Dealerships strive to find the right compensation for salespeople.
But stores perform differently based on volume and location. That means no one perfect percentage applies to everyone. Each store must structure a pay plan that works best for them. But here are some things to consider if you are thinking of restructuring.
Approach the process as a partnership. The more you give salespeople the opportunity to earn, the more the dealership will make. Good salespeople bring their talent to work. They add value and invest their efforts in the success of a dealership. They should be compensated for that.
Look first at what individuals need to be fairly compensated for their skills, and at what the market will bear.
Take a broad view of the salesperson’s job and of the business, then align the two.
For example, if prospecting and networking are critical to business success, consider compensating salespeople for the time spent on these efforts to bring in new clients or paying them when customers keep appointments. The point is to restructure creatively.
The goal is to develop a plan that pays salespeople well enough so they can make a living and motivates them to perform at their highest level. Salespeople usually have a tremendous amount of job opportunities. If a business doesn’t keep them motivated and fairly compensated, they will go work for someone who will.
Here are a couple of what we at APB call “thought starters” intended to get managers thinking creatively.
Concept No.1: Eliminate minimum commissions and create a commission pool. It would be funded by income generated by the gross. Set a minimum standard or a starting point that includes a minimum number of deliveries and a minimum gross profit per vehicle.
Define an activation level that must be hit for the pool to become accessible. This includes a specific number of vehicles that must be sold and a minimum gross that must be generated.
Once activated, every salesperson will share in the percentage they added to the pool, in either gross or volume. For every additional vehicle sold above these levels, increase the commission pool and the percentage each salesperson receives.
This approach develops teamwork and motivates salespeople to work together. Instead of creating internal competition, the pool motivates every salesperson to help their colleagues meet and exceed the sales and profit goals in order to maximize overall compensation.
Negative attitudes are replaced with teamwork and positive attitudes toward work and each client. The more everyone sells, the more everyone wins.
Concept No.2: Change the way the finance and insurance department operates by paying salespeople to sell additional products and services.
Look at the grosses for the front and back end of a deal. Compensate salespeople for selling vehicles, service contracts, add-ons and any other item or service, even after the vehicle has been delivered.
Benefits to this arrangement include shaving time off the purchase process. It provides continuity for the customer, who works with the same salesperson the whole time. That builds rapport and a willingness to buy F&I products.
By taking this approach, a dealership increased its per-vehicle F&I revenue by 50%, increased its customer-satisfaction scores by 4% and reduced F&I expenses by 50%.
All compensation plans must be easy to understand and achievable. They must even the playing field by being accessible to everyone. They should foster teamwork. Finally, they must put the customer first.
The goal is to make everyone a top earner and performer. Pay people for doing their job. Keep them motivated. The manager’s job is to make salespeople successful. A management team can only succeed when its salespeople succeed.
Richard F. Libin is the author of the book “Who Stopped the Sale?” and president of Automotive Profit Builders, a training firm that focuses on customer satisfaction and personnel development. He is at firstname.lastname@example.org or 508-626-9200.