Long-Term Customers: The Indirect Auto Finance Opportunity
Blog: Enterprise Decision Management Blog
Most auto loans booked by banks are originated through indirect channels like Dealertrack and RouteOne, but how many of those new auto loan customers end up becoming long-term customers? Not enough. Banks competing in the indirect auto lending channel can’t stop once they successfully book the loan. That is just the beginning.
Banks spend a lot of money to win auto indirect loan customers—from investments in automated decisioning technology that can turn around credit decisions in seconds to special pricing and promotions that will help customers afford the car of their dreams. However, these investments do not guarantee a relationship with the customer that last longer than the term of their new auto loan. So how can banks transform these investments into a sustainable return for their business? We believe it is by applying specific best practices that build relationships with customers that will extend far beyond the terms of their auto loan.
Communication is one of the most important aspects of building a relationship. You have just acquired this customer via their purchase of a new vehicle. They are excited and happy with their new car. This is the honeymoon phase — possibly the best time to engage with your customer.
Introduce yourself. They may have never even heard of your bank before. Educate them about your institution and the services you provide. Invite them to download your mobile banking app.
Gather and track customer consent and then gather data on communication preferences. Learn more about the customer — their behavior, preferences, financial aspirations—so you can communicate with them more effectively.
Use analytics to help understand your client better as well as help yourself communicate more effectively. It is crucial to communicate with your customer in the channel that is most familiar and comfortable to them.
These best practices, while they may seem inconsequential, can have a large cumulative impact and will help your organization connect with your customer on a more personal level. The more comfortable they feel with your company, the more likely they are to make payments on time, and consider additional products and services, and the less likely they are to attrite.
Deliver Value to Indirect Auto Finance Customers
Providing your customer with value is another important component. While this goes hand in hand with good communication practices, it is critical to provide your customer with relevant content and valuable insights. Examples may include information such as the trade-in value of their vehicle, recommendations for vehicle servicing or maintenance, or insights into the total costs of their loan over time and how their repayments are impacting their FICO® Score. If the customer has complaints or problems, be available through all relevant communication channels to help them resolve it.
Be Prepared for Moments of Truth
Finally, be prepared to effectively handle the key moments of truth in the lifecycle of the loan.
As your customer nears the end of their loan term, it is imperative that you have gathered enough data to make relevant offers that can extend or broaden your relationship. Having acquired the right insights into your customer’s financial needs and aspirations, you may be able to anticipate their desire to trade in their current vehicle and help them acquire new auto financing. You may recognize their need for a home equity loan, or a student loan for a child getting ready to head off to college. You may extend the invitation to open a new checking account with you or pre-approve them instantaneously for a new credit card. The success of these cross-sell tactics often hinges on establishing a positive brand affinity with the customer and tailoring offers to the customer’s unique financial needs and goals.
It’s possible that your customer will experience financial difficulty that imperils their ability to make their payments on time. Be prepared for this eventuality. Establish a consistent, personalized communication cadence with the customer. Understand their communication preferences. Apply what you know about them to tailor your payment reminders to be most impactful. Remember—tone, timing and channel are all critical. People always have a choice in which bills they pay first. If you have put the time and effort into developing a relationship, the customer will most likely prioritize paying your bills over others.
Time to Get to Work
In today’s finance environment, every profitable customer is a precious asset. By incorporating these best practices, banks will have a better chance of growing their relationships with the indirect auto loan customers that they so diligently acquired in the first place. The moment the customer signs the paperwork in the dealership, it’s time to get to work.
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