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2019 New Year’s Resolution: Measure the Success of Your Financing Program

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Nearly all successful HVAC organizations understand financing options are key when looking to ensure homeowners can afford the repairs or new equipment needed to keep their families comfortable. It’s equally important for dealers to offer a top-of-the-line financing program with configurable solutions to meet each homeowner’s circumstances. January is the perfect time of year to incorporate financing upgrades to improve both the application process and the customer’s ability to qualify for financing options that make sense for their unique situation.

There are several concrete ways to continuously improve your financing program in 2019 and avoid losing valued customers. One is leveraging technology integrations from your financing providers or a POS technology vendor to increase application speed and accessibility. Another is broadening your prime credit offering with a second look financing option which supports customers with lower credit scores. While prime lenders often qualify shoppers with FICO scores above 700, second look programs come in afterwards to re-evaluate whomever your prime lender declines.

To be sure you are making the right upgrades for a prosperous and comprehensive financing program in 2019, it’s important to review your suite of credit options and understand which key performance indicators (KPIs) to measure when determining which adjustments make the most sense for your objectives. Depending on the lapses you’re looking to correct or the goals you have set for your financing program’s success this year, below are performance-driven KPIs dealers and dealers should be monitoring when evaluating the success of current and future financing programs.

Application Volume

The application volume, or the amount of applications being received, can indicate a few success factors in your program, such as whether sales personnel are offering financing often enough or whether customers are willing to engage with the application process. If your application volume is down, consider tech upgrades at the various points of sale (e.g. dealer website, contractor’s tablet, etc.) that can easily offer a more frictionless application process. Doing so will reduce customer fatigue during the application process and increase overall volume. This includes onboarding a waterfall process that automatically transfers applicants who are declined by a prime lender directly to a second look application without requiring the customer to re-enter personal information.

Multi-touch marketing campaigns can also drive increases in application volume by positioning pricing as monthly payments to reduce sticker shock. Financing solutions should be highlighted prominently across marketing communications, including the company website, social media, direct mailers, emails and other points of conversation.

Approval Rate

The next metric dealers should understand after application volume would be the percentage of applications that are converted into approvals, which can indicate whether your program reaches a wide enough audience as it relates to credit profile. If you’re still losing customers due to your prime program declining them, it would make sense to add a second look financing provider that can improve approval rates. For example, we at Fortiva Retail Credit have been able to approve between 30 and 50% of customers who were initially declined for prime credit, which increases the overall approval rate of a seller’s credit program.

Increases in approval rates can have a direct impact on sales and revenue. At the very basic level, increased approvals mean that you are declining less customers who may not be able to afford your service with cash or who would simply prefer the comfort of a flexible payment plan rather than paying it all in one lump sum. Elevated approval rates better position you to avoid losing sales to competitors who can approve customers your financing program declined.

Take/Acceptance Rate

Once approved, the customer must accept the credit offer for you to close the sale, meaning that the acceptance rate, or take rate, is another essential piece to the revenue puzzle when analyzing your credit program. While approval rates indicate the success of your financing program dynamics to provide more customers with more opportunities to buy, the take rate looks at whether the credit options themselves were actually accepted by the consumer. It is important to analyze this number to see what factors may be causing customers to accept or reject a credit option.

For example, if the approval rate increases, yet the take rate remains low, then it might be worth looking at the terms being offered by your financing providers. In a world already riddled with debt, more and more homeowners are interested in establishing revolving lines of credit for longer-term repayment plans with higher credit limits. In this case, it may be worth revisiting whether your current program only offers more stringent, short-term installment loans.

Basket Size

When customers feel empowered by their financial options, they’ll spend more money. Measuring the ticket sizes of credit transactions provides insight as to whether your program’s offerings are driving this empowerment, which obviously has a direct impact on sales and revenue measurements.

Returning to the installment loan and revolving line of credit comparison, installment loans are tied to the price of the product being purchased by a customer, whereas a line of credit application can offer the customer flexibility to upgrade to a more expensive unit since the credit line awarded exceeds their initial expectations for the purchase budget.

Repeat Purchase

An often-overlooked factor is a healthy repeat purchase rate, which impacts overall revenue boosts year after year. Customers holding a private label card specific to your company in their wallet are more likely to return since they already have the funds available to make the purchase without filling out an application again. Your financing program providers should have data on how many existing customers are returning, how often and how much is being spent. Post-service surveys are another great option for gathering data on customer satisfaction, future purchase predictions and anticipated timelines for their next upgrade or service.

One way to proactively encourage repeat business based on your credit program is to execute a direct marketing campaign to existing customers who already have a line of credit exclusive to you. Done in conjunction with your financing provider, this can even include personalized messages to let your customers know how much they have on their line of credit so that they know how much they have available to spend with you.

There are several ways to measure the success of your financing program, and for each measurement, there are various strategies that, when executed correctly, have the potential for improvement when evaluating the numbers. As we all strive to ensure the most effective solution for your customers and your sales goals in 2019, it’s essential to understand which metrics to monitor and what factors might be having an impact as we continuously improve to achieve our business objectives.

Bob Maisel

Posted In: Money

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