Professional Community for Car Dealers, Automotive Marketers and Sales Managers
Let’s take a look at our compensation plans.
Many of the dealerships I visit today still employ some type of sales consultant compensation plan based on a commission to the amount of gross profit generated.
Yet, many of these same dealerships lament the challenges of keeping their staffs, finding new employees and keeping a focus on motivation.
Is it really any wonder?
With today’s consumer journey many of the assumptions we used to operate with in the auto industry no longer apply - or at least they are not as effective as they used to be.
With today’s consumer spending most of their time online, the days of achieving those large grosses on an unsuspecting consumer are largely gone. Of course, the manufacturer’s continued downward pressure on the gross margin plays a large role too.
Also, in a recent survey by CarFinance.com they found that respondents overwhelmingly stated that negotiating is the worst part of buying a new car.
With these facts, is it really any wonder why traditional compensation plans are proving to be less and less effective?
How motivating is it to today’s salesperson to spend hours with a customer, deliver an excellent experience and then find out the vehicle they just sold at invoice (or below) earns them a $50 or $100 “mini-deal”? Many of today’s vehicles, even if they are sold at sticker, do not represent enough gross to beat a “mini-deal”.
Too many of the sales consultants I have worked with are actually demotivated by their compensation. Instead of working to sell the vehicle, they give up because they believe there is “no gross”. This not only affects the sales person but can have major implications to the dealership.
I believe we can achieve a consistent gross with volume with today’s consumers. We need to ask ourselves if our sales processes work with today’s consumer or are they stuck in the past. It is time to consider a no negation or no haggle selling process combined with a pay plan that pays on volume, rather than gross.
I have seen this type of compensation plan work well with a negotiating or non-negotiating process.
Paying on volume provides a solution to many of the challenges facing dealers today:
• Provides a competitive compensation structure
• Can reduce turnover
• Allows dealers to attract from a broader pool of applicants
• Provides better control over percent of sales compensation expense
• Motivates sales consultants to go for volume rather than just high gross
• Keeps sales consultants focused on all units regardless of age
• Allows sales people to focus on the customer’s needs rather than negotiating
• Focuses the sales people on the entire “deal”, i.e. accessories, F&I, service
• Is more in tune with the majority of today’s shoppers expectations and desires
Providing a base salary along with a rising bonus level tied to volume keeps the focus on selling every day. With each sold and delivered vehicle representing more income to the sales person, there is less incentive to “sand bag” for the next month.
Most people tend to work their pay plan. Providing compensation on what you want achieved will get results. In addition to just the unit bonus amounts, pay can be based on accessory sales, F&I sales, and CSI scores. With this type of plan the whole deal or sale is the focus, not just selling the vehicle.
Of course, setting individual goals and tracking performance is still essential. This ensures that production levels are being achieved, addresses areas that need attention, and motivates for performance.
So you can continue doing the same old thing and getting the same results or look at a newer approach. Today’s consumers are demanding it.