out your online application are looking for a “yes.” Unfortunately, most of this small number will never get one. But what about all those 590s, 610s or 640s who used to be that 810 you so covet? Well, I have news for you. They still won’t give you their name and social over the Web. They may have lost their wealth and their credit, but they never lost their good sense.
So here’s the secret sauce for capturing those customers: Use a huge net. In the process, you will haul in some prime customers, as well. Stop asking for the customer’s SSN and DOB. Yes, it is that simple. Remove these two lines from your online form. It is your way of saying, “Yes, we want to sell you a car. Yes, we deal with less than perfect credit. Yes, we believe we can get any deal bought. Yes, we will work our butts off to get your deal done!”
Take the SSN and DOB out of your applications and see what happens to your conversions. Give them the info without the fear of rejection. Say “yes” to it all. Be as eager to please that secondary customer as you are that super prime, and see what happens. Secondary customers are, in fact, just shopping for the “yes.”
In everything you do — on the Website, in the showroom or on the phone — train your salespeople to say “yes” to that secondary customer. Yes, yes, yes. I promise you, they will say “yes” to you. The only difference is when they say “yes” — 54 percent of the time, to be precise — their “yes” will put more profit to your pay line.
TALES FROM THE LANE:
How to Turn a Positive Service Experience Into a Negative Dealership Experience in Just 20 Minutes
It’s low-hanging fruit. Those service customers represent huge dollars to the point — not just service dollars, but sales dollars. Trade ‘em up! Lower their payment, upgrade them, exchange ‘em, your keys for theirs…. There are too many to mention, but they all sing the same song: The service lane is a gold mine for new vehicle sales.
Now, let me be the prom spoiler and sour the punch bowl. Today, right now, you are pushing service customers away with your sales process in that very same department. Customers are coming in for service, and some won’t come back. Not because of anything your service department did.
It’s because of your sales department that the consumer isn’t coming back.
I’ll begin by saying I am in no way advocating for you to cease service lane sales. It is a gold mine, and one that needs to continuously be worked to extract the perfect mix of paid ROs and new retail units. What I am saying, however, is that your process might be leaving you susceptible to providing that customer with an experience that will keep them from coming back. “Mr. Smith, I have some good news. While your car is being serviced we took the liberty of appraising your trade….” Insert pitch here.
So the salesperson does his or her job, takes the customer through the paces and gets them to love the new car. They get them excited. The customer can just see the looks on their co-workers faces when they drive up in the new car. They are even calling friends and family excited at how you are going to be able to lower their monthly payment, because you need their trade in.
And then it happens — you pull their credit. 560. But wait, wasn’t Mr. Smith an 810 the last time you pulled credit?
This scenario happens every day in dealerships across the country. With the best of intentions, sales goals in mind, we seek to extract sales gold from the service lane, enticing our customers with a trade up that can lower their payments. In most cases, these customers can trade up with payments well within — if not lower than — their current monthly payment. This is only true, however, as long as their credit worthiness has remained solid.
Now you’re asking, “How would I know?” Pre-screen. Simply put, it is the best way for you the dealer to arm yourself with the credit data necessary to structure and negotiate a car deal, or more importantly see if there is a deal there before you begin the sales process. So, if you aren’t utilizing this process, find one and use it. Recently, the tide against dealers has been a high one, but new credit score technology is a profit life preserver — and an SSI savior. Now that same consumer leaves in the well-serviced car your service department just completed, you avoided a heat case and, most importantly, you kept that happy customer happy.
About the Author:
Don O’Neill is the vice president of sales and marketing for CreditMiner. He can be contacted at 866.469.9770, or by email at email@example.com.