Fall 2010 issue of Horizons

Automotive

Innovative Compensation Plans for Salespeople In the same spirit of the old ad slogan, “Not Your Father’s Oldsmobile,” it is rare, nowadays, to find dealers paying their salespeople on the traditional straight commission from the gross profit of their car sales.

Over the past several years, dealers have experienced a significant decline in new car sales volume as well as shrinking new car profit margins. These negative trends have squeezed salespeople to the point that turnover has dramatically increased, causing dealerships to lose important salespeople. This turnover has challenged dealers to find new and creative ways to competitively compensate and retain their top salespeople. No individual dealer has found the perfect formula, but many dealers of all sizes are certainly working at finding it. A survey conducted by Automotive News reported that one in three dealers changed its sales plan in the past two years. In a separate response, one in three dealers admitted to “tweaking” its pay formula over the same period. Creative Compensation The most common pay plans dealers are turning to consists of a base salary plus commission or bonus. Specific iterations reported include: • Small salary, plus 20 percent gross profit commission on new cars, 25 percent gross profit commission on pre-owned cars • Straight salary to those who sell 8 cars per month, plus bonus on additional cars sold • Commission only, plus volume bonus • Higher percentage of gross profit for achieving volume targets (30 percent at 10 cars per month, 35 percent at 13-15 cars per month)

Raise Your Expectations

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