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Written by George Kriza on 07/31/2017
Driving profitable sales volume is a key goal for both car dealers and manufacturers. In recent years, most manufacturers have cut dealer margins significantly, often by as much as 40 percent. The highest volumes of sales are often at the lowest price points.
Additionally, consumer-facing strategies include deep discounts in the form of instant rebates, brand switch incentives and various other tactical approaches.
How can both change the dynamic from today’s current state to one with better outcomes?
Manufacturers should consider incentive strategies that shift selling and buying behaviors. For example, we can safely assume that cars loaded up with a higher ratio of options carry significantly higher margins for the manufacturer. It should be simple to measure these configurations, and reward salespeople for selling optioned out cars. For example, if the ratio of the base price to the options total is high, the reward should be minimal. Every ratio bump could constitute a reward tier, as follows:
A structure like this directed at salespeople could significantly alter the mix of vehicles sold. To keep it simple, the ratio structure could be bracketed, so that sales within bracket ranges would get the appropriate reward. Manufacturer POS tracking could identify cars and tag them with key identifiers so that rewards could be easily tracked from sales out data. Administration would be simple, requiring the salesperson at the dealership to simply pick the VIN’s they’ve sold off a screen and automatically receive the appropriate award.
This strategy could then be amplified by increasing the reward structure for higher prestige or higher margin product lines from the manufacturer.
Dealers and manufacturers should also consider new ways to motivate consumers to increase both the volume of purchases and the price point of purchases. We don’t ordinarily think of consumers as making volume purchases from car dealers, but statistics show more and more families have three, four and even five vehicles in the family. If a family were to purchase multiple vehicles from the same dealer in the same rolling twelve-month period, why not give them an incentive? There could be very interesting ways to structure this to motivate the entire family to get on the brand railroad tracks. For example, the most recent, but not current purchaser would get a referral fee for bringing in the next family member (perhaps $100). And the family member making the purchase would receive a bigger family loyalty incentive (perhaps $250). These family loyalty incentives would be in addition to any other consumer facing incentives in place at the time.
Adding these strategies to those currently in market can result in desirable business results, higher ticket sales, and more profit for all. However, just adding them isn’t enough. Automating the process with sales incentive software allows dealers the opportunity to implement and effectively manage multiple, customized incentive programs. Automated software also provides unmatched transparency into the sales cycle – tracking progress and results in real-time – something that is welcomed in the fast-paced world of auto sales.
Article Published in Driving Sales on 2017.07.31