Enhancing pre-approval tools to help more customers secure vehicle loans.
Role
Sole product designer for research, testing and design.
Duration
3 weeks from discovery to redesign
Collaboration
1 product manager, 4 software engineers
Outcome
2x lender integration, reduced time to value
Background
Summary
A little about Clutch
Clutch is Canada's largest online automotive e-commerce platform, with whom customers can buy a used car completely online, hassle and haggle free, and have it delivered to their home. The business prides itself on being able to provide a seamless and transparent, no-pressure car buying experience to Canadian drivers across the country.
Growing pains and a shift in the winds
Given a less desirable change in the macro-economic landscape in early 2022, the company devised a new plan that was geared towards better unit economics rather than solely focusing on volume. The reason for this was twofold:
Our explosive growth during COVID was not something we could take for granted or advantage of forever.
Clutch had grown to the point where our initial systems weren't appropriate to our scale anymore.
As such, our product team accordingly identified a set of front end and back end initiatives to move us in a new direction:
Part of the back end improvements included increasing attachment rates and increasing our reserve, both relating to vehicle financing. Since profit margins for the company are much better when customers choose to finance as opposed to paying in full, it made sense to focus our energies here.
While the number of financing customers was steadily increasing, there were bottlenecks and the rates weren't exactly where we wanted it to be. Together with my PM, we got to work diagnosing the problem before coming up solutions.
Understanding Pre-approval
Our pre-approval tool, originally released in 2021, was Clutch's very first foray in getting more customers into the financing funnel. It consisted of a simple questionnaire that asked basic details like name, address and income before providing an pre-approval amount.
Its shortfall however, was that because of lender and software contraints at the time our pre-approval results only worked well for prime borrowers. Sub-prime borrowers, a large segment of our customer base, were either told to wait for results or were immediately turned away even if they were perfectly entitled to being financed by banks. In short, we were shooting ourselves in the foot with a poorly implemented tool.
Something nobody wants to see after waiting for their results, but happens far more often than acceptable.
Downstream effects
As we spent time unravelling how poor pre-approval rates were turning away potential customers, we realized there were downstream effects as well, but in a more surprising direction. Even if someone were to get a pre-approval, the actual rates given by our lenders oftentimes were not to our customer's liking. This happens so often that this has become the primary reason most sales fall through. This alerted us to the fact that even for those approved, pre-approval accuracy was something we had to fix as well.
The strategy
Based on all of our findings, it was obvious to us that poor pre-approval results for customers are resulting in lower financing attachment rates. Thankfully, as we were doing our research a hypothesis was already forming in our heads:
If we can increase our pre-approval accuracy and get customers their results sooner, our financing attachment rates will improve.
Collaborating with my PM, we came up with a roadmap of what we can accomplish within the time given and specifically around pre-approvals. We decided to tackle the pre-approval and client facing piece of the puzzle first, and then following up right after by building strong internal tools to round out the entire project.
This division of labour allowed us to test our hypothesis without commiting too many resources, as internal financing tools would be far too complex and time consuming to be achieved by the small team assembled.
Simplified illustration of project scope and timelines
How we're measuring success
Now that we had a sense of the scope, it was time to set goals for what these changes should. To that end, we set up three major metrics by which we would measure the success of this project. Metrics one and two would be immediately realized with this rework, while the latter would require a mix of this project and further initiatives to achieve, representing a more long term goal.
Integrate with more lenders
More than double our lender count from 2 to 5.
Reduce time to value
85% of customers should get pre-approval results in minutes
Improve financing rates
Financing should represent 70~75% of all sales
Understanding the ebbs and flows
First things first, we had to map out our basic user flow:
User flows for customer seeking pre-approval
One of our big goals for the pre-approval revamp is to integrate more lenders. Doing so is important because with more lenders we're able to shop for better rates for our customers, giving them more flexibility and as a result, reducing the number of customers who would have been turned away otherwise.
To get there however, meant we had to understand what pieces of information need to be collected, sort through similarities and differences with our existing form, and make the appropriate additions:
Mapping out how information is collected during the pre-approval and financing stages of a potential sale.
With a clear understanding of how the information was to be gathered and flowing, it was exceptionally easy for us to know where to focus the bulk of the design work. Previously, we only had to contend with a prime customer flow. Now we had to account for subprime customers and customers for whom we could not pull data.
Pre-approval 2.0
Because of these flows, we had to get creative with how we show a user's progress. Previously we only had one form so there was nothing to worry about, but now we had to adapt the length of questionnaire based on user inputs - if customers didn't meet a certain threshold set by our lenders, we had to collect more information afterward.
To make this experience not feel disjointed or create any more friction than is necessary, I designed a flexible progress bar that changed in length based on which path they were on to get their pre-approval rate. Of course, we also informed our users when we required more information as to not discourage them with unexpected surprises.
Small moments of delight
While pre-approvals are instantaneous, a lot of customers didn't find our numbers trustworthy because they were generated too fast. From a physcological point of view, this did make sense. Number crunching should take a second, especially if it was a "custom" rate. To build trust with our customers, I decided to slip in a minor animation and offer reassurances if the number crunchingactually did, on occassion, take too long.
User account improvements
One thing that both the PM and I agreed on was that our existing pre-approval tool lived too much in isolation: by that we meant that once a customer did get their rate and pre-approved amount, it was only ever found again as an email in their inbox. Nowhere on the site was this number ever reflected again, forcing customers to either tab away to check or to have the number open side by side or written down, neither of which is an enjoyable experience.
To that end, we decided to revamp the user profile to show pre-approval information or drive them to our pre-approval if they haven't recieved one already.
End Product & Impact
Summary
Pre-approval, new and improved
The results
The product was launched Q1 2023, and in the weeks following already showed promising results. Just by nature of deploying this new pre-approval we've hit our first goal of more lender integrations. While adding additional forms generated more friction than before, our ability to give customers their results sooner meant that the time to value for this tool has also dramatically improved.
With an improved pre-approval tool, we were able to give customers more flexibility and value in a shorter amount of time.
What's Next
Summary
Project Mercury
Pre-approval was just the tip of the iceberg for Project Mercury. As mentioned earlier, we had big plans to also build add-on internal tools to help facilitate financing deals. Part of that work would incorporate all the data collected during the pre-approval process and transposing them into their actual financing applications to lenders.
This would allow help relieve the manpower bottleneck Clutch's underwriting team is currently experiencing, allowing them to process a significantly larger volume of financing applications. This would allow financing to be a much more viable option as we continue to scale as a business.
Want to learn more?
If you have any questions regarding this project, please feel free to contact me.
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