Since the beginning of the financial crisis, qualitative elements have been cut back, along with some auditing of meeting qualitative targets and standards, and volume bonuses plus campaigns have become much more important.

“Dealer incentives should be aligned to the realities and strategy for both dealer networks and vehicle supply,” said Waller.

A mature brand defending market position will tend to pay too much in all areas of the dealer margin scheme, and this only worsens the price focus and network costs. When brands reach this stage, the long-term actions required can be quite challenging, such as to reduce network costs (reduce outlet costs and/or simplify the network), and at the same time reduce the level of product variety offered in the market (package more, offer less options etc.).  

“Other brands in less defensive positions have the opportunity to tailor their margin and bonus schemes to their network and supply strategy,” said Waller.

 

Is there a way to marry volume and service incentives?

Can manufacturers realistically set dealers high incentives to shift their cars yet also tell them to delight their customers?

Piers Trenear-Thomas, managing director of TT Automotive Consulting and part of the AMi team, believes the two concepts work against each other.

“Set targets that are difficult to hit and put enough money on it and ingenious and energetic sales people will deliver a large number of cars that aren’t what customers really want.

“Some will get something close, but some will not. And that isn’t customer service – the car the customer wants, when they want it, at a price they can afford.”

But car factories need to keep running at a commercial level of production without too many disruptions. This relies on forecasts and in turn keeping to the production plan – with targets and bonuses for achieving them.

“The real trouble is that setting targets is not effective,” Trenear-Thomas said. Or if it is, the unintended consequences often outweigh the benefits.

“Targets should be yard sticks used to measure improvement. The objective being, for example, to deliver increasing numbers of the right car to increasing numbers of people and the ‘target’ number being simply a way of measuring whether you are getting better at doing it. It’s the process that matters and the method used to produce sustained improvement of it.”